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Washington Post Loses $1.10 Per Copy?

Virginia Postrel remarks concerning the results of the Washington Post Company:

"Per @Romenesko, Washpo lost $143 million through the first six months of this year." Which means they lose $1.10 PER COPY. Yikes."

That makes sense to me, but I do not hold myself out as an accounting expert or financial analyst. Question to professional analysts or accountants out there ... is that a fair way of representing the results of the newspaper division? I'm not disputing it, but would like a second opinion on whether that's a fair methodology for characterizing financial results, from someone who is pretty close to doing this for a living. Romenseko, writing at Poynter Online, says:

Graham tells investors: "We're not at all satisfied with results at The Post and Newsweek

Washington Post Co. chairman Don Graham, however, is thrilled with the results at Kaplan, which provides more than half of all Post Co. revenue, which has surged from $258 million in 1999 to more than $2 billion today. WP publisher Katharine Weymouth told shareholders that the newspaper division lost $143 million through the first six months of this year. In response to a question, she said that Post doesn't have a plan to start charging for its online content.

I'm not so concerned with finding the exact number of papers in question - assume if you like that the division works. My basic question is whether it is a fair way to represent results for a newspaper company or division like the Post.

byomtov (mail):
No. Of course not. Presumably the paper has some fixed costs, and marginal cost changes with the number of copies printed.

The questions are how much they would have lost had they not printed a single copy and how much they would have lost had they printed one less copy. The marginal cost of the first copy is high, that of the last copy is (probably) low.

This is pretty basic stuff.
9.13.2009 10:52pm
JJ799:
I don't do this for a living, but if the division in question has other revenues or expenditures that aren't directly related to producing individual newspapers, it seems unfair.
9.13.2009 10:52pm
JKB:
Well, loss per print copy is an incomplete representation. More information is needed in finer detail. Such as separating out content generation, i.e., reporting and writing, from content delivery, i.e., newsprint printing/delivery and web presence overhead. If you had this detail then you could determine loss per newsprint copy and loss per unique daily online reader. It is quite possible that the hard copy has a greater loss per copy than reported with the online advertising covering web presence expenses as well as providing additional revenue. The opposite is also possible. The continued decision to not charge for online content could indicate the former. Sure charging for online access might generate direct revenue but would it offset the lost unique visitors for advertising?
9.13.2009 11:24pm
Mac (mail):
Tell the truth, you posters are really insurance actuaries and are just commenting here to take a break from the hard work. Right?
9.13.2009 11:26pm
cubanbob (mail):
It would seem the best thing for the company to do is sell off the newspaper and magazine.
9.13.2009 11:30pm
mke Grissom (mail):
David and Goliath "Grissom vs. DSC" is headed to Trial
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9.13.2009 11:47pm
mke Grissom (mail):
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9.13.2009 11:50pm
mke Grissom (mail):
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9.13.2009 11:51pm
mke Grissom (mail):
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Part 1
9.13.2009 11:53pm
mke Grissom (mail):
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9.13.2009 11:55pm
Maxim (mail):
Fair in what sense? What do we want to get out of the statistic?

If we want to know if the Post is producing a product that consumers like enough to pay the full value for, then it seems fair to look at the loss in the newspaper division and divide by the numbers of copies sold.

On a similar note I think it would also be fair to look at, say, the loss per train ride at Amtrak. That would tell you the difference between how much the average consumer is willing to pay for the service and the real cost of the service.
9.13.2009 11:56pm
zarkov@mail.com (mail):

Look at return on tangible capital. Standard measure
management effectiveness.
9.14.2009 12:18am
Brooks Lyman (mail):
What does DSC have to do with WaPo?
9.14.2009 12:42am
PersonFromPorlock:
Not a whole lot. Maybe it's time for the Conspiracy to post a notice that anyone who posts commercial messages in comments will be charged a fee.
9.14.2009 2:02am
Tenrou (mail):
The old gray ladies are dying left and right. It's only a matter of time before every bit of news we get comes from the online world. I read an interesting post about it on this blog: http://lawblog.legalmatch.com/ I hope it doesn't come to that though. I may sound old-fashioned, but I still love a good newspaper.
9.14.2009 3:35am
Borealis (mail):
I am not crying for the newspapers. They charged an outrageous amount for classified ads when they had a monopoly on such advertisement. So Craigslist is just a long deserved comeuppance.
9.14.2009 4:47am
devil's advocate (mail):
So it might be fair to subtract expenses and revenues related to online presence. And depending on the percent of revenue generated online, alot a proportion of the news collection costs.

But it doesn't seem to me to be outside the bounds of convenient discourse not amongst accountants to do some simple arithmetic. It's a newspaper. If they sold 130 million papers and lost 143 million dollars, I'd say Yikes.

Obviously if you're thinking about buying (or selling) stock you'll be interested in the structure of that loss. One time charges and the like. But if there isn't anything extraordinary about the result, if it's buck a paper in 2 bucks a paper out that's a tough loss leader.
9.14.2009 7:40am
TruePath (mail) (www):
Seems to me that giving the loss in this fashion is potentially misleading. It suggests that the *marginal* costs to the newspaper per paper are $1.10 more than the marginal revenue. In other words it suggests that if the paper started selling millions more papers they would be losing even more money. Far more likely is that most of their costs are fixed costs so that selling more papers would actually lead to profitability.

---

As an aside it really drives me nuts when I hear people from the newspaper industry arrogantly insisting that they need to charge for online content to stop people from getting their work for free. Yes, eventually it will probably be possible to charge for online content but you can't do so now because there are too many papers and competition drives the price down to zero. The internet has improved the efficiency of news delivery and that means we need less duplication in the newspaper business. There is no sense in which the newspaper industry deserves to wastefully run duplicate versions of international and national news in every city and get paid for it.

Just like the printing press radically reduced the number of scribes needed so too does the internet reduce number of printed newspapers covering the same material needed. Once the dust is settled there will actually be more resources for doing serious reporting but the newspaper industry needs to accept that there needs to be major downsizing to eliminate duplicated effort first.
9.14.2009 8:50am
Padraig:
The answer is yes, it is fair. Is it 100% accurate in accounting terms, may be not. WaPo is a public company and if you read its filings with the SEC, it breaks down revenue and expenses by segment and has management discussions. Think of it this way Graham, Weymouth and the head of the Kaplan division are sitting at the table. The Kalpan division head says "hey Katherine the newspaper lost $143 million sounds like a loss of $1.10 per copy" Grahma is not going to like it if Weymouth starts talking about fized an vairable costs.

Yes if you want to get into accounting geek talk about fixed costs, variable costs, restructuring costs, impairment charges, unrealized foregin currency gains/losses, then read the SEC filings, otherwise WaPo lost $1.10 per copy
9.14.2009 8:59am
BT:
It certainly strikes me as a reasonable metric, after all they are in the business of selling newpapers and this is just a variation of their profit/loss per unit. We do not know how they got there, fixed costs, variable costs, one time charges, etc., but for the time period cited, it is good barameter of how sound their business is, or in this case is not. As for online expenses, etc., my view is that any profit/loss should be included in this number as the online part of the paper is directly related to the printed edition. It is not a stand alone division like Kaplan.
9.14.2009 9:46am
Gabriel McCall (mail):
It's fair in the sense that it does not misstate any facts, but the fact it states is not useful. If they had an annual bake sale with revenues of $143, it would be equally fair and equally useful to say that WaPo lost a million dollars per brownie.

Newspapers are not the product which a newspaper company sells, any more than brownies are. The product is the readership; the buyers are the advertisers. The fact that you can get your product to pay a small fee for the privilege of delivering itself to your customer is just gravy.
9.14.2009 9:53am
stevesturm:
In publishing (as in any business) there are a lot of statistics that get tossed around but aren't particularly useful to management or anyone else trying to get a handle on operations, and a WaPo loss of $1.10 per copy is one such accurate but useless statistic.

And especially so in ad-based publishing, where ad revenue is only indirectly related to subscriber levels.
9.14.2009 9:58am
John M. Perkins (mail):
Probably an accurate accounting, but as a division, there may be some bookkeeping decisions that are legit for the corporation as a whole, but may be deceptive for internal divisions. Just think of the older ownership of the Atlanta Braves that received only $1/year from the Braves parent TBS.
9.14.2009 11:16am
byomtov (mail):
Yes if you want to get into accounting geek talk about fixed costs, variable costs, restructuring costs, impairment charges, unrealized foregin currency gains/losses, then read the SEC filings, otherwise WaPo lost $1.10 per copy

In other words, if you want to understand what's going on you have to talk about some complicated matters. Otherwise you can just talk about arithmetically accurate but unhelpful numbers.
9.14.2009 11:24am
Eli Rabett (www):
The Post made two major errors. The first was not to go national the way the NY Times and the major European papers did. The second was to abandon its public in its editorial policy. By moving to the right, they ticked off their liberal base without gaining any subscribers on the right, who had been sucked up by the Washington Times. In short, a major part of their previous supporters now don't even look at the rag.
9.14.2009 11:59am
Maxim:
Truepath writes: "In other words it suggests that if the paper started selling millions more papers they would be losing even more money."

But it would be the other way around... selling more papers would mean that they would be loosing LESS per paper.
9.14.2009 12:18pm
Can't find a good name:
Maxim: Truepath's comments indicate that they understand your point. The $1.10 loss per copy is not a fixed amount. All of us here agree that if circulation doubles in the second half of 2009, losses won't double to $286 million on the grounds that the Post will always lose $1.10 per copy. They won't.

On the other hand, some less numerate people might think that was the case. That's why Truepath said the $1.10 loss per copy could be misleading.
9.14.2009 1:05pm
Kharn (mail):
Eli Rabett:
In the DC metro area, the WaPo is still considered liberal, just not as far left as the gray lady.
9.14.2009 5:55pm
neurodoc:
Here in the DC area, one can have the Post delivered 7 days a week for $1.50/week, and I do. If they really upset me, as they sometimes do, can I spend 75 cents for an extra copy and cause the a $1.10 loss? (Just kidding, I do understand the concept of fixed and variable costs. But from time to time would like ways to let them know of my displeasure.)
9.14.2009 9:06pm
Eli Rabett (www):
Kharn, to be to the left of the Examiner and the Washington Times is sort of like being to the left of Ghengis Khan.

Anyhow the point is that the Post cast loose from a large number of supporters in order to secure their right flank. This is costing them.
9.14.2009 9:25pm
tarheel79:
Eli Rabett,

So the Post should veer left to restore its credibility/revenue base?

Yeah, that's the ticket.
9.15.2009 10:39am
ohwilleke:
Total circulation of all the publications in the newspaper division (per the 2008 annual report), which includes quite a few beyond the flagship Washington Post, is closer to 300 million per six months. So, the loss is something on the order of 48 cents per copy, rather than $1.10 per copy. This still sucks, the difference is material relative to the 75 cent newstand price of the paper. As of December 2008, the Post "is still is among the least expensive major daily newspapers. Gannet's flagship USA Today raised its price from 75 cents to $1 on December 8. The New York Times charges $1.50 a copy, and the Wall Street Journal retails at $2."

At $1.25, the Washington Post would break even if the company's other papers made comparable price increases. At $1.50, it could make a profit.

In 2007, the newspaper division was on pace for about $63 million in total operating income. In 1989 operating income was $176 million. Loss of circulation and financial crisis related drops in advertising revenues are the big culprits in the current loss.

There were two big one time charges in 2008. One was an $111 million employee buyout. The other was a more than $100 million writedown of goodwill (probably originally booked when newspapers were acquired at earlier dates). It isn't clear if any major one time charges of this type go into the $143 million loss figure.
9.15.2009 3:24pm

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