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Boletín Semanal mayo 29, 2020

The momentum in the newspaper industry is all towards consolidation, chains merging into megachains. But it’s their very size that hurts them when seeking federal stimulus dollars.

When they began to see the devastating impact coronavirus-related shutdowns were having on their advertising revenue, local newspapers across the country — like local businesses across the country — turned to the federal government and its stimulus package for help.

Of all of the CARES Act’s various moving parts, the one that seemed most likely to help was the Paycheck Protection Program, which promised small businesses emergency loans that would be forgiven if the business maintained its payroll.

That program has had its own share of problems — but as The Wall Street Journal notes,1 many local newspapers face the distinct one of being too big to count as a “small business”:

Seattle Times Co. received a nearly $10 million loan last week as part of the federal government’s rescue program for small businesses. The money is helping the publisher avoid layoffs and payroll cuts for its staff of 700, despite a plunge in advertising revenue during the coronavirus pandemic.

The Arkansas Democrat-Gazette is in essentially the same financial distress as the Times, with a similar size workforce among its parent’s publications. Yet it isn’t eligible for the aid and had to furlough or cut pay for 10% of its 900 employees this month.

The reason: its parent company, WEHCO Media Inc., has more than 1,000 employees—the Small Business Administration’s maximum size for newspapers to qualify for the forgivable loans.

Across America, most of the newspaper industry is in the same boat as the Democrat-Gazette, while the Times is one of the exceptions. Papers representing more than 80% of U.S. circulation are disqualified from the government’s Paycheck Protection Program because of the way their companies are structured, according to data from the Alliance for Audited Media.

[Here is my obligatory cranky note that the Alliance for Audited Media includes data for only a small fraction of American newspapers. It measures circulation for 602 of America’s roughly 1,250 daily newspapers and 366 of the country’s 5,000-plus weekly newspapers. All or nearly all large newspapers and all large newspaper chains are in AAM’s database; nearly all of the newspapers that aren’t are small enough to qualify for PPP. It’s not that using AAM data is bad — it’s that you can’t say anything about “papers representing more than 80% of U.S. circulation” when you’re using data from only half of all dailies and a small fraction of weeklies, even if they represent a much larger share of total circulation. Anyway.]

Listen, I am not on board with the Ben Smith view that we should “let newspaper chains die” because the large ones are, as we have reported ad nauseam, now nearly all owned by, controlled by, or profoundly in debt to hedge funds, private equity firms, or other varieties of rapacious financial vulture.

wish we lived in a world where, if Gannett were suddenly raptured away, we could still be confident that replacement newsrooms of at least the same size and quality would naturally arise in Shreveport, Hagerstown, Redwood Falls, Reno, Nebraska City, Cherry Point, New Bern, Chillicothe, Bucyrus, and the several hundred other cities Gannett papers currently serve. The unfortunate reality is, though, that they won’t in the vast majority of cases — just as they haven’t in the vast majority of places that have become so-called “news deserts” over the past decade.

So I say give stimulus money to the small weekly and Gannett and McClatchy and Tribune and the rest. Newspapers serve a public purpose, and that public purpose is not limited to communities with a family-owned daily. Hopefully a future round of stimulus can include newspaper owners more universally. (Given that nearly 80 percent of the businesses that applied for a loan in the first round of PPP were left hanging when they money ran out, there will likely be multiple chances for the feds to get this right.)

All that said, though…it is difficult to read the Journal story without noting the profound cosmic irony that it’s the consolidation of newspapers that, in this case, makes revenue recovery more difficult rather than easier.

The entire argument behind newspaper chains — from William Randolph Hearst to Al Neuharth to Mike Reed — is that centralization allows for cost-cutting that can sustain higher levels of net revenue than a solo paper could on its own. Except in this case, it’s the chains’ very size that is their handicap. Instead of “too big to fail,” they’re too big to support.

Neuharth must be spinning in his grave. Reed will just have to spin it on Gannett’s next earnings call.