• Associated Press, Friday, November 18, 2005 12:30 PM

Associated Press writer Seth Sutel has produced an explanatory piece on the travails of the U.S. newspaper industry. Using a convenient Q&A format, he dissects what ails the business, from rising newsprint costs to fresh competition for classified advertising. None of this is news. However, Sutel makes clear the little secret that many outside the business do not really appreciate: Newspapers still make money, lots of money. An excerpt from his piece on the subject of newspaper profits:

"Q. Wow. So newspapers must be losing a lot of money, right?

A. Actually, no. Newspapers are still a very profitable Business--for now. Industry analyst John Morton says that newspapers owned by publicly held companies earned an average of 20.5 cents on the dollar in 2004, a very healthy margin for any business. By comparison, companies in the blue-chip Standard & Poor's 500 Index of large U.S. companies made an average of 11.4 cents on the dollar in 2004, according to S&P.

Q. Wait a minute. If newspapers make about twice as much money as a typical large company, why are they cutting jobs?

A. Newspaper publishers are feeling pressure from investors to prove that they can still be profitable in the face of all these challenges. Cutting jobs and other costs, such as using less newsprint by printing a smaller newspaper, are some of the ways that publishers are trying to preserve their profit margins while revenues are faltering. Plus, many of them are expanding their efforts to make money on the Internet."

Read the whole story at Associated Press »