• 
• Some highlights from this interview
• What she would do if she ran a newspaper
• The advantages of online classified ads, and what newspaper can do about it
• Private ownership as the future of the newspaper business
• Her advice for the newspaper industry

Lauren Rich Fine is a managing director in Merrill Lynch's equity research department and an expert on the newspaper industry. She has come under fire from some journalists for advising investors to avoid newspapers. This is an edited transcript of an interview conducted on Aug. 3, 2006.

... Do you like newspapers? Do you read newspapers?

I love newspapers. I get up very early every day to read three of them, and I read front to back. I don't read every single article, but I read as somebody who likes to be an educated consumer. I read professionally for things that might affect the companies that I cover.

I try very hard almost every day to find an article that I think one of my children will be interested in, because I'd like to keep them engaged in a print product. But it's not that they don't care about the information; they just know it's right online, and, without losing sight of the TV screen in front of them, with their left hand they can reach over and find it online.

And as someone who cares about papers, do you worry that this is it for papers?

No, I really don't. I really think there is an answer to the question here. Ultimately these are going to be smaller companies, not bigger, and I think it has to go back to individual private ownership. It doesn't have to be a billionaire, but I think private ownership, where they're not being held to the same financial standards, is the real key. ...

The general knock on newspapers these days as an industry is that they're dinosaurs; they're going to disappear. The Internet has come along, and the last investment you would want to make is putting your money in newspaper stock.

I don't know if it's the last investment. It's a business that I happen to feel very passionate about what it stands for, and I suspect it will still be a good business going forward, but I wouldn't want to own stocks, that's correct. There's a difference between a good investment and a good business. Typically when you invest in a stock of a company, you invest because you think it's either undervalued or you think the company's going to grow and the stock will grow with it.

“If I ran a local newspaper like the Cleveland Plain Dealer, I would go so heavily local that it would turn people's heads.”

Newspapers are not a growth business. The industry is under enormous financial pressure, and so to invest in these stocks with a very, very uncertain future is a challenge, and the advice that we've given our clients is to stay on the sidelines until we can figure out what the growth rate is, if there's a growth rate. But until then, you really don't need to own the stocks.

Giving that kind of advice, isn't that sort of putting the nail in the coffin for newspapers?

No. The funny thing is that, despite all the negative rhetoric, newspapers today are still very profitable. ... They still have margins that are more attractive than if you were to pick the average of the S&P 500 companies. ... What's become a challenge is trying to figure out that growth rate. I think they can possibly grow over time. Cynically I suspect they won't, but I think they can still be profitable. ...

So a paper like the Los Angeles Times, for instance, makes, we are told, about [a] 20 percent margin of profit; in other words, very roughly, a billion dollars in revenue a year, $200 million they can take away. ... Why wouldn't I invest in companies like that?

Well, first of all, the sense is that the Los Angeles media market is a really challenging one, ... because you've got a tremendous number of TV station outlets, networks that serve that market. Local cable ad sales are encroaching on newspapers. Radio stations are even more competitive because their industry is under the same pressure. ...

You invest at 200 because you think it's going to 250; the fear today is 200 can go to 150, and that's your fear as an investor. Newspapers generally, at one point at their peak, they were generating close to 70 percent of their pretax profits from their classified advertising: help wanted, real estate and auto. Today a good portion of help-wanted classified has gone online, a lot of it with newspapers. ... Real estate is going online; auto is going online. ...

I have kids in their 20s, and they and all their friends don't even know what a classified ad is. They all go to craigslist.

But they should. What's fun about reading microscopic print in the paper that isn't organized in the way that you think? I mean, if you're looking for a job, it's just not that helpful to do it in the paper. But if you go online, whether you go to Monster, craigslist or anywhere else, if it's done well, you can read about the job. Typically, there's something there that will take you to the Web site of the company that's offering the job. You can read about the benefits. You can go to Yahoo! Maps and figure out if you like the commute. ... Then you can submit your résumé, and you've never left your desk.

If you're looking for real estate, seeing the ad in the paper is one thing; going online and doing a virtual tour, looking at the taxes of that neighborhood, figuring out if the schools are bad or good. It's just amazing what you can do online. That's ultimately why the newspaper industry is under pressure. Classifieds are better online, period.

So what's a newspaper to do, roll over and die here?

No. Newspapers have done a great job with their classifieds online. Most classified searches are local. You might go to Monster and look, but you'd probably go to your newspaper Web site, because you know they're going have much better penetration of the local community. Similarly for real estate, you can still get paid to have a comprehensive group of these listings; it is still of value. You can be the one that brings in all those other services and brings them together. ...

[Former Los Angeles Times editor] John Carroll wants to preserve some kind of institution that will employ a lot of people to go out and turn up the news for the good of society, he would say. He also said he doesn't care ... if they're necessarily print newspapers in the future, if all of those can be supported on the Web. The problem is he doesn't see now how the Web has a financial model to support them.

Well, the Web should have a financial model, because it's all about aggregating eyeballs and selling advertising around it. ... So the margins can be as good, if not better, because of the cost structure not involving that arcane production equipment or people who have to physically deliver the newspaper. And it should allow you to reinvest more into the quality of the journalism. The key is getting advertisers to buy in and allowing the technology to unfold that allows you to target smaller and smaller groups of people. ...

Something else John Carroll told us, which is that he said [that] instead of taking the money out, the profit out of newspapers, that what newspapers should be doing right now is investing all that in the Web.

The newspaper companies are investing in the Web. They didn't initially. When we all first really became aware of the Internet, people knew exactly what was going to happen; they understood. But if you were the editor of a newspaper, you were pretty convinced that your brand would allow you to forestall any economic impact from the Internet. ... What they started to realize was that was not exactly the case; that ultimately consumers were very economic in how they make decisions, so if something was free online, they were going to try it.

We saw a complete reversal a few years into the birth of the Internet, where most companies really did put all their classifieds online, and they wanted really solid Web sites. They haven't completely kept up. I think at this point they're afraid to invest because they feel like it's changing so quickly, they're not quite sure where to spend their money.

But we've seen a completely different strategy: They're investing in Internet companies themselves. So Gannett, Tribune and now McClatchy [companies] commonly own a company called CareerBuilder, which is giving Monster.com a real run for its money in terms of trying to become the de facto online site for help-wanted advertising. ... So I've actually seen a complete reversal where they all are making newspaper investment. Of course, sitting on the side I'm sitting on, I'm trying to understand, is there going to be a good return to what they're investing in?

Some papers, like The Washington Post, have made a lot of money in a slightly more traditional way, for example, owning Kaplan. That's been very successful for them.

The Washington Post [Company] and Scripps both embarked on a very different strategy than their peers. ... Washington Post years ago bought the original Kaplan franchise that most of us remember in terms of studying for SATs, but they've transformed it into one of the really more successful lifelong learning companies in the country. They own assets ranging from SCORE!, which are centers that you take your children to to enhance their reading and math skills; ... they own for-profit post-secondary education schools; they've got the only accredited online law school. They've really invested overseas as well, so it's really been tremendous. It's added enormously to the growth rate, and it's allowed them to maintain their editorial quality at The Washington Post newspaper, where I think they've got probably the lowest margins in the industry. ...

E.W. Scripps is a company that was a newspaper and television company, recognized that those are all going to be good businesses -- they generate cash -- but they weren't going to grow at a rate that would cause people to want to own their stock. They invested heavily in cable networks, and they've got some of the most profitable, high-growth, high-rated networks -- Home & Garden TV [HGTV], Food Network -- that they've leveraged even further. Now they've got a major presence on the Internet as well. They seem to stay one step ahead of the curve. That's one where you buy it and say it's OK that they own newspapers and TV, because I know I have a smart management team that's looking into the future. ...

[John Carroll] said in general, but also speaking about the L.A. Times, "Newspapers, the big newspapers, are cash cows, but they're being milked to death." Is he right?

What he's suggesting there is that the corporations that own multiple newspapers are taking that cash flow and trying to show a certain growth rate that might not be the natural growth rate and might not be good economic decisions for shareholders long term that are helping short term. So I think it is a fair statement. ...

If you are an editor of a newspaper, in theory, you are a highly passionate human being. You care about democracy. You're really there to fight the good fight. You love investigative journalism. It's really expensive to do that, and you can't really prove that you sold more newspapers or sold more advertising as a result of good-quality journalism. ...

There have been a lot of studies done that prove that even good-quality newspapers that have maintained the quality -- The New York Times being a great example, The Wall Street Journal being an even better example -- ... you can't really prove that they're doing any better economically than their peer group. They suffer the exact same issues. ...

A lot of this gets to the threat of the Internet. If you look at younger generations, it's not that they don't want to be well-educated consumers, but they're accustomed to [having] everything at their fingertips online. They might never choose to read a print paper. It seems very arcane to them, that. By definition, it's old news if it took that time to print it and distribute it. ...

So what about the argument that young people don't read newspapers, that everyone who reads newspapers is over 50 or well-educated, so let's go after that youth market?

I wouldn't go after the youth market with a print product, which is different than saying they don't read. They do read; they just read different things. They will read a product that is tailored to them and doesn't have the Iraq war on the front of it. ... I don't think younger people will pay for a print product. I think they're happy to take it for free. There's a lot of companies that are very successful without charging for their product, TV being the most notable one, that still can survive on advertising. But I wouldn't go after the youth market specifically. It's a very fickle market. ...

The New York Times has just announced they're going to shrink the size of the paper. Is that a good idea? Does that bother you as a reader?

I don't know because I haven't seen it yet, but the paper's been losing a few inches over the last few years anyway. You probably read The Wall Street Journal is doing the same thing, and they've moved to a tabloid in Europe and Asia. It bothers me in the sense that one of the things I like about any newspaper is the predictability of being able to find things. But once you get used to a new format you probably are reasonably indifferent to it.

They need to do it in the sense that there are certain costs involved with the production of the paper, the cost of paper itself. So these are ways to try to maintain the editorial quality but cut costs that don't affect it. It certainly is a worthy experiment, and if you really think ultimately over time it moves online, it's a great way of weaning people from the print product.

What about ads on front pages?

I am completely indifferent to it. I think it's a brilliant decision. There are certain advertisers that will really enjoy getting that positioning. There have been a lot of studies that prove that most people will read the front page and that a much smaller proportion ever get past the front page. So if I was an advertiser, that's the slot that I would want. ...

In Europe, of course, they do it a lot. And papers here are putting it on the front page of other sections. ...

I don't even know why there's a debate. If you brought in anybody of my generation or anybody who's just looking at pure dollars and cents, it's just such an easy decision to make. I don't think it makes anybody think differently about the quality of the editorial. Let's just say there's always an ad by a restaurant; are you going to trust the review of that restaurant? You know something? You are going to trust it because you can't afford to compromise your relationship with the consumer by writing a positive review just because they're an advertiser. ...

You know [former L.A. Times editor] Dean Baquet, you ask him about Wall Street, he says, "Wall Street's my enemy right now."

I think Wall Street is viewed as the enemy in that there is a fixation at [the] corporate [level] on your stock price and the valuation. When you believe in your own business and you don't think you're being valued appropriately, it does become a bit of a battle. ... I think their time and energy is better spent trying to figure out what their future business model will be, because if they can figure it out ... -- we're real easy; we'll take the stock higher -- so we will no longer be the enemy. ...

The L.A. Times thinks of itself, after 1960, as being the New York Times of the West, a major player. They're very proud of their overseas bureaus, their coverage of the war in Iraq and so forth. So Dean Baquet says: "I don't care what the reader survey is telling me what people really want. I'll give them that, but they've got to eat their broccoli, too. I'm going to give them Iraq war coverage whether they want it or not."

Well, there's the interesting phenomenon. If I ran a consumer packaged-goods company and I told people that "I'm sorry that this toothpaste tastes really bad, but it's good for you," and then don't understand why I'm not selling any toothpaste, I'd get voted out of running the company. ...

So Dean is right. Everybody should care, and they should eat their broccoli, but they have a choice whether to put down their 25 or 50 cents each day, and if they don't like what's on the front page and don't think it's what they're interested in, no one should be surprised that circulation is gushing downward. ...

Do you know a guy named Dan Gillmor, [director of the Center for Citizen Media], by any chance?

I've met him once, yes.

OK. So he's got a blog. He said: "Lauren Rich Fine is one of the key Wall Streeters who are all but ordering newspaper companies to get rid of all their journalists. She and her colleagues, far more than the CEOs, run the industry these days. Wall Street doesn't give a damn about journalism and never has."

That's a little harsh. It's taken out of context, I suspect. ... If I were asked to ever come in and be a publisher or the CEO of one of these companies, yeah, there would be a bit of chaos; I would do things very differently. I don't think the old model works anymore. I don't believe consumers are willing to pay for the distinction between good-quality and poor-quality journalism, which doesn't mean you don't want to hold yourself to the standard of high-quality journalism. ...

If you can't go completely online and get rid of your production and distribution, the only other cost you have to get rid of is the editorial staff. You don't need great journalists for certain types of events. I'm not qualified to tell you what all of them are, but if I ran a local newspaper like the Cleveland Plain Dealer, I would go so heavily local that it would turn people's heads. I don't think people pick up a metropolitan newspaper today to find out about the war in Iraq or Israel. I think they pick it up to find out what's going on locally in terms of politics, in terms of crime, in terms of high school sports.

If I were covering high school sports, I would go and give a Blackberry to everybody in the audience, ... and I would have them just submit things throughout the game. I would have it all online; I would take the bad with the good, the hilarious with the way too serious. Then I would have somebody edit that and put it as an article in the paper that would make it so flavorful and full of local people's names that they would have to buy that paper because they would want to see their name in print.

If I were covering local politics, I wouldn't trust it to citizen journalists. I would trust it to a really well-educated journalist, ... but I would make sure that that reporter had a much deeper relationship with the community than they have today. I've had a chance to get to know a lot of reporters, and once you really get engaged with them, ... it's amazing how you get absolutely intrigued by what they write, because you know their personality, you know where they're coming from, and you can't wait to read either their column or their article.

[There are] ways to engage people that have not been pursued yet to the degree that they need to be. ... I've seen some really amazing investigative journalism that ended flat. ... There was no follow-up. There was no reaction. There was no suggestion of where it should go, which is what I really want that distinguishes the newspaper from other ways I could have gotten that same information. ...

If you look at the media landscape today, a lot of the growth is in television or radio or even print where there is attitude, where there's satire, where there's comedy, where there's point of view, where there are people yelling. Is that the media landscape we're in now? That's what people want?

I think that's what a portion of the population wants. There's obviously other people who would prefer to just have the news and nothing but the news. And the question is, can you satisfy all those different constituents? I think newspapers need to distinguish themselves by having a slightly greater point of view, and by that I don't mean bias. It should be clear it is someone's opinion. ... It doesn't have to be an article on a big event that has an opinion, but it could have a sidebar of this columnist's opinion of this event and how it impacts Cleveland. It should be something that says, "Let's go beyond the event and really get at how does this impact different people." ... People want contact with people, and seeing names of people they know in the paper or getting a sense of who they live around and what they think is enormously powerful.

In the heyday of newspapers, columnists were the meat and potatoes of papers. I mean, that's who people went to.

I think they still are. You look at what The New York Times has done with TimesSelect; it's basically said, "This is what distinguishes us, and so if you're not a subscriber and you want access to it, you have to pay for it." The numbers aren't huge, but there is a business model out there that says, "That makes sense; we did get extra revenues as a result of that." ... One of the best things these columnists can do is make sure they speak frequently in a community and get to know their audience. It doesn't mean they have to cater to them, but form a tie with them so that that person wants to read them, whether it's online or in print. It's not that hard to do. ...

When you do surveys, you find a lot of people who say just what you want: They want an investigative piece to come to a conclusion, to say what ought to be done, to have some kind of impact. But we're trained not to do that. That's not being objective.

But historically newspapers weren't objective. Historically they were all family-owned or locally owned, and that was why they existed, was to be very opinionated. It's why you had two newspapers in every town, to make sure you were getting both sides of an event or something going on. That's what some of the industry has lost, and I don't think that was because of Wall Street. It might be, but I don't know. ... Fewer people will read a print paper in the future, period. The declines in circulation have been happening for over 50 years; the percent of advertising has been declining for over 50 years. Your only other choice is to be private and not have to hold yourself to those standards.

Newspapers don't need to be public. They do generate a lot of cash flow. The reason they went public was the wrong reason to go public. Most of these companies were family-controlled and they had no liquidity. And people have a habit of dying -- it just happens -- and somebody has to pay estate taxes. ... So what you did is you sold a separate class of stock to the public so that you had some liquidity. ... This is to me one of the critical issues in the industry, which is, for all the complaints about Wall Street, go private. Use you cash flow; go private. ...

There are several billionaires in Los Angeles ... who say if the Tribune [Company] put the L.A. Times up for sale, they'd happily buy it. ...

That's a real prescription for the industry. Either the people running these companies have to have the conviction to take themselves private, or the industry has to go back to its original roots, which is being owned locally by somebody who isn't just focused on profit margins but really wants that newspaper to stand for all things good. ... When Knight Ridder was put up for sale, there were not a lot of interested buyers of this corporation, but when you went and sold individual newspapers there were multiple bidders for each one. It's because it really isn't a good corporation to own, but it's a great local business. I mean, if you can afford it, you get invited to a lot of good parties if you're on a newspaper. But more importantly, if you really are a passionate citizen, there would be nothing like owning a newspaper; it would be tremendous.

The Los Angeles Times, ... for 120 years it was owned by the Chandler family. They had a real investment in real estate. ... And the L.A. Times was very useful to them ... because it helped to promote the growth of Los Angeles. So a family or individuals can use a paper for other than, say, perhaps, totally altruistic reasons as well.

Sure. As I said, it's a good business. It might not be a growth business, but it does generate free cash. ... You raise another point, which is if these newspapers are being owned for other reasons, that's bias; that's not objective. Yet today the industry is being held to a standard that I think is just way too high. There have always been people who have tried to use the press to manipulate or for other reasons, and you count on the consumer to see through that, and you count on the collective wisdom of who produces that paper to make sure it doesn't go too far, although it still does. ... You don't really want the owner involved day to day; you still want to have a qualified editor and publisher running it. ...

Eli Broad, he is a major collector of art, and when we asked him if he would make any changes in the Los Angeles Times if he owned it, he said: "Yes. I think they should do more fine arts coverage."

But that's fair. The problem is that if you were really looking at what the return on that investment would be, there wouldn't be one. ... The New York Times really tried to do this. They did an analysis, section by section, of the paper -- this was probably in the mid-90s -- and they tried to have a separate income statement for each section to understand, was there enough consumer interest to write on the topic, and could you generate enough incremental advertising to support it? I have not seen a company experiment as much as they have, and I think it's all been good. There are things that have survived, things that haven't survived. ... He could try to add that fine arts section, and it's going to be up to him whether he wants to support the losses or not.

And yet Wall Street put a lot of pressure on The New York Times recently to say, "You're not delivering enough to your shareholders."

They aren't. ... This is still a family-controlled company; it's two classes of stock with family ownership, and they're trying to balance what they stand for, which is quality journalism. I think regardless of anyone's political affiliation, they would have to agree this is one of the best newspapers in the country. They are trying to invest heavily for the future, which is again a good thing, not a bad thing. But it doesn't mean that you need to own the stock near term, because they aren't getting return on the investment. ...

They tried to make a move into TV. They bought into Discovery [Channel], and that didn't pan out so well.

It's a good example of a company that understood, strategically, that they were investing enormously in investigative journalism, and the thought was: Is there a way to repurpose that same content and generate incremental returns? The Discovery Times Channel was a great idea, ... but given the proliferation of cable networks, it really never got the audience that it deserved. So it was a great idea, and I don't criticize them at all for trying it. In fact, I compliment them for trying and acknowledging it wasn't working and getting back out.

So you're a big advocate of newspapers trying a lot of stuff, of innovating. ...

But I wouldn't do it with a lot of the current management teams. I would bring in new people who aren't wed [to] the way things were done, which isn't the same as getting rid of all the journalists, but it is an effort to bring in people maybe from new media and other areas that look at the world differently and understand future generations better. At the same time, you still have 55 million people a day who read a paper. You still want to serve them as well. ...

Tell me about this L.A. Times deal. ...

… The Tribune Company owned several newspapers in major cities, and they owned a lot of TV stations. When they bought Times Mirror, they only bought newspapers and some other non-strategic assets. They didn't buy any TV stations there; they already had them. ... The feeling among their shareholders was they felt they hadn't been forewarned that Tribune was interested in owning more newspapers, so they were very surprised. The price the Tribune paid at the time was actually very rational, so from a financial point of view it wasn't as much of an issue. But it was more of a strategic issue that nobody understood why, as a broadcaster, they wanted to own more newspapers.

The strategy was to try to couple TV stations and newspapers in major markets, and if you couldn't do that, try to put together an unwired network among all the major markets across the country ... so that you could go and get more national advertising. ... And also at the time, the Times Mirror Company had lower margins than Tribune, and I think there was a presumption that they could come in and really use their financial acumen to improve the margins of Times Mirror. There was both a strategic-revenue opportunity that they thought they had and a cost-saving opportunity, and that the two would provide good returns on the investment they had made.

So it looked to make some sense?

At the time it made sense, except that if you were a Tribune shareholder you were still shocked. ... A lot of things have gone badly in that deal. Some of them were beyond their control and had everything to do with industry issues. Some of them were just tactical errors.

Such as?

I do not believe that they really ever went in and applied best practices across these papers and really took advantage of some of their combined strength. So if you've got really good overseas news bureaus, do you need separate ones across all these different metropolitan regions, or can you find a way to really combine them? Common systems that affect the back office in terms of circulations management and ad sales managements, things that they're doing now would have been brilliant to have done five or six years ago.

They took a gamble on a pending tax issue. They ended up losing, and that cost them a billion dollars. That could have happened to anyone. ... The Newsday circulation fraud issue, they could never have known about. ... That was something that you can't hold them accountable for at all. But some of it, I think, was a reluctance on their part to give up on the strategy of going after the national ad dollar when it worked in a minor fashion and refusing to see the impact the Internet was having on, for example, the entertainment and movie category. ...

So there's a lot of little things, a lot of big things. Overall it's been a touchy issue, I think, from a morale point of view. ... There is a feeling that there's a bit of slash and burn going on. And the company is trying to prove that it's strategic, and they're trying to position themselves for the future. I don't know that either side is listening well enough to the other side to know what's really going on, but I would say there's a tremendous number of morale issues across their properties.

The Chandler family -- at least some prominent members of the Chandler family -- seem to have some seller's regret here.

From an outsider's point of view, it's really hard to discern what's going on. I don't think it's as much seller's remorse as it is trying to preserve a deal where they didn't pay taxes. Some of their outcry right now is trying to preserve their capital and isn't necessarily helpful to other shareholders, so I'm a little bit cynical about their current crusade. ...

Now, on the staff of the L.A. Times, on the other hand, you can't help but get this feeling they don't like being owned by a company out of town.

You know something? No newspaper in this country likes being part of a larger newspaper or corporation, ever. There's a feeling that the decisions being made don't apply to their unique specific situation, and no one in this business today is enjoying what's happening economically. ... It's no different than if I'm asked to remove somebody from my team, and sitting here going, "Just tell me how much money you need to save; I'll find a way to do it." But there's a corporation with a structure in place that doesn't permit for that deal to be cut on the side. I think that's all you're hearing.

We went into the Los Angeles Times printing press, ... and then, just even with the robots that they now have, you're still talking about 400 or 500 people coming in on Saturday to put out the Sunday edition. ... It seems like this archaic process.

Actually, the technology has advanced considerably through the years, and in the past some of the labor unions refused to allow them to take advantage of some of the efficiencies. The industry is less unionized today than it used to be, and it's a thousand times more efficient. I actually think it's been modernized, and I'm surprised by your description of the numbers of people. I'm more surprised [by] the other direction, where I go in and go, "Oh, my God! There's like, 10 people here putting out an entire paper," because it's all been automated. Why aren't some of these companies doing better if they've reduced some of these costs so dramatically? The real cost is distribution: Somebody actually has to physically bring the newspaper to your door, and, much like the U.S. Postal Service, that becomes really challenging over time in terms of the cost.

What do you think about something like Google News and the finances of it? Because ... you go to Google News, there's a lot of news there; they didn't report any of it. ...

It serves a purpose. It ultimately could be damaging to the newspaper industry, and I like everything I'm seeing over the last few months of newspapers trying to claw back their rights. ... You're starting to see AP [Associated Press] getting involved in the fray in terms of making sure people are getting paid for their content, which ultimately they really should. ... Do I subscribe to Google alerts? Of course I do, because I have some very focused, specific interests professionally, and the fact that they're bringing in these articles that I might not have otherwise seen is great.

In most media companies there aren't two revenue streams; there's one: It's advertising. Newspapers are one of the few that get two revenue streams: circulation and advertising. In theory, over time they should be willing to forgo some of the circulation if they can maintain or expand the advertising side. Google could end up being a boon for them as well. ...

All I have to do to buy a newspaper in America is put down 50 cents, maybe a dollar, and I get a hell of a deal for 50 cents or a dollar. Why wouldn't something like that continue indefinitely?

I'm not sure I completely understand why somebody is either sensitive to the cover price and won't pay it or chooses not to buy the paper. A lot of it has to do with media habits changing, but just overall consumer habits changing. There's too much coming at them every day, and ... to really sit and stop and read is becoming more difficult for people. ... I know, for example, I stopped getting one of my papers for a while because I felt tremendously guilty that I was only reading the front page and a little bit, and I had cut down a lot of trees to do that. But then I reached the point where I thought: "You know what? I really miss it. I'm going to get it back again." ...

I have this fictitious ad campaign in my head for a newspaper that shows a clock running 24 hours, and it shows a blank newspaper with just the masthead at the top. As the clock is ticking forward, it shows you how it gets populated throughout the day. Then the punch line is, "All for 50 cents," because it is amazing what's in a newspaper that starts out blank in the morning, because you don't know what the news events are. But at the same time, when I think about what I can get online -- you think about Katrina, tsunamis, how you can watch straight from the event that people are filming -- that's a pretty [amazing] experience also.

On Sept. 12, 2001, newspaper readership had to have been the greatest it's been as people were trying to make sense of the world. It was the worst day, economically, to put out a paper, because no advertiser in their right mind wanted to be associated with those images. And that, to me, sums up some of the challenge of the industry: ... Whether you pay the bills or not, the consumer expects you to be there. ...

Long-term future for newspapers or not?

We don't know the answer. I believe you'll still see a print newspaper close to its current format 20 to 30 years from now. But what will happen is much like your losing stock tables in some newspapers today: Maybe the classified section doesn't get printed anymore; maybe there's a page that says, "We've added 25 new house listings, 30 new jobs; these are the income levels; these are the disciplines; go online." I think more of it will be produced online, but the print paper will serve as the gateway and should satisfy the people who are regular readers who ... are reading for the analysis and the news. ...

If you can give blanket advice to an industry, ... what should the newspaper industry do these days to survive and to try to grow?

I would say to survive and to grow, the first thing you might need to do is invest so heavily that it does hurt your short-term profits. Understand that the stock prices will go down, but really look long term to what you think you can be going forward and what consumers really want from you. Ultimately you need to listen more to the consumer. It doesn't mean that you have to go tabloid. It doesn't mean you have to become an entertainment newspaper and put Britney Spears on the cover. But it does mean that you need to be more in tune with what the consumer wants and find a more creative way to give them what they don't want but you think they should get. There are ways to do that. There's ways to engage consumers in a dialogue, and I think you can use the Internet very forcefully to do that. ...