Monday, July 28, 2008 | I retired from The San Diego Union-Tribune years ago, and years too early. I left after working there became no longer enjoyable. The turning point came when middle managers were deemed to be the cause of all problems there, and were not made part of the solution. New faces and high-paid consultants became the new fonts of salvation. Continuous planning was substituted for continuous improvement. Browbeating was substituted for constructive conversation.

Although the U-T’s circulation has been dropping since 2002, household penetration (the percentage of households subscribing) has been dropping since the late 1960s. On a graph you can project a straight line to zero between 1968 and 2012. The problem with a major metro like the U-T is like that of most industrial-age manufacturing plants: too much fixed overhead. Whether a single newspaper is delivered to a neighborhood or thousands, the only variable cost is that of the newsprint and ink. The fixed costs of equipment, utilities, fuel, facilities, maintenance, etc. limit the return on investment, or at least the time value of money. Long before circulation reaches zero, the cost of daily production exceeds revenues.

When the variable cost of salaries is attacked through wage freezes, reduced benefits, not replacing staff and finally reduction-in-force (RIF), the inevitable result is lost talent and the further loss of the hearts and minds of employees still on the job. Lower quality leads to lower circulation which leads to lower advertising rates (based on industry standard of cost per thousand readers reached) which lead to lower revenues, which leads to more cost cuts.

The one variable not included in the above discussion is that of profits. Newspapers historically have run at obscenely high (double digit) profit margins. When owners refuse to adjust to the new reality of single digit (or less) profit margins common in most industries, they do irrational things: they kill the goose to get that last golden egg.

With all of the U-T newsstands on the streets of San Diego, one question was never effectively answered: “What would induce the tens of thousands of teens on the streets each day to pull that quarter from their pockets and put it into one of those news racks instead of into a video game machine?” A similar question might be formed for other “market segments” now not served by the U-T. The best answer the U-T consultants were able to come up with was that “those segments couldn’t be reached anyway, so why bother?”

It must be a cold comfort for the top U-T management at the helm go down with a 100+ year old company because “it can’t be done otherwise” or that “no other newspaper is doing it” or that “no one else has figured it out either.”

Bless the people behind voiceofsandiego for going online to distribute news and opinion, where costs can be controlled more effectively. Thanks too for trying new things and for having the patience to find things that work.

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