Media professionals lose while their companies win in a bad economy

The more you study the more you know,
The more you know the more you forget.
The more you forget, the less you know,
so why study?

The more I learn about business and Wall Street and investing, the less I seem to understand. I was listening to a radio talk show this evening on which an economist from the University of Oregon said we are not only in a recession, we are in an economic depression.

You see businesses all over laying people off and some business closing. More people are out of work. This week, more than 1,700 people are losing their jobs from one newspaper company -- Gannett. The layoffs are not done there and the final tally is not yet known. But it will get higher.

To a casual observer, it might make sense because fewer people are out there spending money on stuff, including advertising and newspaper subscriptions. And everyone has probably seen headlines on newspapers or websites of how much advertising has been pulled out of newspapers and other traditional media and was being directed to websites, even before the economic collapse became daily front page news. So it would be easy to assume that publicly owned newspaper companies, like Gannett, are losing money. Right?

Well, they aren't. These companies are still making money, and lots of it. They just aren't making as high of profit margins as they used to make. In order to maintain the margins that Wall Street seems to expect in an economy where real estate advertising and classified advertising have dwindled, costs are being slashed. The biggest costs in the newspaper business are newsprint and people. So, you see the physical sizes of pages getting smaller, the number of pages in papers getting fewer and the number of people on the payroll being slashed in order to maintain profits.

In the interest of full disclosure, I used to work for a Gannett paper in California for 5 years. I left to move back to Oregon to accept a job that allows me to be closer to family. Like many former and current Gannett employees and media observers, I've been following the carnage over on the Gannett Blog.

When I left Gannett, the company's stock was valued at about $74 per share and the company paid a dividend of 27 cents per share. The last five dividends issued by the company were 40 cents per share, but the stock price has fallen through the floor, down to $6.32 a share on Nov. 21.

But what's happened this week? The news has been bleak for newspaper professionals, particularly at Gannett, which is leaving some empty positions unfilled permanently, buying out some workers and laying off others, meaning readers will get less of something, or a lot of things. It doesn't seem to bode well for the short-, or long-term quality of information media. But Gannett's stock price, for the time being at least, is rising for now. Up more than $2.50 a share since Nov. 21 to $8.87.

That's not enough to do much for my 401(k) account, or for the escalating numbers of people out of work. I can't imagine it will do much for readers either.

Many are blaming the Internet for causing the demise of the traditional media. It may be the insatiable demand of Wall Street that a company like Gannett maintains double-digit profit margins (well in excess of 20 percent for lots of newspaper properties) even when the wider corporate world seems to get by with 7 percent margins.

You need to read behind the business headlines. Less profit is not losing money.

I feel bad for the people who are losing job. I even feel bad for the people who are in the position of having to dismiss employees. But the more I understand about all this stuff, the less I seem to know. Because I still don't understand why Gannett's stock has fallen so low, or why a company like Google's could get so high ($279.43 per share even after it's dropped).

But after seeing what happened with mortgages and the credit market and banks, I don't feel so bad. Even the people who get paid to understand financial stuff don't seem to know what the hell they are doing.

All I do know is that a lot of friends and former colleagues are wondering if they will have jobs for long, or if they will have any money left in their retirement funds when all the dust settles. They are wondering what they will do if they can't do what they've known and put their passion into their entire adult lives. It would all be comic if it weren't so tragic.