Breaking the News

It's not the Internet that's killing newspapers. It's the equity-chasing investors and their friends at the FCC who have put outsize profits before a free press.

Senate reconfirmation hearings tend to be predictable affairs, marked by polite give-and-take and senatorial grandstanding, but generally free of surprise plot twists. And so it was supposed to go last September 12, when Federal Communications Commission (fcc) chairman Kevin Martin appeared before the Commerce Committee. In March 2005, following the departure of Michael Powell (Colin's son), President Bush had named the young Republican lawyer to head the extraordinarily powerful five-person panel that oversees the nation's media and telecommunications policies. Martin, a boyish-looking 40-year-old who'd been on the fcc since 2001, planned to carry on much of his predecessor's unfinished business, particularly stiffening penalties for on-air indecency and the sweeping deregulation of media ownership rules. But unlike Powell, who was confrontational and contemptuous of his critics, the bland and soft-spoken Martin seemed unlikely to attract controversy.

But controversy caught up with him when Senator Barbara Boxer (D-Calif.) strayed from the script at his reconfirmation hearing. Boxer began by asking Martin about an fcc study, commissioned by Powell, on the impact of media ownership on local news. Unsuspecting, Martin said that it had never been completed. Then, as he watched glumly, Boxer brandished a draft of the study, which had, in fact, been written more than two years earlier, only to be buried by the fcc. The report found that locally owned television stations, on average, presented 5 1/2 minutes more local news per broadcast than stations owned by out-of-town conglomerates. The findings squarely contradicted the claims made by Martin, Powell, and big media companies, who have argued that lifting limits on ownership would improve local news coverage.

"Now, this isn't national security, for God's sakes," Boxer continued, unable to resist making Martin squirm. "I mean, this is important information. So I don't understand who deep-sixed this thing." Martin meekly said he had no idea, and promised he'd look into it. Within a week, a former fcc lawyer claimed that "every last piece" of the report had been ordered destroyed before it was leaked, and a second unreleased study came to light, prompting Boxer to refer the matter to the fcc's inspector general.

The discovery of the missing studies wasn't just bad for Martin's image, it was a blow to his pet project—trying to repeal what's known as the cross-ownership ban, a 31-year-old fcc rule that prohibits a single company from owning a newspaper and a TV station in the same regional market. Powell had repealed the rule in 2003 amid public outcry, only to have a federal court reinstate it the following year. Last April, Martin told the members of the Newspaper Association of America that he would renew the effort to end this regulatory relic from "the days of disco and leisure suits." Lifting the ban, he said, "may help to forestall the erosion in local news coverage." But now, the fcc's own internal findings confirmed what its critics had been saying for years—that letting one company dominate a city's news business actually undermines the quality of the local media that most Americans rely on for their news.

The renewed push to consolidate even more of the nation's newsprint and airwaves comes as the media are in profound transition. Although we are bombarded with a seemingly endless supply of media options—from cable television to blogs to satellite radio—more and more of the actual news and information we consume comes from a handful of giant media companies. (See "And Then There Were Eight") Meanwhile, locally owned outlets are being squeezed out of business or absorbed at an ever faster clip. In the past three decades, two-thirds of newspaper owners and one-third of television owners have shut down. Newspapers are particularly feeling the pinch: Fewer than 300 of the nation's 1,500 daily papers are still independently owned, and more than half of all markets are dominated by a single paper. The number of newspaper employees has dropped nearly 20 percent since 1990. Hardly a week goes by without another pundit lamenting the demise of the great American newspaper.

The eulogies are also coming from the newspaper executives and investors whose pursuit of phenomenal profits has turned many dailies into shadows of their former selves. They claim that ending the cross-ownership ban will throw a lifeline to foundering papers by allowing them to merge with TV stations and compete with the Internet. In reality, such a move would only fuel the "cut-and-gut" strategies that generate short-term value at the expense of the kind of journalism that exposed Watergate, nsa eavesdropping, and countless corrupt politicians. To see how disastrous this could be for the future of news, just take a look at the cities where the fcc has already allowed cross-ownership to get a toehold.

Three weeks after Martin's embarrassing Senate appearance, the fcc held a rare public hearing in Los Angeles, the first of six that Martin had promised before his planned proposal of new ownership rules later this year. He had hoped the event would be a chance to win over skeptics. But it would be a tough sell: The ban on cross-ownership has bipartisan support from a loose-knit coalition that includes religious conservatives, centrist Democrats, and an array of progressive groups. "The failure to implement these rule changes is not our fault alone," Martin had told a meeting of newspaper publishers last spring. "The public is not convinced of the need to change these rules, and if you can't convince the public, our chances to do that are dim."

Martin assured the more than 500 people who had packed into an auditorium at the University of Southern California that "public input is critical to this process." Yet once the microphone was opened to the floor, it was obvious that he didn't like what he heard. "There were about 100 people who spoke," recalled Jonathan Adelstein, one of two Democrats on the fcc, "and I'd say 99 of them spoke out against media consolidation while one spoke out in favor of it. And I thought that was great, because that's just about the breakdown of how Americans feel about this issue." As speaker after speaker pounded the fcc's cozy relationship with the companies it's supposed to regulate, Martin slumped in his seat, head in hands. By the time his staff rescued him to attend another event, he looked like a man who wished he'd never gotten out of bed.

Martin had made the mistake of kicking off his final deregulatory push in Los Angeles. Having witnessed the havoc the Chicago-based Tribune Co. had wreaked upon the Los Angeles Times during the past six years, Angelenos were familiar with what can happen when an out-of-town company tries to control the local media.

Tribune Co. is the nation's second-largest newspaper owner (behind Gannett) and is, more importantly, the only corporation to own both a newspaper and a television station in the three largest markets in the United States—Chicago, New York City, and Los Angeles. (The Chicago arrangement is grandfathered; the FCC has granted Tribune temporary waivers to cross-own properties in the other cities.) The company acquired the Los Angeles Times, along with New York's Newsday, the Baltimore Sun, and the Hartford Courant, when it purchased Times Mirror Co. for $8.3 billion in 2000. Its executives proclaimed that the deal would make Tribune "the premier multimedia company in America." They marched into Los Angeles prepared to merge news production at the Times and the WB network affiliate ktla, folding another city into their "convergence media" model, in which journalistic and corporate "synergies" between newspapers, TV stations, and websites reduce inefficiency and maximize profits.

The paper's employees and readers soon discovered that this jargon was code for old-fashioned downsizing. The Los Angeles Times had long been known for its extensive local coverage as well as national and international reporting on a par with the New York Times and the Washington Post. Indeed, it won six Pulitzers in 2004, before Tribune started slashing its domestic and international bureaus—just as world events and Southern California's booming immigrant population made their reporting more necessary than ever. By 2006, Tribune had eliminated one-fourth of the editorial staff, trimmed the news section, and canned two popular editors-in-chief after disputes over cutbacks, losing 335,000 subscribers in the process. (See "Reckless Disregard")

The Times' critics also charge that the leaner publication lost touch with local issues and its civic mission. "A succession of publishers and editors who don't know an Amber Alert from SigAlert"—warnings to look for kidnapped children and massive tie-ups on L.A. freeways, respectively—"have been parachuted in to run the Times," wrote Harry B. Chandler, a former Times executive whose family owned the paper for nearly 120 years, in an op-ed last November. "The paper needs executives who understand the area. Providing great editorial coverage and civic leadership for this, the largest, most complicated urban space in the world, are tasks unsuited to outsiders whose tour of duty in the Southland may not outlast the Santa Anas."

When convergence failed to produce a windfall, and Tribune Co. stock dropped almost 35 percent in three years, shareholders—including many members of the Chandler clan—revolted. Last fall, Tribune put its entire business on the block. The decision fed hopes that David Geffen or another benevolent mogul would acquire the Times (at press time, sharks including Rupert Murdoch were also circling). The auction also added to suspicions that Tribune had been, as one Hartford Courant writer put it, "bleeding its local properties to keep the corporate mother ship in Chicago above water."

If Tribune's record in Los Angeles should give pause to advocates of consolidation, so too should its stranglehold on its hometown media market, where its holdings include the Chicago Tribune; "superstation" CW affiliate wgn-tv; wgn, the region's top AM radio station; cltv, the only local cable news station; Chicago magazine; the top online entertainment guide; the most popular Spanish-language daily; a tabloid aimed at readers 18 to 34; and the Chicago Cubs.

Tribune Co.'s presence is so powerful that locals refer to Chicago as "Trib Town"; the Wall Street Journal observed that the company has become "synonymous with the part of the world in which its audience lives." When a story piques the interest of Tribune's managers and editors, it echoes through the company's news outlets, giving it extraordinary influence in setting the local political and cultural agenda. Independent and locally owned news outlets often take their cues from Tribune. As Steve Edwards, host of a popular local affairs program on public radio station wbez, told me: "If the Tribune decides something was a major story and runs front-page coverage and repeated editorials on it, you would hear that story topping many local newscasts; you would hear other reporters doing more coverage of that issue.... There's no question there would be a ripple effect." Or, as a Chicago media critic puts it, "Tribune is the 800-pound gorilla."

The company also has the power to relegate a story to obscurity merely by ignoring it. Mayor Richard M. Daley, who has himself enjoyed nearly unchecked power in the city for almost two decades, acknowledged this when Tribune Co. all but ignored his favorite team, the Chicago White Sox, during its march to the 2005 World Series. "How can you compete with Tribune?" he asked. "I mean, give me a break. They own the Cubs, they own wgn Radio [and] TV and cltv. Come on. You think you are going to get any publicity for the White Sox? You can't. Let's be realistic."

And Tribune's ability to decide what becomes news goes far beyond baseball. In 2000, for instance, the Chicago Housing Authority announced the city's largest planning initiative since the urban renewal programs of the 1950s, proposing a 10-year, $1.6 billion scheme to demolish 18,000 units of public housing, forcing thousands of families into the private market. Local and federal agencies implemented the massive, controversial plan without significant public input, not even from public housing residents. The project was ripe for investigation, yet Tribune's management didn't take issue with it, and the Chicago Tribune and its media siblings barely took notice. Almost 50 "special reports" are listed on the newspaper's website, yet not one concerns public housing. This oversight was consistent with the paper's larger blind spot concerning issues affecting black Chicagoans, says local author and activist Jamie Kalven. "What about coverage of segregation? Or poverty?" he asks. "You can't make up for that with a special report."

But is it truly possible for a company—no matter how large—to dominate a local market in the digital age? According to Tribune Co. executives, the company's editorial decisions have limited impact in Chicago because consumers there have an infinite number of additional news sources. "In an environment where people's choices for obtaining information have radically multiplied, there is no risk of one voice dominating the marketplace of ideas," Jack Fuller, then-president of Tribune's publishing division, told the Senate Commerce Committee in 2001. "Today in clamorous cities such as Los Angeles, Chicago, and New York, it is frankly a challenge for any voice—no matter how booming—to get itself heard." Yet Tribune has told a different story to investors. Speaking to shareholders in 2005, President and ceo Dennis Fitz Simons boasted that the company's "varied media choices" for Chicagoans reached 6.4 million people, or more than 90 percent of the market.

this is exactly the kind of imbalance the fcc had sought to prevent when it passed the 1975 newspaper-broadcast cross-ownership ban, and it's why Tribune Co. has long sought to roll back the rule. The company spent billions acquiring properties that are only temporarily exempt from being found in violation of the ban—unless the fcc changes the rules first. Between 1998 and 2005, it spent $1.1 million on lobbying and more than $380,000 on political contributions, trying to convince lawmakers that its business model proved the rule unnecessary.

This strategy seemed brilliant when President Bush put Michael Powell in charge of the FCC in 2001, giving him a mandate to clear away the agency's regulatory underbrush. Powell, after all, had famously quipped that he did not know what "the public interest" meant. "The night after I was sworn in, I waited for a visit from the angel of the public interest," he told a crowd of executives in 1998, after President Clinton appointed him to the commission. "I waited all night, but she did not come. And, in fact, five months into this job, I still have had no divine awakening and no one has issued me my public interest crystal ball."

Breaking with precedent, Powell announced that the burden of proof no longer rested on the opponents of ownership limits, suggesting that most regulations were unnecessary unless it was otherwise demonstrated. In June 2003, he led a 3-2 party-line vote to relax cross-ownership restrictions. (The commission also voted to significantly loosen television ownership caps.) The decision was made in spite of the 3 million public comments that had flooded into the fcc, the overwhelming majority of them opposing deregulation. "Seldom have I seen a regulatory agency cave in so completely to the big economic interests," said Senator Byron Dorgan (D-N.D.). Trent Lott, his Republican colleague from Mississippi, stated simply, "This is a mistake."

Powell may have been deaf to the public interest, but the courts were not. A year later, the 3rd U.S. Circuit Court of Appeals blocked his order, finding that although the fcc had the right to ease cross-ownership laws, it had not shown sufficient justification to do so. It was a stunning blow to Powell, who announced his resignation nine months later, walking through the revolving door into a job at a media and telecommunications investment firm.

But repealing the ban still remains a holy grail for media companies, and the newspaper industry's bumpy entrance into the digital age has provided them with a new rationale. Consolidation, they claim, is necessary to save newspapers, which otherwise can't compete in the new economy.

In fact, falling circulation numbers and sinking stock prices notwithstanding, corporate executives' cries of impending poverty are exaggerated. Newspaper chains routinely generate profit levels that most companies would kill for. ExxonMobil topped the Fortune 500 list for 2005, reporting 11 percent profit margins, while the average profit for the entire list was 5.9 percent. That year, the top 13 publicly traded newspaper companies enjoyed average profit margins of 20 percent; the 3 most financially successful chains, Gannett, McClatchy, and E.W. Scripps, earned around 25 percent margins. The Tribune Co.'s newspaper division earned 20 percent, as did the beleaguered Los Angeles Times. And this during a year that analysts lamented as "the industry's worst" since the 2001 recession.

What newspaper executives do not exaggerate is the pressure they get from investment analysts and large shareholders, who demand extraordinary, constantly growing profit margins and punish companies that fail to achieve them. But the newspaper chains themselves are partly responsible for setting unrealistic expectations. During the '70s and '80s, Gannett developed what would become a popular formula for making papers more profitable: Buy up a local newspaper, crush the competition, jack up ad rates, downsize the editorial staff (and, if required, break the union), then watch earnings soar.

The cut-and-gut approach does not treat newspaper ownership as a public service, but rather as an investment in a commodity like any other. This can make dumping papers an attractive option when profits sag or shareholders get antsy. Last spring, the Knight Ridder chain succumbed to pressure from its largest private investor and sold off its entire lineup of 32 papers to the McClatchy Co. for more than $4 billion. McClatchy then made a healthy profit flipping 12 of its new titles, including the well-respected Philadelphia Inquirer and San Jose Mercury News. Then, in December, McClatchy reaped a $160 million tax write-off by selling its "underperforming" marquee paper, the Minneapolis Star Tribune. The buyer, a private equity firm, had no experience running a newspaper. "They're buying cash flow and tax-benefits," an analyst told the New York Times. "It's not the sort of religious commitment that you hope to get from newspaper owners."

Obviously, the newspaper business is changing. The Internet has made it harder to sustain high profit margins, not because readers are abandoning news but because publishers have not yet figured out how to make more money from their websites. Until now, papers sustained themselves by selling a physical product and the ad space in it. With online readers refusing to pay for what they read and web ads generating pennies on the dollar, the old model is collapsing. As Jay R. Smith, president of Cox Newspapers, told Editor & Publisher, newspapers are "finding whole new pockets of audiences for which they get no credit," clocking record-breaking readership figures if online traffic is included. But online advertising will account for just 6 percent of newspapers' $50 billion in ad revenues in 2007, the Newspaper Association of America predicts.

What's really at risk here is not the future of newspapers but of the news itself. While our democratic culture could survive the loss of the daily paper as we know it, it would be endangered without the kinds of reporting that it provides. It's the journalism, not the newsprint, that matters.

Even in the online era, more than 60 percent of Americans say they read a local newspaper daily or several times a week. And with good reason: Few of the cable channels and websites that newspaper chains claim as competitors actually provide original news and information. Cable networks do virtually no local reporting of their own, and while bloggers do a good job exposing journalistic lapses, they generally aren't doing the muckraking, beat reporting, and pavement pounding that generate news. (See "A Blogger Says: Save the msm!") As the 3rd Circuit Court stated in its opinion upholding the cross-ownership ban, the Internet "may be useful for finding restaurant reviews and concert schedules," but it does not offer "the type of 'news and public affairs programming'" that public policies should promote.

fcc head kevin martin has suggested that "newspaper-owned [television] stations provide more news and public affairs programming and also appear to provide higher quality programming," echoing the findings of a 2003 study by the Project for Excellence in Journalism. However, the study did not examine what happens to the quality of newspapers after they merge with television stations. From what I've seen of these hybrid operations, the results are discouraging.

In the late 1990s, I spent two weeks inside Tribune Co.'s famous Chicago office tower interviewing reporters and editors for a book about a local heat wave, but found that everyone wanted to talk instead about "corporate synergies" and "cross-platform production." The company had just started to require its newspaper staff to report breaking stories on its cable news station, cltv. Many reporters were anxious about the new arrangement, which meant more work without more pay, and less time to do their regular jobs. They weren't comforted when managers announced that they were remodeling the newsroom to put a television studio directly outside the editor-in-chief's door. These reporters recognized that technology was changing their industry, and most were eager to learn new digital skills and make the occasional TV appearance. Their main concern was that as "content providers," they were losing time for reporting, thinking, and writing—the essential ingredients of their craft—forcing them to churn out increasingly dumbed-down articles.

It didn't help that their bosses had abandoned even a rhetorical commitment to newspaper journalism and the values it represents. "I am not the editor of a newspaper," Editor-in-Chief Howard Tyner told the American Journalism Review in 1998, "I am the manager of a content company." Tyner's predecessor, James Squires, had already observed this shift. "Journalism, particularly newspaper journalism, has no real place in the company's future," he wrote after leaving the paper. "No one ever uses the word. The company bills itself as an 'information and entertainment' conglomerate and hopes that newspapers will become a smaller factor in its total business."

Media General, a newspaper and television chain in the Southeast, became a leader in convergence journalism due to its long-standing ownership of the Tampa Tribune and nbc affiliate wfla. In 2002, I spent a week at its Tampa News Center, a cutting-edge facility where the newspaper, television, and web departments shared an editorial "Superdesk" that looked like the bridge of the starship Enterprise. Although the Tampa market is considerably smaller than Chicago's or Los Angeles', the News Center is one of the world's most technologically sophisticated and innovative convergence complexes, drawing visits from media executives eager to see the future of 21st-century news production.

Editors and reporters at the News Center were trained to constantly look for ways to make stories overlap in as many outlets as possible. Every day, print, TV, and online editors held a 15-minute "convergence meeting" to discuss shared projects. And every month, the company's multimedia manager compiled a report that listed successful overlap and praised "overt acts of convergence."

While the Superdesk enabled editors to do more with less, some Tampa Tribune reporters were finding themselves juggling competing demands. I shadowed several print journalists who were pulled away from their desks to do short spots and longer stories for television. While one was waiting to tape a shot, I asked her how she felt about the added work. "Well," she began, "the good part is that it's fun, it's different, it's difficult, and it's interesting for me. It's a break from my regular routine. But a few weeks ago I did TV every day for two weeks. And every day—when you spend 40 minutes writing the script, 20 minutes putting on makeup, 20 to 30 minutes taping, and then taking the makeup off—it takes, like, two hours to do the job. That's two hours—a quarter of my day—and that doesn't help my reporting." As their job descriptions required them to be more telegenic, some reporters feared that the norms of TV news production—short stories, soft features, celebrity journalism—were creeping into the print side.

These concerns reveal the vicious cycle that drives the newspaper business today: Slashing editorial content and standards may be a recipe for quick revenue, but it doesn't retain readers. However, doing the meaningful, quality reporting that print and online readers expect is expensive. And so each new round of convergence, downsizing, or outsourcing further erodes the product, paving the way for yet another round. As Los Angeles Times columnist Tim Rutten commented last fall, "A newspaper that is indifferent to its bottom line goes out of business; a newspaper that thinks only of its bottom line has a business that isn't worth saving." He knew what he was writing about: In October 2005, as its circulation plummeted, the Times announced that it would attempt to regain readers by running shorter articles and more celebrity stories.

this is the choice that Kevin Martin, the Tribune Co., and other advocates of continued media deregulation seem to be offering: We must destroy our newspapers in order to save them.

It doesn't have to be this way. Citizens, communities, and even a few media executives are beginning to make intriguing suggestions about how to reverse the course of radical deregulation and replenish the nation's supply of local media outlets. Frank Blethen, whose family has owned and published the Seattle Times since 1896, has been advocating newspaper ownership caps that would discourage chain journalism and create new opportunities for locally controlled dailies. Grassroots organizations in several states, including California and Illinois, are calling for the fcc to put teeth back into the broadcast license-renewal process. And radio enthusiasts, recalling the '60s boom of free-spirited FM radio, are asking why radio and TV stations should not be required to air original programming on the 1,000-plus new channels they will get on the digital spectrum.

Meanwhile, the fcc says it will continue to hold public hearings on the future of America's media. The question is how closely Martin will be listening. Last November, he quietly commissioned his staff and a few select contractors to complete new studies on media ownership, which will presumably bolster the rule changes he unveils. Whatever happens next, the stakes couldn't be higher. As Michael Copps, the other Democrat on the fcc, observed at October's hearing in Los Angeles, "We're back at square one. It's all up for grabs."