Good Til The Last Drop: The Future of Advance Publications and The Plain Dealer in the Wake of "Digital-First" Media

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Regardless of the continued day-to-day involvement of octogenarians Si and Donald Newhouse, it's clear they have begun to pass the mantle to younger Newhouse family members. The third generation not only must manage the radical shift in the very underpinnings of the family business, but they also are likely intent on defying that traditional "third-generation jinx" that fells so many previously successful family-owned enterprises. Front and center is Steven Newhouse, labeled in 2012 by the New York Observer as "the third-gen Newhouse to watch," who, with the changes at the Times-Picayune and other Advance newspapers "has proven himself a savvy businessman who little relishes underwriting a failing business model."

An unlikely defender of Steven Newhouse is Dan Shea, one of the Times-Picayune's two former co-managing editors who was unceremoniously forced out by the 2012 layoffs, and has since been hired as chief operating officer and general manager of the Advocate by its new owner, New Orleans businessman John Georges. "When I see people condemning [the Newhouses] and saying that they're doing this just because they're greedy, I don't think that's the case," Shea said in March 2013, six weeks before landing the job with the Advocate. "Steve Newhouse doesn't want to be the generation that runs this off the rails. I don't ascribe evil motives to it. People don't understand business and the serious role Steven Newhouse has in preserving his family's fortune." But Steven, his two siblings, and their cousins have limited options, given the company's overwhelmingly "legacy media" assets in today's increasingly digital media world. "They're saddled with the legacy, and they're a prisoner of that legacy," Mutter observed. "They got caught when the music stopped. The value of their newspaper assets is shrinking, and they long ago missed the opportunity to get out while the getting was good." Although Donald and Steven Newhouse have been adamant that their company will not sell the Times-Picayune, Mutter's observation points to the reality that the Newhouses' intransigence may very well represent less of an unwillingness to sell, and more of an unwillingness to sell at the price their newspapers would fetch in today's market.

The third generation of Newhouses are "pissed because they didn't sell when they should have, they're pissed because theycouldn't do anything about New Orleans after Katrina, and they're pissed now that they've got this rich guy [Georges]who's suddenly confronting them with a form of potentially asymmetrical warfare, a competitor who appears to have the assets and desire to do what it takes to be the dominant publisher in southern Louisiana," analyst Alan Mutter observed. "They're between a rock and hard place. They don't want to be the ones to turn off the lights at the newspapers. They don't want to be the ones who fail."

But improved profitability via cost reduction is the real short-term goal, Doctor, Edmonds, Morton, Mutter, and others conclude. "All of this suggests that [Advance is] trying to maximize near-term profitability against the day when [daily newspapers are] no longer a viable business," Mutter said. "What can you do this month, and next month, and for the foreseeable future? You can control your expenses to maximize short-term profitability. The plan is to keep figuring out ways to make money, and the day they figure out that they can't make money anymore, they'll close it.

On his "Reflections of a Newsosaur" blog, Mutter borrowed the term popularized in 2004's The Vanishing Newspaper: Saving Journalism in the Information Age by former newspaper editor and University of North Carolina at Chapel Hill professor emeritus Philip Meyer—the "Milk It" strategy: Accept the inevitable decline and fall of the traditional newspaper model and then whack costs to extract the most profits from the decaying business for as long as possible. As unfortunate as it may be that Ann Arbor, New Orleans or Mobile are deprived of the power of a vigorous press, the strategy evidently selected by Advance makes sense if you believe that the best days of newspapering are behind us. By cutting staff to a bare minimum and printing only on the days it is profitable to do so, publishers can milk considerable sums from their franchises until the daythese once-indomitable cash cows go dry.

Doctor predicts Advance will be more profitable in 2013 than it was in 2012, "but their print advertising is declining with everyone else's. The only way they maintain the newer, higher profit is to continue to cut expenses because they don't have increasing reader revenue. If they want 12 percent, or 15 percent profit, the only way to achieve that is to continue to cut. They will have to continue to cut content, and that's simply not a strategy."

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