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March 10, 2020, 1:51 p.m.

How much danger does coronavirus pose to the battered U.S. news industry?

Declines in ad revenue and all those canceled events might prove manageable. But the real risk would come with a virus-inspired recession — and how the industry’s hedge-fund owners might respond to it.

The news cycles of the past few days have been almost completely monopolized by the novel coronavirus, with stories that would have dominated headlines not that long ago seem to have been shoved deep inside the Internet’s A-section.

(Just this morning, Harvard — where we at Nieman Lab and the Nieman Foundation work — announced it was making all classes after this week virtual for the rest of the semester, telling students they needed to vacate their dorms by Sunday evening. Expect a significant share of the next couple of months’ Nieman Lab stories to be written and edited from our kitchen tables. Or coffee shops practicing good social-distancing hygiene.)

But amid it all, it may have gotten lost just how dangerous the COVID-19 disruption is to the American news business — in particular, its most endangered segment, local newspapers. I’m not talking about the journalistic risk, which are very real: staffers coming down with the virus, quarantines hurting their ability to report effectively. I’m talking about the risks to the battered business of reporting the news. Here’s a sampling of some of the biggest, in what I’d consider increasing order of potential damage.

Event cancellations. While events are still a small slice of the overall revenue pie for most publishers — less than 10 percent for nearly all local outlets — cancellations can come with catastrophic losses of payments made upfront. It’s not just the events about journalism that are shutting down; it’s the festivals, conferences, town halls, and other events produced by news organizations. That’s an especially big loss for national outlets who generate big chunks of their annual revenues in a single weekend. And even if your event doesn’t get canceled, who knows how many of the people who would have bought tickets will stay home and watch Netflix instead? This will be a small and nagging problem for most, but potentially existential for some.

Home delivery. Remember, most newspapers still make the clear majority of their money from the print edition, not anything digital. Most of the readers they deliver the print paper to are older and thus more at risk of infection.

If lockdowns on travel and movement within cities grow more intense, how will it impact the thousands of delivery people who take those papers from printing plant to front porch? Will some sneeze-happy paper deliverer be found to be spreading his virus all the way down his route?

Newspapers were already having a very hard time finding people willing to do that job, thanks to new competition from Uber et al.; but now even Uber is worried about keeping drivers — not to mention passengers who might not be too keen on being the 18th person to sit in that particular backseat today. Physical distribution is likely to get caught in the web of whatever changes come.

Advertising declines. This impacts all levels of the news. Big TV networks are canceling their upfronts to pitch their shows to ad buyers. Nervous advertisers are blocking their ads from appearing next to coronavirus stories, making an increasingly popular subject harder to monetize.

Many outlets, especially NBC TV stations, expect a quadriennial boost in ad revenue and audience because of the Summer Olympics. Will they still get it if athletes in Tokyo play before empty arenas — much less if the games are canceled altogether?

Perhaps most importantly, all the companies that stand to lose big in the coming months — hotels, airlines, restaurants, movie studios, cruises, trade shows — will almost certainly have less money to spend buying ads. (And Purell and Clorox don’t need to — they can sell out their inventories via panicked Amazon searchers alone.)

The New York Times Co. has already warned that it is “seeing a slowdown in advertising bookings due to ‘uncertainty and anxiety’ caused by the coronavirus” and projects it’ll be responsible for a roughly 10 percent drop in digital ad revenue this quarter. And that was eight days ago, when there were only about 80 confirmed cases in the United States; now there are 790 people in 36 states, a total expected to rise substantially over the next two weeks. Other companies elsewhere are expecting similar drops.

The Times has a failsafe: It is far less reliant on advertising revenue than it used to be, and far more reliant on revenue from readers via digital and print subscriptions. More than 5 million paying subscribers can do that for you. But most news outlets — both local and national, both print- and digital native — don’t have that backstop. They’re far more at risk; what for the Times might be just a minor infection could be fatal for its weaker relations.

Recession risk. This is the potentially catastrophic one. The American news industry had gone through enormous struggles in the decade-plus since the Great Recession began. And for the past 10 years and eight months, they’ve been struggling within an economy that is steadily (if unspectacularly) growing. Over that span, I’ve heard the question a hundred times: If this is how bad things are when times are good, what the hell is gonna happen when there’s a recession?

Some headlines from the past day or so: “A ‘short, sharp’ global recession is starting to look inevitable.” “There will be no easy cure for a recession triggered by the coronavirus.” “These top economists just upped their odds of a U.S. recession.” “The markets are sending a message about coronavirus: The recession risk is real.”

The news industry has long been unusually responsive to the broader economy; advertising gets cut more quickly than overall spending does. (In 2009, U.S. ad spend dropped 12 percent, significantly more than the 2.5 percent decline in the overall economy. That responsiveness is why the classic chart of newspaper advertising is so wavy even decades before the web came along.)

The local newspaper business entered 2020 in an unusually tense state. Its largest two companies, No. 1 Gannett and No. 2 GateHouse, merged in November. The new No. 2 company, McClatchy, just declared bankruptcy. No. 3, Tribune, is currently being pillaged by the hedge fund that has already pillaged by No. 4, MNG Enterprises.

All of these companies are now either owned, run, deeply in debt to, or being puppet-mastered by one or more hedge funds or private equity firms, and they are all watching a June 30 deadline that is likely to prompt a new round of mergers and acquisitions.

There is exactly one thing that these financial actors find appealing about owning local newspapers: the opportunity to engage meaningfully in the day’s civic discourse through bold journalism that meets the needs of the communities they serve.

Lol, no, really: The one thing is that newspapers generally still throw off predictable cash flow quarter after quarter, and they’d like to have it. The money guys want to milk those assets for as long as they can — cutting costs to the extent possible, pulling out money via questionable dividends, management contracts, and other self-serving, and making sure expenses stay a reliable level below revenues. They appear to have no real end game other than discarding whatever husk remains.

How will those hedge-fund and PE guys react if their newspapers face a sudden revenue shock — and their once-predictable cashflow becomes a lot harder to pull out? I don’t know! But private equity funds are not known for their humane treatment of companies that have outlived their perceived usefulness. At an absolute minimum, expect another and bigger wave of layoffs. In the worst case, could a coronavirus-aided recession be the thing that leads to the wave of daily newspaper closures people have been anticipating — but not seeing — for the past decade?

Photo of microbiologist Kerry Pollard extracting a coronavirus sample at the Pennsylvania Department of Health Bureau of Laboratories, March 6, 2020, by Pennsylvania governor’s office used under a Creative Commons license.

Joshua Benton is the senior writer and former director of Nieman Lab. You can reach him via email ( or Twitter DM (@jbenton).
POSTED     March 10, 2020, 1:51 p.m.
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