If you believe print is doomed, the opinion of investment banker Jonathan Knee might surprise you. What follows are some quotes from Knee that appeared in the Wall Street Journal. He’s an investment banker who advised on the San Diego Union-Tribune deal and who has covered the media industry for over 15 years. Knee is the director of the media program at the Columbia Business School and the co-author of “Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies?”, which is to be published by Portfolio Books this year.

    “The reason why most newspaper companies have gone bankrupt or appear perilously close to it is that they have too much debt, not that they have stopped being profitable. … [C]ompared to most media businesses like movies and books, most newspapers still have higher profit margins …

    “There is widespread confusion … regarding the source of the shocking historic profitability of many newspapers. The most profitable newspapers have tended to be monopoly markets with circulation of 20,000 to 100,000 readers. These are not sexy papers like The New York Times and The Wall Street Journal, which have historically have significantly low margins.

    “Major market papers typically have suffered from the greatest anachronisms in their cost structure due to everything from oppressive union work rules to just bad management.

    “When the smoke clears, the local newspaper, which may not be the sexiest part of the newspaper industry but is overwhelmingly the largest and most profitable part of the industry, will be a smaller and more-focused enterprise whose activities will be directed to those areas where their local presence gives them competitive advantage and they will continue to generate as a result better profits than the supersexy businesses in the media industry asking for government or nonprofit help like movies and music.”

Bay Area Media News


  1. This article highlights the problems with Singleton’s business model. His idea was to buy up all of the newspapers in a region and then have them consolidate operations in order to save money. So instead of two nearby newspapers having separate presses, they would share one press. He promised his lenders that consolidation would free up cash that could be used to pay them off and still leave his company with handsome profits.

    What he didn’t anticipate, however, was the public’s reaction to consolidation. Going back as far as the early 1990s, when Singleton consolidated papers in the LA region or with the ANG papers in the Bay Area, circulation would drop. Why would a person in San Mateo want to read Oakland news in their local paper? When circulation drops, you can’t charge as much for ads. So his revenue dropped faster than other newspapers in the region that were still managing to hold on to most of their readers.

    Declining ad revenues eliminated any savings he got through consolidation. Yet he was left with a massive amount of debt service, that continues to cripple MediaNews.

    When the history of newspapers is written, it will be said that Singleton’s style of consolidation hurt him more than it helped him. It was truly penny wise and pound foolish.

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