Sharing your ownership with employees!

I assume that newspaper corporations face an issue with their financial flows largely due to their inventory. Today’s newspaper edition naturally turns into a piece of garbage tomorrow. In addition, the demand for today’s paper fluctuates by the day’s news value. Even though newspapers secure a predictable demand through subscriptions, it is difficult to avoid high amount of inventory. While private firms file their inventories as an asset on their financial statement, I doubt that newspapers can record yesterdays’ papers as an asset on the statement the same way. Therefore, it is becoming more critical for the newspapers to take account of the high amount of inventories when producing news contents. 

In addition to the inventory issues, newspapers are sensitive to the economic cycle, especially since news became much accessible with the help of internet. Economic downturn makes people cut unnecessary expenses, and the news consumption is considered one of them. From this perspective, news consumption can be regarded as a luxury good. Therefore, in order to keep the business afloat, high level of liquidity should be guaranteed.

Nowadays, many newspaper corporations try to get funded by private equity firms. However, it is doubtful that those investments can ensure sustainable growth for the newspapers since the private equity firms are usually under pressure to generate short term profits. Frequent ownership change was seen in the newspapers whose ownership belongs to private equity firms. Those unstable financial sources may affect the performances of editorial departments in negative ways because the high quality of editorial work is not linearly related to the short term investment.

One possible answer to the cash flow problem will be an adaptation of more employee stock ownership plan. In an exchange of ownership, newspaper corporations will have more stabilized cash flow from employees who can be loyal to the company even in an economic downturn. Moreover, newspapers can sell their stocks to local residents at a discounted price through public offering. Since many local newspapers in the U.S. are bound to narrow geographical boundaries, it is important for readers and employees to have a certain level of ownership, in order for newspapers to serve their community in a stable way.