Saturday, October 07, 2006

Duke lacrosse: Citizen journalists slam N&O

Agenda-driven liberal and leftist professional journalists at the McClatchy News Company's Raleigh News & Observer used an unstable hoaxer's wildly improbalbe and unsubstantiated claims as the basis for the following headlines which the N&O ran five column wide on page one and above the fold on March 25:

DANCER GIVES DETAILS OF ORDEAL
A woman hired to dance for the Duke lacrosse team describes a night of racial slurs, growing fear and, finally, sexual violence
Those headlines are one example of the N&O's biased, inaccurate and inflammatory Duke lacrosse reporting which, in the words of one veteran journalist, "violated every bedrock principle of ethical journalism."

Yesterday at the N&O's Editors’ Blog Deputy Managing Editor Linda Williams offered the N&O's latest justifications for a story its executive editor for news Melanie Sill tells readers she's "proud" of.

N&O readers commenting in response to Williams' justifications don't see why the N&O is proud of its Mar. 25 story.

Those readers, in the best citizen journalist tradition, are exposing the falsehoods in the N&O's original Mar. 25 story. They're also refuting and exposing point-by-point the self-serving, incomplete and misleading justifications Williams made in her post and Sill has made on the comment thread.

You don't want to miss it.

The citizen journalists, God bless them, are serving all of us, and most especially all the innocent people the N&O has so recklessly harmed and endangered.

I plan to leave a comment at the N&O and another here tonight.

4 comments:

Anonymous said...

I like your info on The Paxton Media group. I'm from Paducah KY, center for Paxton bias. I run a small website to inform people in this community of the bias that is in thier publications, and I mention the paper in N.C. While I don't agree with everything we post on the site, it's a local center for free speech since the Paxton Media Group owns the local paper and the NBC affiliate WPSD-TV in this town. The site is www.paducahmoon.com Looking forward to hearing from you.

Anonymous said...

John,
The following concerns the H-S. It's lengthy and I'm looking at their revenues plus some history on their bids. I also note that they have seen a loss of 5-6k readers over the past 18 months (I found a figure for the 6 months to january 05 while the current is the six months to july 06). I have the price that Paxton paid for H-S (125 mil) which was thought to be double the 'fair' value at the time of purchase by financial analysts. My revenue figures for the readers are fairly accurate - if they are subscribers paying the actual rate (no renewal discounts) then they make $7,100,000 off readers and if we're generous and add in machine purchases etc we can round to 10 mil in reader revenue. I've assumed 10-20mil in ad rev and a 10 percent profit margin which is probably a bit much as the H-S was thought to be half as profitable as comparable papers at the time which have low margins anyway. They bought H-S in an auction and apparently had 'buyer's remorse' afterward; at the time of the auction they all wanted it and weren't really 'thinking' - which is why 43 staff went the first day (although they were overstaffed relative to comparable papers to begin with).

I hope this is of some value. I'll also note that Paxton Media Group is focusing quite a bit on the ad segment as opposed to the reader market - they launched an ad supported free paper (weekly) not that long ago.

The basic point is that no one would touch this paper at the price Paxton would need to receive due to their purchase price. Therefore the paper is set to remain a local 'monopoly' (87% Durham market share) that will continue to concentrate on Durham by well focusing on Durham (as in ashley continues his baiting tactics)

I have done a bit more research on the Herald Sun under Paxton (I have not looked at the above poster's link but will when I get the chance). The bottom line is that Paxton 'overpaid' when it purchased the H-S with the 'consensus' (by financial analysts covering the newspaper/media sector) being that they paid about twice what the paper was worth. The price tax on H-S was $125 million which based on January 2005 circulation numbers (paper was bought the year before so I would imagine they had more subscribers then but I'm basing it on 05) Paxton paid $2500 per H-S reader. Note that H-S had ~50,500 M-F readers at that time (~44,600 18 months later). By the way H-S has ~45,100 Sunday readers compared with ~51,000 18 months ago, ie, they have lost ~6,000 sunday readers and sunday is the most profitable edition (because they lost more sunday readers than m-f it appears that either subscribers are choosing for m-f, m-sat in greater numbers as the decline isn't proportionate and m-f has a lot of 'nonsubscribers' buying the paper from the machines which is also much more profitable).

So...they originally paid $2500 per M-F reader although presumably they had more a year before hand so they actual placed a lower value on it to begin with (this is of course not a good valuation but there are no financial statements for H-S available). In the 18 months (newest audit figures are July 06) that valuation has become ~$2800/subscriber.

Here are the rates for the H-S:
Note: Daily means M-Saturday
Daily and Sunday $43.50 $87.00 $159.00
Those 3 rates are for 12,24,48 weeks

Saturday/Sunday Combo $28.50 $57.00 $114.00
ie you only get it sat, sunday note that sunday is expensive to get...which you will see next:
Sunday Only $24.00 $48.00 $96.00

M-F is ~138/year.

My main point here is that if we assume that all readers are subscribers and all readers subscribe to the MTWThFSatSun service then based on the *exact* audit number of 44,651 M-F subscribers the H-S would make ~$7,100,000 in subscriber revenues a year. This ignores discounts that you get when renewing which can be fairly large but excludes the high margin machine sales.(seems reasonable to use - I've been rounding down above but not in the calculations just when typing the subscriber count out)

Let's assume that in total - all readers subscribers and those who buy from machines - the H-S makes $10,000,000 from subscribers/yr.

Let's also say they make the same amount in ad rev (it could be double but the numbers are going to be basically the same for profit - error of about a mil). H-S - and this is being generous - *might* manage to get a 10 percent profit margin (in fact the speculation was that H-S was half as profitable as comparable papers at the time of purchase). Then counting 10 mil ads and 10 mil from those paying to read the ads:) then the total rev is 20 mil and the total profit is 2 mil.
If ad rev was 20 mil we'd get 3 mil obviously. On a profit of 2 mil it's
~$44.80/reader on 3 mil it's ~$67.20/reader in profits. That, however, is not what matters at all.

Paxton PAID $125 MILLION for a paper that makes $2-3 MILLION A YEAR ( in fact the paper was losing money up until six months before the sale which is one reason why paxton also cut 43 staff on the first day they took over - they needed to justify the price).

We can all do math here and it seems that Paxton paid a price/earnings ratio of 62.5-41.67. I'm going to guess that the analysts thought that 3 mil (p/e of 41.67) was a good profit figure for the company regardless of revenue or margins because it validates their suggestion that the price was double the value. What that means is that the 'fair p/e' is ~20.835 p/e.

Let's just make that 20 (and it's still too high but it might be fair because isn't exactly comparable to other papers as H-S has a near monopoly on Durham advertising (they boast that they have an 87% market share in Durham on their advertising section of their web site).

Paxton overpaid and is living with a nightmare paper with declining readership. They are lucky in the sense that they have a 'hold' on the market. Their 'problem' is that they probably are alienating some readers (no need to go into demographics here) and will see another fall in the january audits/post lacrosse hoax effect. Anyway they also launched a 'community paper' apparently to capture the market that doesn't want to pay but where they can still get ad money (that is Paxton's main 'innovation' since taking over the H-S - a freebie paper).

There is NO WAY a RATIONAL company would take over H-S at >100 mil. H-S is also not an East Coast spring board - it is a regional paper that has monopoly power over newspaper ads in the Durham area (87% market share - 13 percent to N&O i'm sure).
The fair price on that paper is probably 50-60 mil and if there was an auction they might get 70-80 mil (they overpaid because they were taking part in an auction and felt they 'had' to win - and then had buyers remorse).

Anonymous said...

Interesting. Could someone offer an analysis of the News & Observer? Does McClatchy ownership of the N&O, the Charlotte Observer, the Columbia (S.C.) State, the Hilton Head paper and others mean that the Carolinas are in for a Sacramento-Minneapolis left-wing tidal wave. (See the Power Line blog to check up on the Minneapolis publication, one of the most left-wing papers in the nation and edited by Melanie Sill's predecessor.) Are McClatchy's top editors even to the left of the Knight-Ridder editors?

Anonymous said...

OK, I know this thread is old, but I feel like it's in desperate need of some context so people don't take the revenue calculation to be accurate. First off, the H-S, like all U.S. newspapers, relies MUCH more on ad revenue than on subscription revenue. The average U.S. paper gets about 70% of its revenue from ads and only 30% from subscriptions. That's why every time you see a story about newspaper layoffs, it cites the drop in ad revenue as a reason (and makes no mention of subscription revenue). In fact, the disparity between the two is so great that in many discussions about future business models for newspapers, there is strong advocacy for giving the paper away for free and relying completely on advertising (whether that's a smart move is a debate for another day).

Therefore, the assumption here that the H-S takes in as much from ads as it does from subscriptions is pretty far off-base.

The post also mentions a free weekly newspaper. As someone who worked at the H-S before and after Paxton took over, I can tell you there was no such publication. The N&O, on the other hand, did launch the Durham News, which was given away for free to N&O subscribers, along with a severely discounted one-year subscription rate to the N&O, as part of the effort to lure readership. Perhaps that's what the previous poster was referring to. And from what I know, the ad rates for that publication are severely discounted so as to lure advertisers away from the H-S.

And the idea that the H-S has a monopoly on the Durham market is pretty silly. The N&O has been a serious competitor for a long time, and it was only due to the hard work of the staff at the H-S that the N&O was kept at bay in the Durham market. With the severe cutbacks that have taken place and are still taking place at the H-S since Paxton took over, the door is swung wide open for the N&O (and Paxton people are idiots if they thought they were buying a paper without much competition).

As for another poster's idea that the McClatchy acquisition of papers in the Carolinas would lead to a "left-wing tidal wave": If you really believe that somebody is sitting in the Sacramento or Minneapolis corporate headquarters directing the daily news coverage and editorial directions of all the papers in the chain, then you really have no idea how a newspaper gets put together. Mostly what will change are the people making the call in terms of how much staff to keep, how big their budget is, etc. And by the way, the irony is that the people sitting in those corporate offices are much more likely to be on the right side of political spectrum.