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A Banker's Plan to Save Newspapers

Jonathan Knee, an investment banker who advised on the San Diego Union-Tribune sale and is director of the media program at Columbia Business School, sees plenty of hope for newspapers. At the same time, he admits the newspaper industry "has not been blessed with the best managers," and that generations of monopoly profits "have dulled their senses."

Compared to media businesses like movies, music and books, most newspapers still have higher profit margins, he says. The most profitable newspapers have tended to be in monopoly markets with circulation of 20,000 to 100,000 readers. Big papers like The New York Times and The Wall Street Journal, have historically had low margins.

Knee's advice to papers is to focus on their competitive advantage, which is local. "When the smoke clears, the local newspaper, which is overwhelmingly the largest and most profitable part of the industry, will be a smaller and more-focused enterprise" doing work where its local presence gives it competitive advantage. Going forward, managers should force journalists to "think harder about what their readers want, rather than what they want their readers to want," he says.

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