24/7 Wall St.

Sisyphus kept moving that rock up the hill and it kept coming back at him. Newspaper executives must feel that way. John Morton, a long-time analyst of the industry made the point in the American Journalism Review that "through the first half of 2007, using results of publicly reporting newspaper companies as a proxy for the industry, total revenue was down nearly 5 percent and operating profit was off more than 14 percent."

Morton adds that "bad as 2007 has been, the publicly reporting companies still produced an average operating-profit margin of nearly 16 percent in the first half of the year–a level many businesses can never hope to achieve. Still, the average profit margin has been in steady decline since 2002, when it was 22.3 percent."

A sixteen percent margin is very good, unless, like Journal Register (JRC) and McClatchy (MNI), a newspaper company has a high debt load and a modestly poor debt rating. Each point of margin that comes off makes the notes harder to pay.

Morton has one final bit of wisdom that will come to late for most firms in the industry. "Most newspaper companies concentrated on shoring up the profitability of their traditional newsprint-oriented business, chiefly through laying off employees, downsizing their newspapers and cutting back on circulation in distant areas of little interest to advertisers in their core markets. It was a classic defensive strategy that undermined the very things–standing, reputation, influence–that are crucial to success on the Internet."

No one seems to have listened.

Douglas A. McIntyre