Earlier this month, HBO’s John Oliver devoted the main segment of his weekly show, “Last Week Tonight,” to highlighting the dire state of local journalism.

In a 19-minute rant that only he could deliver, Oliver offered what amounted to a primer on the economic factors that have decimated local newspapers across the country.

“The newspaper industry today is in big trouble,” Oliver said. “Papers have been closing and downsizing for years, and that affects all of us.”

As it happened, Oliver’s monologue, which has garnered more than 5 million views on YouTube, was a timely illustration of the plight facing Oahu Publications, the publisher of the Honolulu Star-Advertiser.

Two weeks ago, the Honolulu-based publishing company, which also owns MidWeek and a number of other Hawaii publications, let go of eight nonunion employees including MidWeek editor Don Chapman — in addition to leaving 20 vacant positions unfilled this year — to offset losses in print-advertising revenue.

And more trimming is in the works. Dennis Francis, the company’s president and publisher, told Civil Beat that the Star-Advertiser’s unionized newsroom will be downsized through buyouts and job cuts — by a yet-to-be-determined number — within the next several weeks.

In many ways, what’s happening at Oahu Publications fits a dismayingly familiar narrative: As print-advertising revenue continues to decline precipitously for newspapers across the country, digital advertising has yet to take a strong enough footing to make up for the losses.

As Oliver put it, it’s “like finding a lucky penny on the sidewalk on the same day your bank account is drained.”

Online Advertising Revenue Still Lacking

The plight facing the newspaper industry is best explained by a much-reproduced line chart put together by Mark Perry, a professor of economics and finance at the University of Michigan.

Perry’s chart, based on figures from the Newspaper Association of America, shows print-advertising revenue taking a nose dive from a peak of $67 billion in 2000 to $16.4 billion in 2014 — a decline of more than 75 percent.

Digital advertising has made up for some of the losses, but its contribution has essentially been a drop in the bucket: In 2014, it amounted to only $3.6 billion.

That’s not to say that there’s no money to be made in digital advertising. There is: $59.6 billion in 2015, according to the Pew Research Center’s annual study.

But Facebook, Google and other tech giants have an iron grip on the market, gobbling up a lion’s share of digital-advertising dollars — $38.5 billion out of the $59.6 billion, or 65 percent.

The net effect has been devastating for the journalism workforce. According to the American Society of News Editors, the number of full-time newspaper jobs in 2015 was 32,900, the lowest since the organization began the annual count in 1978.

And, if the earnings reports from publicly traded companies are any indication, no reprieve from the “newspaper death spiral” — as Reuters once called it — appears to be in sight.

At Gannett, advertising revenue fell by roughly 10 percent year-to-year in the second quarter. McClatchy‘s advertising revenue was down by 11.1 percent. And The New York Times Company saw its print-advertising revenue fall by 14.1 percent, down for the eighth-straight quarter, while its digital-advertising revenue dropped by 6.8 percent.

American Enterprise Institute

Near-Monopoly In Hawaii

It’s difficult to get a full financial picture of Oahu Publications, as it’s owned by Black Press, a private Canadian company that doesn’t report its finances publicly.

But Francis told Civil Beat that, by and large, the company has been able to weather the storm and keep a steady stream of revenue coming in.

That’s in no small part because the company has been able to leverage the fact that it holds a near-monopoly over the state’s newspaper market.

Besides MidWeek and the Star-Advertiser, the company owns Hawaii Tribune-Herald, West Hawaii Today and The Garden Island, effectively cornering the market on the Big Island and Kauai.

The Maui News, owned by West Virginia-based Ogden Newspapers, is the only daily newspaper in the islands that’s not part of Oahu Publications.

Still, Francis said things changed last year, when an exodus of spending by major national retailers, like Macy’s, led to a “sharp fall off” in its print-adverting revenue.

Francis declined to discuss the extent of the company’s shortfall.

“At this juncture, I feel comfortable in saying only that it was a significant enough for us to be forced to look at some offsetting cost reduction measures, including in staffing,” Francis said.

Rick Edmonds, media business analyst at The Poynter Institute, a leading journalism think tank and training organization, said the company’s experience mirrors the industry trend.

“There was some hope that (the decline in print advertising) may start to level off. But, in percentage terms, it’s been worse in the past two years,” Edmonds said. “And I certainly expect it to continue this year and the next year.”

Honolulu Star Advertiser offices Restaurant Row1. 27 may 2016
Dennis Francis, Oahu Publications’ president and publisher, is confident that the looming downsizing of the Honolulu Star-Advertiser won’t affect the quality of its reporting. Cory Lum/Civil Beat

Union-Related Cuts?

The job cuts at the Star-Advertiser come at a rather contentious time — when the union contract for its editorial employees is set to expire at the end of the month.

In the upcoming weeks, the Pacific Media Workers Guild, which represents the Star-Advertiser’s editorial employees, will sit down with the company’s management and begin negotiations for a new contract

Still, Sjarif Goldstein, a sports editor who will lead the negotiation, declined to speculate whether the company is trying to play hardball.

“There was some hope that (the decline in print advertising) may start to level off. But, in percentage terms, it’s been worse in the past two years.” — Rick Edmonds, media business analyst at Poynter Institute

“We’re certainly aware that that’s a possibility,” Goldstein said. “But I haven’t really thought about how it’s going to affect the negotiation.”

Francis denied that the job cuts have anything to do with the contract negotiations.

“That’s a game — I don’t play that,” Francis said. “I can see how someone might think that’s some kind of leverage, but that was not our intent at all.”

And it appears likely that the job cuts, if any, will be carried out long before a new contract is signed — a process that could take several months.

Two weeks ago, after the company offered buyouts to union employees, Francis told Civil Beat that he planned to wait for up to 45 days to gauge the interest before deciding the number of the job cuts.

Under the terms of the company’s “voluntary separation incentive program,” those who take the buyout will receive severance payment equal to one week’s wages for each year of employment, as well as medical insurance for three months.

But, last week, Francis moved up the deadline for signing up for the buyout to the end of this week because, he said, “a few individuals” had already come forward.

“So we felt that there’s really no need to have such a lengthy period to respond,” Francis said.

In theory, at least, that means the job cuts could come as early as next week.

But Francis ruled out the possibility. “No announcement will be made that soon,” he said.

A segment in John Oliver's HBO show featured a fake trailer for a movie called Stoplight, in which click-friendly stories about a cat that looks like a raccoon is favored over an expose on local corruption.
A segment in John Oliver’s HBO show featured a fake trailer for a movie called “Stoplight,” a parody of the Academy Award winning “Spotlight,” in which click-friendly stories about a cat that looks like a raccoon is favored over an expose on local corruption. YouTube

The Future Is In Digital Advertising

Whether Oahu Publications can avoid similar job cuts in the future will likely depend on how successful it is in shedding its dependence on print advertising.

The task looks daunting, given that print advertising remains the lifeblood of the company, accounting for about 55 percent of its overall earnings.

Gerald Kato, chair of the communications school at the University of Hawaii, said the first order of business for the company is clear: putting more resources into its digital products and boosting digital-advertising revenue.

According to Francis, digital advertising now accounts for less than 20 percent of the company’s overall earnings — below the industry standard of about 25 percent.

But Kato said the Star-Advertiser has been slow in making headway online.

“They’re still finding their way in the digital world,” Kato said. “I don’t think the culture there has gotten into this digital-first mentality. They still think of themselves as a print newspaper company.”

The company will also need to grow its circulation revenue, which comes from both print and digital subscriptions, as well as newsstand sales.

“I don’t think the culture there has gotten into this digital-first mentality. They still think of themselves as a print newspaper company.” — Gerald Kato, chair of the communications school at the University of Hawaii

By one metric, the company appears to be on a solid footing; the Star-Advertiser circulation, for instance, has remained steady over the years.

According to the reports submitted to the Audit Bureau of Circulations, the Star-Advertiser’s print circulation was 117,885 in 2010, when it was launched following the merger of the Advertiser and the Star-Bulletin.

Five years later, the number was down slightly — by about 450. But the company put up a paywall in 2011, gaining an additional 5,391 digital-only subscribers in the process.

Still, only 25 percent of the company’s overall earnings comes from circulation revenue — a far cry from the experiences of national and international newspaper companies, like The New York Times and the Financial Times, both of which raise more than half of their revenue from their readers.

As Ken Doctor, a noted media business analyst, pointed out last week in his article for the Nieman Journalism Lab, local newspapers like the Star-Advertiser have historically struggled to broaden their base to boost circulation revenue.

Doctor wrote that the reason isn’t necessarily because national newspapers like the Times can draw upon a much larger universe of their potential subscribers; it’s because local publishers’ business logic — “cut the news staff in half and charge twice as much for the remaining output” — has made little sense.

“Consumers have responded understandably by walking away,” Doctor wrote.

Kato said the Star-Advertiser might fall into the same trap with the looming downsizing of its newsroom.

“Having fewer people being on the streets and making those phone calls to check out the information just makes it even less effective in terms of covering the news,” Kato said.

For his part, Francis said he agrees with Doctor’s analysis.

“There are a lot of newspapers across the country that have gone way too far with job cuts, particularly in their newsroom,” Francis said. “And I think it has affected the quality of the papers.”

But Francis is confident that the Star-Advertiser won’t suffer the same fate.

“Certainly, the mission for us is not to do that,” Francis said. “We’ll have some cuts, but we’re going to try to do it as best as possible so as not to affect what the readers would actually see in what they’re used to reading.”

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