Press Box

Steven Rattner’s Newspaper Ballet

The investment tycoon dances around the future of the newspaper biz.

Investment tycoon Steven Rattner puts the stethoscope to the ailing newspaper industry in a Wall Street Journal op-ed today (Feb. 15) titled “Red All Over.” Rather than telling his patient to take some very strong medicine or change its rotten business habits, he concludes that the case is hopeless and that “perhaps it’s time to think about new models for the news business.” 

Rattner’s “new models” of newspaper operation are nonprofit (like the St. Petersburg Times), tax subsidized (like the BBC), philanthropic (like burger heiress Joan Kroc’s $200 million give to NPR), and, although he doesn’t actually come out and say it with any precision, he suggests that newspaper are like the subways—too vital to the public interest to fail—and should therefore continue as government-run enterprises.

For a major capitalist addressing the nation’s top capitalist audience on the subject of capitalist media, Rattner is embarrassingly short on business specifics. He essentially believes that the newspaper industry, which sits atop a $45 billion ad market, should be treated like the ballet or other charitable causes.

Rattner’s 1,300-word diagnosis and prescription doesn’t ever consider that the falling circulation and rotten earnings reports can be simply explained: Many of the newspaper industry’s customers—subscribers and advertisers—prefer other products. That horse-and-buggy customers might prefer automobiles or VCR owners might switch to DVDs is only rational. So, if newspaper customers want to spend their money elsewhere, why should we put newspaper companies on the dole? If the cable news channels were having trouble hitting their numbers, would he send Fox News, CNN, and MSNBC to ballet school, too?

The modern newspaper “crisis” that Rattner writes about was readily apparent to the industry in the mid-1970s, as I wrote in a November column. Declining circulation, failing newspapers, and depressed advertising revenue were acknowledged by industry panel after industry panel. Changes in living and working patterns, demographic shifts, and increased transience got the blame for the business’s woes.

But Rattner’s piece neglects to mention that for better than 50 years newspaper companies have feasted on their advertisers, charging steep ad rates everywhere and confiscatory rates wherever they owned the only daily. Now that the Web is underselling them on the ad front and other media are stealing eyeballs, should we weep for them? Or should they stop the blubbering, quit wishing for the return of 1975, and start competing? I obviously think so.

In a gutsy June/July 2005 American Journalism Reviewfeature, Washington Post reporter Paul Farhi places the newspaper “decline” in perspective, noting that cable news, local TV, the broadcast networks, and radio are struggling, too. Despite drops in circulation, newspapers still enjoy an array of competitive advantages, Farhi writes. Most notably, newspapers have the very best customers, measured in both quantity and quality (demographics), have the best-established brands in their markets, and are better placed than anyone to attract local customers.

The crisis observed through Farhi’s end of the telescope reveals the poor, poor, pitiful newspapers holding a set of winning cards. Shouldn’t Rattner, who is the managing principal of Quadrangle Group LLC and “focused on the firm’s $2.9 billion media and communications private equity business,” be advising newspaper companies on how to make money and not how to surrender elegantly?

So, please, let’s call off pledge weeks for newspapers. I want the next burger heiress to give her fortune to the Pacifica Radio Foundation, not a newspaper. And let’s amend the Constitution to ban tax subsidies for newspapers. If dailies can’t make it on their own, they deserve death.


While we’re on the subject, I’d have the FCC suspend its newspaper-broadcast cross-ownership rules so that dailies can purchase television and radio stations in the markets they serve (see this timeline). If we really expect the self-pitying newspaper industry to compete for audience and advertisers, it should have the same access to customers that the competition has. What deregulatory ideas would you prescribe? Send mail to (E-mail may be quoted by name unless the writer stipulates otherwise. Permanent disclosure: Slate is owned by the Washington Post Co.)