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 As newspapers face the disheartening reality of continued ad declines and online competition, Moody's Investors Service reports a sobering statistic: a mere 14% of newspapers' costs arise from producing editorial content. The print distribution model and corporate overhead account for 70% of the expense. It goes without saying that Internet-only rivals don't sweat the cost of newsprint, ink, printing plants and trucks. For many newspaper companies, the cost imbalance is just the start of the problems. Bankrupt publishers Star Tribune Holdings Corp. and Journal Register Co. battled with unions during their restructurings. Both asked bankruptcy judges to erase collective bargaining agreements, before reaching settlements. New York Times Co. (NYSE:NYT) is at odds with members of the Newspaper Guild who work at The Boston Globe. Meanwhile, USA Today publisher Gannett Co. (NYSE:GCI) faces serious problems of its own. With looming credit maturities and a debilitating number of so-called negative-basis trades featuring credit default swaps combined with the industry's downturn weighing on it, the newspaper may be lucky to last through June 2011. - Chris Nolter See The Deal Pipeline story on newspapers' battles with unions (subscription required) See The Deal magazine story on Gannett's plight See The Deal magazine on newspaper industry, Black and white and red all over
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Very misleading study by Moody's. Print distribution is expensive, but, depending on which CFO you speak to (NYT or WSJ), you'll find out that print advertising generates as much as 100x more dollars than web ads, on a CPM basis. Sure, the NYT can rid itself of its distribution costs, but it would immediately shrink its revenue by over 80%.