Correction to This Article
Earlier versions of this story incorrectly said that the New York Times Co. borrowed $250 billion from Mexican billionaire Carlos Slim Helu. The company borrowed $250 million. This version has been corrected.
How Low Will Newspapers' Ad Revenues Go?

By Howard Kurtz
Washington Post Staff Writer
Thursday, February 19, 2009

When Arthur Sulzberger Jr. refused to talk to his own reporter about the financial condition of the New York Times Co., it was the latest sign of an industry in deep trouble.

After all, the Times is not only the nation's top-selling metropolitan daily but also boasts the top newspaper Web site, averaging 19.5 million unique visitors each month. Its struggles have sparked a passionate debate about how to wring more cash from the online world where the Times, like most newspapers, gives away its wares for free.

Sulzberger, the chief executive, declined to comment for an article last week that described the Times Co. borrowing $250 million at 14 percent interest from Mexican billionaire Carlos Slim Helu -- described by the paper two years ago as having a "robber baron reputation"-- while trying to arrange a sale-leaseback of its Manhattan headquarters and unload its stake in the Boston Red Sox.

The Times, which has barely cut its 1,300-person newsroom, the largest in the business, remains in better shape than many newspapers. The debate over its future is merely a snapshot of the argument over how to save newspapers from turning into tomorrow's Detroit automakers.

Thriving newspaper Web sites may be popular -- USA Today and The Washington Post also drew more than 10 million monthly visitors last year -- but they are slowly strangling print circulation. Online ad revenue remains far too modest to support the sizable reporting staffs that make newspapers worth reading and enable them to do real digging.

"We have to find some method to allow people to pay for content and make it easy, just one click," says Walter Isaacson, Time magazine's former managing editor. "The main problem isn't that people won't pay 15 or 25 cents for today's Washington Post. It's the rigmarole of putting in credit card numbers and e-mail addresses. We need to allow impulse purchases of content."

A wave of newspaper shutdowns seems likely this year as revenue continues to plummet. Tribune Co. and the Minneapolis Star Tribune are bankrupt. The Seattle Post-Intelligencer and Rocky Mountain News are for sale and will probably close if buyers cannot be found. Layoffs, buyouts and cutbacks are endemic. Even among the biggest papers, the Times has folded its Metro section into the paper, while The Post has killed its Sunday Source section and is dropping Book World as a separate section.

It was arguably a mistake for newspapers and magazines to hand out their goodies to anyone with a computer screen, but the culture of the Net was -- and is -- that everything should be free. The question now is whether that mind-set can be changed.

Isaacson argued in his old magazine that newspapers should adopt an iTunes model of charging for bits and pieces of content: "Steve Jobs got music consumers (of all people) comfortable with the concept of paying 99 cents for a tune instead of Napsterizing an entire industry."

But that struck a discordant note. People keep songs for a lifetime; news stories are ephemeral. And why would readers pay anything for, say, a Los Angeles Times piece on Hollywood when they can read Tinseltown news on Yahoo, Google, AOL, Huffington Post, Drudge and a thousand other Web sites? (Yes, most of these sites recycle and pontificate on the original reporting done by newspapers, but that distinction is lost on many folks.)

Michael Kinsley, founding editor of Slate, which once carried a $19-a-year subscription fee, noted in the Times that "we were quite self-righteous" about charging for content and believed that giving it away "was an insult -- as if we were just making Jell-O salad in order to sell Tupperware." Slate dropped the charge after a year. The Times itself abandoned an annual $50 fee for access to its columnists, which slashed their readership and walled them off from the thriving online conversation that is part of the Net's strength. (Only the Wall Street Journal has succeeded in billing its affluent audience; many of its 7.2 million monthly visitors can charge the fee to corporate accounts.)

Isaacson, now president of the Aspen Institute, says music might not be the perfect analogy but that newspapers can make "real money" even if, say, only 20 percent of their online readers kick in.

Others, including the New Yorker's Steve Coll, a former Post managing editor, say an endowment should be raised to support quality journalism -- a $2 billion fund that, he says, could underwrite The Post's news operation by spending 5 percent a year. But that not only treats newspapers as a charity case, it raises ethical concerns: Who would manage the fund, who would contribute, and how could the newsroom be protected from donors' political influence?

Coll says many universities handle the dilemma through tight restrictions, while some "accept money from corporations for scientific research, and it turns out they didn't insulate the scientists from conflicts of interest. Some newspapers are used by their owners as tools of political manipulation from time to time." He says any trust could be based on a document "that made the independence of the editor sacrosanct."

Otherwise, says Coll, The Post will likely follow the cost-cutting path of the Los Angeles Times, Boston Globe, Miami Herald and other metropolitan dailies that can no longer "support the breadth and depth of journalism they sponsored 15 or 20 years ago."

ProPublica, a nonprofit investigative newsroom that sometimes teams up with newspapers, has shown early promise. But much of its $10 million annual budget has been donated by Democratic Party donors Herbert and Marion Sandler, former bank owners who were named by Time as among the 25 people to blame for the financial crisis.

Editor & Publisher blogger Steve Outing touts a start-up venture called Kachingle, which would collect a voluntary fee for access to online news and blogs -- say, $5 a month -- and readers could direct money to their favorites by clicking on Kachingle buttons on those sites. Voluntary donations may sound fanciful, but during my online chats, readers often tell me they would happily pay a modest fee to support The Post's Web site if there were a mechanism for doing so.

Yet another idea is a San Francisco site called Spot.Us, underwritten by the Knight Foundation. Would-be journalists (news outlets can play, too) post story pitches and try to collect enough online donations to fund the reporting.

Still others, perhaps emulating such bailed-out banking giants as Citigroup, prefer a government rescue. The owner of the struggling Philadelphia Inquirer recently sought state economic-development funds from Pennsylvania Gov. Ed Rendell. But if the request had been granted, who would believe the paper would investigate the Democrat's administration quite as aggressively?

The disappearance of some newspapers would not mean the end of independent reporting. Some Web operations, such as Talking Points Memo, have broken valuable stories. Voice of San Diego, a Web site that gets 30 percent of its funding from a local businessman, has exposed several municipal scandals. But even in their shrunken state, local papers provide the bulk of watchdog reporting at city halls and statehouses.

After decades in which newspapers grew fat and happy as a near-monopoly, the business model is busted. Perhaps it is too late to persuade consumers to cough up the monthly equivalent of buying a vanilla Frappuccino (though it was once conventional wisdom that no one would fork over money to watch television). But if so, that's a shame.

You ultimately get what you pay for. And if there's not enough public appetite for the kind of journalism that holds politicians and public figures accountable -- ranging from Tom Daschle's tax problems to Citigroup's planned $50 million private jet to Barry Bonds's alleged steroid use -- then such efforts will wither on the digital vine. Of course, we might come up with a brilliant new strategy for financing newspapers. But don't count on it.

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