Via PaidContent comes word that private equity firm Avista has written down 75% of its original investment in the Minneapolis Star-Tribune. The firm acquired the Star-Tribune in late 2006 for $530 million.
In a letter to shareholders, Avista states "In the past year, the newspaper industry has suffered greater than expected declines in circulation and advertising revenue, particularly in print classified advertising."
Greater than expected? Expected by whom? There were a lot of people (including this blog) who have made strong arguments for some time now that the newspaper industry is dead.
During the past 18 months there have been a number of newspaper acquisitions, many by supposedly smart people. Private equity firms boldly entered the market, thinking they could work the same magic they'd worked in manufacturing companies. But turning around a broken company is one thing; turning around a broken industry and a broken business model is something else altogether.
The excuse du jour is that the newspapers didn't anticipate the impact that Craigslist would have on their classified advertising. Again, that "anticipation" problem could have been easily solved had they read this blog, Ken Doctor, John Blossom or any of a dozen others. Or, perhaps attended any of the many conferences like Information Industry Summit, BSeC or PaidContent events where this has been flogged (like a dead horse) for the past few years.
But speaking to executives at the Argyle Forum (via Silicon Alley Investor), former Time and WsJ editor Norm Pearlstine says that much of the problem is the lack of innovation by newspapers during the 1980's when they had huge margins.
The last game-changing innovation by a major newspaper chain was the launch of USA Today, in 1980.
Pearlstine suggests that we are headed back to a highly fragmented news market, like we had at the end of the 19th century when each city had dozens of small newspapers. He feels that newspapers cannot afford to support the type of investigative journalism that we've had in recent years.
That would be a big loss as investigative reporting is needed to balance the powers of government and business. I hope that some major newspapers can maintain that level of reporting (perhaps funded by benefactors not looking for profits) but it's pretty clear that there will be a lot fewer that will offer substantive reporting in the future.
UPDATE: It turns out that there's one more critical news source who is ahead of the private equity firms in figuring out that the newspaper industry is broken. Here's a new article from a great source of investigative reporting themselves - The Onion: Dying Newspaper Trend Buys Nation's Newspapers Three More Weeks. Killer pseudo-quote:
It's nice to see that the printed word is still, at least for now, the most powerful medium for reporting on the death of the printed word.
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