A Rap on a Paper's Wrapper

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With seemingly every industry these days claiming the mantle of being too big to fail, and thus entitled to a government handout, shouldn't newspapers have first dibs on the title relative to economic importance? After all, it was Thomas Jefferson who said, "If I had to choose between government without newspapers, and newspapers without government, I wouldn't hesitate to choose the latter."

Unfortunately, it seems like we will be getting the worst of all worlds. Fitch Ratings reports that it expects newspapers to start defaulting on their debt next year, and as they fold, several major cities may be without a daily paper. Fitch has rated the bonds of both McClatchy (NYSE: MNI) and Tribune (NYSE: TXA) as junk with serious potential for default. I pegged McClatchy as a deathbed stock earlier this year.

There's no doubt that newspapers are a hard sell these days. Advertising revenue fell more than 18% in the third quarter, the largest decline ever in the 40 years that quarterly numbers have been tracked. At New York Times (NYSE: NYT), while circulation numbers inched upwards, ad revenues were down 15%. Gannett (NYSE: GNA), the media giant that owns the country’s largest newspaper, USA TODAY, is cutting 2,000 jobs after slashing 1,000 jobs in August. Maybe Google (Nasdaq: GOOG) will be the next media mogul.

Yet, do declining ad revenues and rising newsprint costs mean that News Corp (NYSE: NWS) has to take liberties with The Wall Street Journal? If you got your copy today, you probably didn't know what to do with it. The paper that typically doesn't change its style on a whim wrapped today's edition in an ad for Dell (Nasdaq: DELL) that covered the entire back of the paper and one-third of the front.

While the Journal's "What's News" column still appeared on the front flap (the rest of Dell's ad ran behind), you couldn't even hold the section when you folded it back, making it a useless appendage. Like all those subscription postcards inside a magazine, that piece got tossed away.

Certainly, papers need to take creative measures, and advertisers do too, for that matter. The Times and the Journal are said to keep a close eye on each other's advertisers, plundering them if they can, but you have to wonder whether Dell got its money's worth from the attempt. While I fretted that Rupert Murdoch would turn the Journal into a tabloid when he first had designs on acquiring Dow Jones, I still don't think we'll see a "Page 6 girl" gracing the gray pages of the paper, whatever it may do for circulation. Jefferson might very well have opted for "none of the above" if it came to that.