WALL STREET VS. MAIN STREET: THE LANES CONVERGE

As papers gain financially, do they still serve the public's interests?

Wall Street has been good to the newspaper business in recent months. This became clear as I was poring over a chart last week showing a composite of 22 publicly traded newspaper and newspaper supplier companies.

The chart – itself put together by a subsidiary of a publicly traded newspaper company, Media General Financial Services – showed that starting last August, the newspaper business did better than the Dow Jones Industrial Average and has consistently outpaced that measurement ever since.

The newspaper industry segment shows a price-earnings ratio of 30.6, which is 118 percent greater than the market's price-earnings ratio.

The Media General Financial Services chart says that the one-year industry return is 38.3 percent. Not bad for a bunch of people who are still in what is essentially a manufacturing business.

(This Media General chart is available on our web site at http://colegroup.com/ and is updated frequently; we purchase the service the same way any other publisher would.)

Some recent news reports caused me to think about the primary mission of a newspaper. I was taken by the notion that what may be good for Wall Street might not be good for Main Street.

As someone who comes to newspapering from the journalism end of the business, I have always believed that newspapers are more than mere businesses. They also hold a public trust to round out the functions of democracy – to observe and comment upon the workings of the executive, legislative and judicial branches of government.

But, as someone once said, you can't help the democracy if you go out of business. So, we have developed these interesting traditions of the newsroom keeping the business side always at arm's length (while the non-editorial folk hold a certain disdain for the news side). Even in this era of editors holding master's degrees in business administration, there is still a significant percentage of newsroom personnel who hold a degree of contempt for the fact that the paper makes money. They wish it would become some sort of non-profit organization.

Listen, I've worked in non-profit organizations (even non-profit publishing organizations), and nobody wants that kind of chaos.

Unfortunately, one of the biggest reasons that reporters and editors may be ambivalent about profit is that they are so poorly compensated. It's easier to mock money when you don't have any.

But newspapering hasn't always been the road to riches: I remember the turmoil of my local newspaper when I was a child. The rumor was that the owner's son married a woman from a well-to-do family so that her fortunes could be used to keep the paper afloat (her family sold it in the ’70s and it didn't survive the ’80s).

A recent article in Publishers' Auxiliary, the paper of the National Newspaper Association, listed a number of rules of thumb that a husband-and-wife team used to make their weekly newspaper profitable, including the notion of keeping press waste to a minimum, because an extra 100 papers a week adds up to a couple of hundred dollars a year – which could make or break their business.

And you thought you had problems.

With Wall Street booming the way it has been in recent months, there's been a lot of talk about what's in the public's interest and what isn't. Some of the pundits have patiently explained that the fuel that has ignited the stock market rocket has been the Individual Retirement Account and the 401(k) plan.

The pundits' theory is that Wall Street isn't Wall Street any more, it's now Main Street. The people who own the stock market aren't fat cats (nor the legendary widows and orphans), but you and me.

So maybe what's good for Wall Street is good for Main Street. But newspaper executives have to remember that neither would exist without democracy, and democracy wouldn't exist without newspapers.

– David M. Cole

Inside ...

• As the on-line classified market heats up, NAA seeks a standard
• Times Mirror editors set out on a voyage of discovery – for readers and beacons
• Ad agency group's rates report opens up a biennial debate
• For the new Pulitzer, little will be big
• As Mercury Center goes, we can hope, so goes the Web
• Persons

From NEWSINC., June 8, 1998, Copyright © 1998, The Cole Group. All Rights Reserved.