Moody’s
tells papers to trim printing, circulation costs
Newspapers
need to figure out how to reduce their high fixed costs of printing
and circulation or their low credit rating could fall even farther,
New York City-based Moody’s Investors Services said in a June
4 report.
John Puchalla, Moody’s
vice president and senior analyst, said in the report that the newspaper
industry’s fundamental problem is spending too much on producing
and delivering a printed product rather than on creating its content
and selling the finished product, Editor & Publisher reported.
Moody’s labeled the
problem a “structural disconnect,” with an average of
14 percent of cash operating costs devoted to content creation, while
about 70 percent of costs are devoted to printing, distribution and
corporate functions. About 16 percent of costs are related to advertising
sales, the principal revenue driver.
“This disconnect
is a legacy of the industry’s vertical integration beyond content
creation and into the production and distribution of newspapers,”
Puchalla said in the report.
According to E&P, Moody’s
report said an online-only model is probably not practical right now,
but a “hybrid model,” combining a greater emphasis on
Web content with reduced print frequency, might be the answer.
Nearly all publicly-traded
newspaper companies have credit ratings considered below investment-grade
or “junk,” E&P reported. Low credit ratings increase
the cost of borrowing and reduce access to money from lenders and
institutions that will not hold stock in junk-rated companies.
Puchalla said that as low
as newspaper credit ratings are now, “additional downward pressure
remains.”
The item above
was written, at least in part, from published reports by Jennifer
Skala, a graduate student at the Northeastern University School of
Journalism and a news staff coordinator for the Bulletin.
