Fall of the Washington Post, Part Two

The Washington Post newspaper was once the financial bulwark of the Washington Post Company. No longer.

The Washington Post newspaper’s operating numbers have been declining for decades. Consider these measures.

1. The Post’s average paid daily circulation peaked in 1993 at 823,752. In 2008, it had fallen to 639,724 – a drop of 22%.


2. The Post’s average paid Sunday circulation has fallen from a peak of 1,158,329 in 1992 to 878,110 in 2008 – a drop of 24%.


3. Newspapers make a big chunk of their money by selling ads. The Post’s total annual ad inches have fallen from 4,679 in 1989 to 1,952 in 2008 – a collapse of 58%.


4. The Post’s full-time workforce has declined from 2,950 in 1993 to 2,121 in 2008 – down 28%.


Despite the Post’s declining circulation, ads and workforce, the newspaper has generally made money for the parent company until recently. Its revenues grew from $643 million in 1991 to $962 million in 2006 before falling to $801 million in 2008. The newspaper’s operating income remained positive until 2008, when it lost $193 million. (Preliminary data indicates that the paper lost another $164 million last year.) The disastrous result in 2008 nearly overwhelmed the profits earned by the rest of the corporation.


The company said this about its 2008 newspaper operating loss:

The newspaper publishing division reported an operating loss of $192.7 million in 2008, compared to operating income of $66.4 million in 2007. In March 2008, the Company offered a Voluntary Retirement Incentive Program to certain employees of The Washington Post newspaper, and 231 employees accepted the offer. Early retirement program expense of $79.8 million was recorded in the second quarter of 2008, which is being funded mostly from the assets of the Company’s pension plans. Also, The Post will close its College Park, MD, printing plant in the second half of 2009, and none of the four presses will be moved to The Post’s Springfield, VA, plant. The Company reassessed the useful life of the presses and the fair value of the plant building and recorded accelerated depreciation beginning in June 2008; as a result, accelerated depreciation of $22.3 million was recorded in 2008. The Company estimates that additional accelerated depreciation of $29.2 million will be recorded in 2009. Also in 2008, as a result of the challenging advertising environment at the Company’s community newspapers, The Herald and other operations included in the newspaper publishing division, the company recorded goodwill impairment charges of $65.8 million. The decline in operating results is due to reduced revenues and the unusual or one-time operating expense items noted above; excluding these charges, however, the newspaper publishing division still incurred an operating loss in 2008 due to revenue declines.

We do not believe 2008 was a fluke year, but rather the culmination of trends that have been in motion for decades. The Washington Post newspaper’s declining circulation and ads and its shrinking workforce are probably mutually reinforcing. Fewer staff means less news coverage, which means fewer readers and fewer ads. Those forces finally caught up with the newspaper last year due to the nationwide economic recession and they show no sign of easing. Even if the newspaper’s results temporarily improve, continued erosions in circulation, ads and employees are a long-term challenge to the very viability of its business.

Tomorrow, we’ll look at the star of the Washington Post Company: Kaplan Inc.