Newspapers Fold Under Higher Costs

'ALL the news that's fit to print,'' has long been the New York Times motto. But, of late, Rolling Stone magazine's takeoff -- ''All the news that fits'' -- is seeming more and more appropriate, for both the Times and the entire newspaper industry.

Newspapers these days are shrinking. As a result, readers are likely to find less reporting on Japanese subway attacks, fewer Ann Landers columns, and no more church-picnic notices.

The reduction has little to do, though, with the usual culprits: TV growth, advertisers' empty pockets, and reader malaise.

This time newspapers from Los Angeles to Milwaukee to Cape Cod, Mass., have been hit with a 40 percent price hike on one of their most essential materials -- newsprint.

''The ups and downs of newsprint prices can have an unbelievable effect on the newspaper business,'' says Paul Godfrey, president and CEO of the Toronto Sun Publishing Corporation,owner of the Toronto Sun newspaper and a 49 percent share in the Houston Post, which shut down last month.

Though Mr. Godfrey admits that the Houston Post had long been the underdog in a 94-year battle with its rival, the Houston Chronicle, he says the announced newsprint increases were ''the straw that broke the camel's back.''

And the Post is not the only paper where broadsheet costs helped convince owners that they had to close. The 113-year-old Milwaukee Journal printed its final edition last month, before merging with the morning daily, the Milwaukee Sentinel. Newsprint would have cost $9 million more for the two papers than last year.

While the Des Moines Register still rolls off the presses, its editor and managing editor recently resigned in part to protest changes driven by cost. The Gannett Company paper cut its size by 4 percent, reduced its personal ads, and canceled ''Chalk It Up,'' its children's page.

In the newspaper industry, where newsprint accounts for 40 percent of a company's costs, sharp price hikes in a short amount of time can have drastic effects.For instance:

* The Los Angeles Times is leaving its Sunday magazine out of 100,000 copies of the paper to save on newsprint costs.

* The Knight-Ridder Inc., which owns 29 papers across the country, is raising some subscription rates. Its flagship paper, the Miami Herald, eliminated 30 to 40 jobs in November.

* The New York Times Company is reducing the size of its pages, lopping 1/8 inch off each side, and raising subscription prices.

''This is having a major, major impact on the industry,'' says Patrick DeGiso, general manager at the Patriot-Ledger, an 87,000 subscribers afternoon daily in Quincy, Mass. ''But we've had practice [in cutting back]. This is just an extension of the recession, really. If it's not one thing, it's another. It's just newsprint this time.''

Despite the cutbacks, some industry watchers say that paper manufacturers have become a scapegoat for more fundamental problems in the newspaper business.

''The price of newsprint can be used as a good excuse for just about anything,'' says Jim McLaren, news editor at Pulp & Paper Week, a San Francisco-based forest products industry newsletter. ''If your newspaper closed down, there was a lot more going on than just newsprint.''

No one is denying that newsprint prices have skyrocketed since last August, though. The five increases since then -- the most recent of which was announced May 1 -- have driven newprint prices up from $430 per metric ton a year ago to $675 today. ''And there looks like there are more on the way,'' Mr. McLaren says.

Increases were expected, but not such steep ones. ''It's almost unconscionable that newspaper suppliers are trying to [recoup their losses] all in one year,'' Godfrey says.

The price hikes are justified, the newsprint industry says. Losses over the past five years, which corresponded with a general economic recession and a newspaper slump in the late 1980s, were devastating to newsprint makers.

''Mills bled red ink for three years running,'' McLaren says. ''Canadian mills shut machines in the '90s, US companies struggled, lost money, and saw dramatic restructuring.''

In addition to making up deficits, newsprint manufacturers are contending with hefty prices increases for fiber (up as much as 40 percent) and costly environmental regulations.

But mill owners were partly to blame for the downturn, says James Burke, president and CEO of Southeast Paper Manufacturing Co. in Dublin, Ga. In the mid-'80s, when newspaper consumption worldwide seemed to level off, the mills spent big to expand their production capabilities. This increased the potential output of newsprint by some 25 percent and further exacerbated the newsprint glut, driving prices down. ''We don't think they're be that kind of mistake again,'' Mr. Burke says.

Being gun-shy, the industry is unlikely to increase their production capabilities in the near future, meaning lower newsprint prices are not on the horizon. Some relief may come, however, from overseas mills.

Even if a US company wanted to spend the $500 million it costs to manufacture a machine, it would take years before it could begin operation.

In the meantime, newspapers continue to look for ways to trim that will affect their readers the least. While advertising revenues are bouncing back, even that is mixed news for the industry. More ads use up more newsprint.

The Virginia-based Newspaper Association of America recently suggested how publishers can cut costs without cutting quality. It includes the reduction of waste in the newspaper production process and the changing of advertising sizes to fit more on a page.

''As always, we'll have to watch our costs very closely,'' says Miles Groves, chief economist at the NAA. ''But this is a cycle,'' Mr. Groves says. ''It's not the first time we've seen newprint prices jump nor will it be the last time.''