The Star-Telegram’s downtown office building is for sale, and staff is being laid off, mostly because of the crushing debt of the corporate parent.
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Smith: Bloggers “are not a replacement for daily journalism.”
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Thomason: “The Star-Telegram is not even a shadow of what it was a few years ago.”
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A D V E R T I S E M E N T
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A D V E R T I S E M E N T
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Falling Star
Are they dimming the lights at Cowtown’s daily paper?
By DAN McGRAW PHOTOS BY VISHAL MALHOTRA
When Gary Hardee got laid off by the Fort Worth Star-Telegram last June — a day reporters and editors still refer to as “Black Monday” — he took with him more than 25 years of experience in the newspaper business. He had worked as editor and publisher of the paper’s Arlington edition, been a sports and news editor, and, in his last gig, served as managing editor of the paper’s online edition.
The ranks of laid-off journalists in North Texas seem to increase each week — more layoffs were announced at The Dallas Morning News last week. Media companies are filing for bankruptcy right and left, and some papers have shut down altogether. Even so, lots of industry refugees and experts still believe in the future of newspapers, convinced that the public’s appetite for news will continue to make some sort of print news business possible. Not Hardee.
“I don’t have much faith in the future of newspapers,” he said. “The business model is severely broken.” These days, “You have to produce content for smaller, niche audiences, and the newspaper model has always been about mass audiences.”
Not that he thinks the internet will be the savior of news organizations either, at least not anytime soon. “I honestly don’t believe a local online news site can make it right now, and not in the foreseeable future,” he said. “Once again, the niche markets are so small that advertising won’t support it. And the people you need to attract won’t pay for content.”
Newspapers have survived downturns before; layoffs are happening in industries all over the country. So why should problems at one business — albeit a large and historic one — be of particular concern to North Texans?
In part, for the same reasons that the death of a major utility would be, or if the state decided to shut down the freeways, or if planes stopped flying out of Dallas/Fort Worth International Airport. None of those entities have monopolies on air travel or delivery of electricity or roads — but closure of any of them could cripple the economy.
The major daily newspaper in any city, likewise, is not a monopoly; increased competition for readers and ad dollars from the internet and elsewhere is one root of the problem. But as information department stores, daily papers, whether they’re good, bad, or indifferent in quality, still fill a unique role in Fort Worth and other communities, providing a one-stop place for learning not only who died that day and what sports teams won, but news you didn’t know you needed to know — and perhaps most importantly, for the watchdog function that newspapers provide: investigating and reporting on government, big business, crime, nonprofits, sports moguls, you name it.
Daily newspapers are not the only section of the news media being affected by the industry’s economic meltdown, of course. Magazines, television and radio news organizations, and alternative papers like Fort Worth Weekly are also feeling the pinch.
The Star-Telegram, unlike many newspapers, would still be profitable as a stand-alone business. But like so many papers around the country, it’s not a stand-alone business: It’s owned by a parent corporation that, a few years before a major recession, went heavily into debt to buy a whole chain of papers from the previous owner. Now, with advertising down, firms like McClatchy Company, which owns the Star-T, Miami Herald, Sacramento Bee, and dozens of other newspapers, are sucking dry profitable ventures like the Star-T in order to keep the chain afloat.
After the latest round of layoffs and staff shrinkage, local journalists, including many from the Star-Telegram, began to voice the unthinkable: Could the only daily newspaper in Fort Worth really die? One industry observer thinks so and put the Star-Telegram on his list of the 10 papers most likely to shut down this year, a prospect that Star-T honchos vigorously denied. But others are beginning to envision that future and trying to figure out what might spring up in the daily’s place. How would any such entity be financed, what would it cover, what would it look like? And what parts of the Star-T’s role would go unfilled? What wouldn’t be regularly reported anymore? Despite its detractors — including, frequently, the Weekly — the Star-T has been a Cowtown institution for more than 100 years, founded by a man who shaped this city as much as any other individual.
There’s another serious question raised by the vast and disturbing changes at the daily. With the deep staff cuts and distinct signs of a shift in philosophy, is the Star-Telegram that Fort Worth has known for so long already, in some ways, gone?
When McClatchy CEO Gary Pruitt got up to address his fellow publishers at the Newspaper Association of America convention in San Diego two weeks ago, he opened with a little humor.
According to the version of his speech posted online, Pruitt, the man who’s ultimately in charge of the continual axing of jobs and content at the Star-T and other newspapers in the chain, told conventioneers that McClatchy’s annual shareholders meeting would conclude with a video of the work by the company’s photojournalists. Pruitt said he was trying to pick a song to serve as the theme of the preceding year.
He’d thought of some Rolling Stones songs that might fit, he said: “I Can’t Get No Satisfaction,” “You Can’t Always Get What You Want,” “19th Nervous Breakdown,” “Shattered,” and “Gimme Shelter.”
Maybe he should have chosen “Under My Thumb.”
Many of the specific decisions that veteran Star-T staffers loathe the most, including the impersonal method of laying off reporters, editors, and photographers who’d worked there for decades, supposedly were ordered directly by McClatchy headquarters in Sacramento. In this case, though, the devil is not only in the human details but in the big picture. And the big picture is drawn in red ink.
According to industry analysts, the Star-Telegram continues to turn a profit — not the 30 percent margins that newspapers were getting in the 1990s, more like half that. It’s still a margin that many companies would love to have. But it may not be enough to save McClatchy or the Fort Worth daily.
Three years ago, the McClatchy Co. bought out Knight Ridder, the chain that then owned the Star-Telegram, for $4.6 billion. “It was touted as a great move by everyone in the industry,” said Tom Corbett, a media analyst for Chicago-based Morningstar, a stock and hedge-fund research firm. “But this was the tail end of easy credit and boom times, and McClatchy needed that perfect world to get the revenues needed to satisfy that debt.”
Needless to say, the economic world has been far from perfect since then. Corbett called McClatchy stock worthless last year. “It’s still worthless,” he said last week. In 2004, McClatchy stock was trading at around $70 a share. When they closed the deal with Knight Ridder in June 2006, the stock was down to $40 a share. As of this writing, the stock price has plummeted to 54 cents a share. The New York Stock Exchange has warned the company that it will be de-listed from the big board if the stock doesn’t get above a dollar by June.
Steve Outing, a columnist for the industry trade magazine Editor & Publisher, said “Certainly, the print edition [of newspapers] will be going away, and it will be going away much faster because of the bad economy.”
McClatchy, Outing said, “is one of the most troubled companies in terms of debt, and they are at the top of the list of the next company to file for Chapter 11.” He said he’s amazed Pruitt is still the McClatchy CEO given all the company’s problems.
Last month, as the paper continued to shrink, the Star-T announced that it’s raising the news rack price of its daily print edition to a dollar. So these days, you could buy almost two shares for the price of a paper.
It’s a far cry from the days when the Star-Telegram was the powerhouse paper for the western half of Texas.
According to former Star-Telegram editor Jerry Flemmons’ biography of the paper’s founder, Amon G. Carter made money as a kid by selling squirrel-meat sandwiches to rail passengers as the train came through his hometown of Bowie. In 1905, he came to Fort Worth as an ad salesman and a few months later teamed up with investors to found the Fort Worth Star. But the Star lost money from the beginning, and Carter came up with a daring move to keep it operating. He raised $100,000 from investors and bought out the main competition, the Fort Worth Telegram. The two papers were merged, and the Fort Worth Star-Telegram was launched on Jan. 1, 1909.
Carter died in 1955. His son ran the paper until 1974, when Capital Cities Communications bought out the family interest in the paper. “Cap Cities” later purchased the ABC television network and then sold all of its holdings, including the Star-T, to the Walt Disney Co. in 1996 (some employees of that time said that Mickey made a mean boss). Disney in turn sold its newspaper holdings to the Knight Ridder chain in 1997.
Now, according to a Morningstar report from February, McClatchy is being hurt in all phases of the newspaper business. Revenues declined by 16 percent in both 2007 and 2008. Comparing the fourth quarter of 2007 to 2008, McClatchy had a 41 percent decrease in classified ad sales. And though their online revenue was up, for every dollar McClatchy lost in print ad revenue, its online operations recaptured just four cents.
John Morton, a Baltimore-based media analyst, said McClatchy might have to file for bankruptcy. There is still about $2.6 billion in debt on the balance sheet, and last fall the company restructured its debt with lenders. It might have to do so again this summer, with default on those loans a real possibility, analysts said.
McClatchy “isn’t going to turn it around until the whole industry turns around,” Morton said. “But that might not be for a few years, or maybe not at all. The problem for the [Star-Telegram] is that they have always been a strong cash-flow contributor, so McClatchy won’t likely sell them because they need that cash. But the paper will suffer, because McClatchy will bleed them dry of every cent they have.”
The Star-Telegram was recently named by the web site 24/7 Wall St. (associated with Time magazine) as one of the 10 major daily papers that would most likely fold this year or shutter their print operations and only publish online. The author suggested that the Star-Telegram and Morning News could not both survive in what has become a single media market. “The Star-Telegram will have to shut down or become an edition of its rival,” Douglas A. McIntyre wrote. “Putting them together would save tens of millions of dollars.”
Star-T bosses reacted fiercely to that assessment. “The paper has been around for 100 years, and, yes, we are going to survive — in a daily print format,” publisher Gary Wortel wrote.
His former Arlington counterpart didn’t agree. “I’m not an expert on how things will shake out,” Hardee said, “but the technological revolution is changing the way we will get our local news. Papers will be closing. I don’t know if the Star-Telegram will be one of them, but you can’t guarantee that they will survive for many more years.”
Another round of layoffs and buyouts (the fourth in two years) hit the newspaper last month, and several sources said McClatchy is expected to order a fifth round in June. The newspaper’s downtown headquarters is for sale. Employees have been told they will have forced pay cuts this year and may have to take a week’s unpaid furlough.
Star-Telegram executive editor Jim Witt referred questions about the future of his paper to publisher Gary Wortel, but Wortel did not respond to e-mails.
Staff, of course, isn’t the only thing that’s been cut. The paper is also bleeding content. Newsprint — the paper that the Star-Telegram is printed on — is always a huge expense, and in the last month the daily has cut its overall page count by 30 or 40 pages a week. Stock listings were reduced, a crossword puzzle and three comics strips were dropped, the editorial page was moved to the front section and cut by a half-page, and the features section was combined with the Friday entertainment guide “Go!”
Corbett calls this the “value-destroying feedback loop.” When newspapers cut costs, “they reduce content and they look stale,” he said. “There is little fat to trim, and readers say ‘Gee, there is nothing in here I want to read.’ They lose readers and the advertisers go as well because the eyeballs aren’t there anymore. It is a terrible spiral to be in.”
Morningstar’s report warns of the spiral. “While the company has made public plans for another initiative to further shrink its cost structure,” the report said, “it is our view that substantial incremental costs reductions will inevitably compromise the quality of its publications, placing its iconic mastheads at risk of a further acceleration of erosion of readers and advertisers.”
Local insurance executive Don Woodard Sr. jokes that, at 83, he loves to retrieve his newspaper from the porch each morning “to see who died the night before.” In a more serious vein, he is adamant about the importance of the local paper.
“Covering local politics explains to people why things happen in their lives,” Woodard said. “It explains why your streets might be so lousy, how schools are educating your kids, how your career is going in your field. It is not just about how many votes someone got.
“The Star-Telegram has become pathetically low right now in how they cover local issues,” Woodard said. “It is rare to see anything in the paper that explains why things are happening.”
But if the paper closed, Woodard said, it would be “Terrible. Awful. Catastrophic. Unimaginable.”
As Hardee had noted, a daily paper traditionally tries to offer something for everyone, rather than tailoring to a specific group: politics, sports, fashion, obituaries, world news, opinion pages, investigative pieces that seek to right the injustices of the world — or maybe just the comics and crossword puzzles.
In the old business model, newspapers would try to get as many eyeballs on their pages as possible, which was fairly easy because, for the last several decades, most American cities have had only one daily paper. About 80 percent of newspaper revenue comes from ad sales, not directly from readers in either subDELETEions or street sales.
But the larger the circulation of a newspaper, the more it can charge for ads, and in a one-daily town, advertisers had no real choice. Department stores and grocery chains took out pages and pages of ads to reach their market. If you were looking for a job or selling a house, you went to your local newspaper.
The big declines began in the 1970s, with the advent of cable TV. Prior to that, newspapers were a key source of information but also a cheap way to kill time. Fast forward to 2009: It’s not just young people who are text-messaging and tweeting. Cable or satellite TV brings you 500 channels and movies on demand. Billions of web sites are available on your laptop.
As a result, the mass audience that newspapers need to keep big advertisers is fragmenting. People are clustering in smaller groups, whether it’s friends on Facebook or fellow sports enthusiasts who subscribe to the same niche magazine. If you want to check out the ratings on a local restaurant, look for a job, sell your house, or find out about crime statistics for your neighborhood, you probably aren’t as likely to go to the newspaper as you once were. You can do all that on your computer.
Of course, much of what folks find on the web comes originally from newspapers and wire services. Ironically, news organizations have made almost all that content free to the web sites and “content aggregators” like Google that are helping drive them out of business.
“The newspapers saw all the changes coming, but they sat on their butt and did nothing,” Hardee said. “All they were concerned about was keeping their profit margins high, and they could do that back then. They lost sight of the fact that their customers were their readers and not Wall Street.”
The newspaper business badly missed out on what all those changes meant early on. Corporate honchos also didn’t do a good job of figuring out how to deal with ads in both the print and online editions. A former Star-T ad executive who asked not to be named said that for years, “the print ad sales people were competing against the online sales folks. It was as if the online sales were the enemy. … And many of these print ad folks were older and had no real training in the working of the internet. That’s how they fell so far behind.”
“I think what is happening is that people aren’t interested in a lot of what newspapers are covering,” said Mike Orren, president and founder of Pegasus News, a Plano-based online Metroplex news site. “Am I interested in a murder case on the other side of town or a burglary that took place down the street? I don’t think most readers care that much about local politics. And that’s what newspapers have traditionally spent most of the resources on.”
Tommy Thomason, a Texas Christian University journalism professor, echoed Orren’s comments that no one knows what the future of news reporting might bring. “There is a technological revolution going on, and most people don’t realize it is changing the way people think,” he said. “All the surveys say more people are going to the internet to get news. They are also neglecting hard news in favor of softer news or no news at all. Many have discovered they don’t need or want their daily newspaper.
“So much of a free society is based on an informed electorate, so these changes in the way people think will have important consequences,” Thomason said. “Print catered to that need, but filling that need online is like finding a needle in a haystack.”
Thomason blames newspapers for not seeing this coming. Market research shows they’ve been losing readers for 40 years, and now they’re weakening their product. “In a time when people are finding alternatives to your product, you make your product less desirable and charge more for it,” Thomason said. “The Star-Telegram is not even a shadow of what it was a few years ago. They just keep giving readers more reasons to turn away from their paper.”
So how is the Star-Telegram working to get readers back? Well, there’s the new product it launched two weeks ago aimed at young people. Going against the tide, the newspaper bosses turned an online product, their DFW.com local entertainment guide, into a printed “DFW.com Ink Edition.” In some ways, it is aimed at the readers to whom the Weekly also appeals.
In trying for hipsterdom, however, the daily missed the mark rather embarrassingly, like a 50-year-old wearing low-slung pants. The first edition shocked many people, including Star-T staffers.
The cover story was headlined “A Good Girl’s Guide to Finding Bad Boys,” or “Why bother searching for Mr. Right when you can spend a night with Mr. Oh-So-Wrong.” In a sidebar called “How to Spot a Bad Boy,” one of the clues was that he “has used the phrase ‘hit it and quit it.’ ” A bad girl, the story said, “knows that tequila always makes her clothes fall off.”
Then there was the article on “3 people We Want to Eff this week.” (The trio would be singers Keith Urban and Madonna, along with you, the reader.) Lastly, the writers gave advice on how men can keep their penises from shrinking when they swim in cold water. “No one likes to look at a frightened turtle when a guy gets out of the water,” the columnist wrote.
“Everyone who saw that was stunned, and most of the people I spoke with from the paper were embarrassed,” said a former Star-T editor who asked not to be named. “They were trying to be so hip and cool, but they came off like high school sophomores. Come to think of it, I don’t even think high school sophomores would go for that.”
Hardee said the DFW.com print edition “was just too late jumping into the game. If you are going to brand something to appeal to a younger audience, why would you wrap a newspaper brand around it and why would you make it print, which most young people don’t read? The Star-Telegram is trapped by their older readers, and you see ads mostly for hearing aids and weight- loss programs and Depends underwear. The young people don’t want to be a part of that,” he said, “regardless of what you put in a free entertainment weekly.”
There are also indications that the S-T may be getting into the “pay-for-play” racket, already practiced by some other local publications. That is the process whereby businesses are promised news content if they buy an ad. According to several sources, the DFW.com Ink Edition has promised bar owners it will publish photos of their patrons partying as an inducement to buy ads. And former Star-T staffers said they have heard of increasing business-side involvement in the paper’s other specialty publications.
When the traditional separation of editorial and advertising breaks down, newspapers further lose credibility with readers. As if the news business needed more of that.
If anyone knew for sure what the news business is going to look like in 10 years, they could make millions — and probably save thousands of jobs and perhaps even keep democracy off the ropes. That last bit worries news veterans almost as much as contemplating the future of their jobs: Who will report the news, keep an eye on government, root out corruption, keep communities informed, and be trusted by the public to do all those things in a relatively objective manner, if newspapers, news magazines, and even investigative TV news programs go the way of the dodo?
In Denver, the Rocky Mountain News has closed. Both daily papers in Philadelphia have filed for bankruptcy. The two Detroit newspapers are also in bankruptcy and have stopped home delivery. The San Francisco Chronicle is on life support. The New York Times, which owns the Boston Globe, has told the union workers at the New England paper that they will shut it down if $20 million in contract concessions are not agreed to. Closer to home, the Austin American-Statesman is for sale.
But new entities, almost all online, are also springing up. The Seattle Post- Intelligencer has stopped publishing on paper and now exists online only. In St. Louis, veteran journalists have created the St. Louis Beacon nonprofit online news site, with an emphasis on in-depth news. In Washington, D.C., and Austin and other places, nonprofits have been created that are dedicated to investigative and watchdog reporting, though little of it is local.
In Fort Worth, as in most cities, numerous web sites and blogs have sprung up that help keep residents informed on specific areas of local news.
Steve Smith, 39, the main blogger on the web site West & Clear, worked at the Star-Telegram as a deputy sports editor for 10 years before leaving in 1999 to join a local marketing company. His site includes some political commentary and notes on upcoming events. It has reported on real estate development projects before the Star-Telegram and even weighed in on the recent DFW.com print-edition horrors. The site also links to 40 other blogs in Fort Worth.
Another site, Pegasus News, was launched first as a local music web site and has evolved into a North Texas news content site. The site has only 16 paid staffers, half of whom are ad salespeople. The difference between his site and a newspaper, founder Orren said, “is that newspaper executives’ view of news is what they think people want and should have, while we let our readers drive us more directly to what they want.” His site asks readers to fill out a short profile, then tracks their online movements. Site operators can tell how many readers are focusing on political coverage or restaurant reviews, and ads for businesses close to a reader’s zip code will follow that reader as he or she moves through the site. That kind of formatting, he said, can help make local news web sites profitable.
But online advertising revenue, which is growing for sites like Pegasus News, is actually dropping for newspapers. According to the Interactive Advertising Bureau, total online ad sales revenue grew by 10 percent in 2008 but dropped by 2 percent for U.S. newspaper web sites.
Pegasus makes heavy use of “volunteer content providers” (read: amateur reporters), many of whom work for free. The amateurs “are truly doing this for the love of the game and not to make required deadline or beat quotas,” Orren said. “They take greater care than most professionals I’ve worked with over the years.”
But Pegasus doesn’t do much serious news, often just posting press releases from government agencies and entertainment sources. Is that good for society? “All of this is evolving, and we will do more of that [in-depth reporting] as the print newspapers are losing their relevance,” Orren said. “But no one knows where this is going right now.”
Smith acknowledged that sites such as his and Orren’s can’t hope to provide what a daily paper does. “We are not a replacement for daily journalism,” he said. “We are a supplement and provide some insight and some intensity.”
Across the country, publishers are (finally) talking about all kinds of changes — perhaps requiring sites like Google News to pay for the content they use from wire services and other news media, reorganizing as nonprofit organizations, and developing a micropayment system, like iTunes, via which readers would pay a few pennies per story read, or perhaps a flat fee per month for the privilege. Amazon’s Kindle electronic reader also has plenty of news people excited. In other cities, online news sites have begun asking readers to donate money to fund specific investigative stories.
In North Texas, Dallas Mavericks owner Mark Cuban (who also created his own HDNet investigative news TV channel) thinks newspapers should partner with other media companies. He would have the Star-Telegram join forces with, say, Charter Communications, the cable TV company, to give cable customers access to premium content on the paper’s web site. Charter would use the exclusive arrangement to sell more of its services, and the Star-T would get a small payment per customer.
Despite Wortel’s denials, could the Star-Telegram end up as — or be replaced by — a web-only site, as happened to the Post-Intelligencer? Such web sites thus far have not proved very profitable, and consistent coverage of a local scene, much less in-depth and investigative journalism, doesn’t come cheap. And a daily paper as a common point of community reference could also be lost.
But maybe the public wouldn’t care much after all. A national survey last month by the Pew Research Center, a nonpartisan media think tank, found that less than 43 percent of the respondents thought that the loss of their daily newspaper would hurt civic life in their community “a lot.” Even fewer — 33 percent — said they would badly miss reading the local newspaper if it were no longer available. In a world where people will pay 20 cents to their local phone company for every text message they send, few seem willing to pay enough to local news companies to keep them alive.
“The problem they are having is that everything — the business model, what advertisers want, how to cover the news — has changed,” Hardee said. “You can’t tell people what happened yesterday, you have to tell them what it means. There is a ton of information out there right now, more than we can humanly synthesize. What is needed is a trusted filtering system, and newspapers have dropped that ball.
“What was frustrating to me was to see almost everyone in the newspaper biz sitting on their fat butts for all those years and failing to capitalize on all the changes they could see coming down the pike,” he said. “The advertisers were looking for leadership. The readers were as well. Instead, newspapers are basically trying to sell a 1955 Buick at 2009 prices.”
Editor’s note: Several editorial staffers at Fort Worth Weekly, including Dan McGraw, formerly worked at the Star-Telegram.
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