What's left of — and what's next for — The Charlotte Observer? 

The "Great Recession" of the last few years hit the newspaper industry particularly hard. Which makes it rather ironic that the Queen City's own daily paper — The Charlotte Observer — has more readers (more than one million each week) and is publishing more stories, more times a day than ever before.

But the largest newspaper in the Carolinas is frighteningly thin these days, as you've surely noticed on newsstands or if it's home-delivered to you.

The problem has been that while the Observer has grown its readership and content through the Web (roughly 25 percent of its readership is online), advertisers haven't followed. Print editions still account for about 85 percent of a typical newspaper's total revenue — advertisements, subscriptions, and newsstand sales — but that revenue has dropped dramatically over the last two-and-a half years. The multiple full-page ads that were routinely purchased by auto dealerships and real estate firms, for example, are now a fraction of what they once were. Meanwhile, many businesses have begun using less-expensive means of advertising, such as social media and online coupon sites.

The McClatchy Company, the Observer's parent company, posted double-digit declines in advertising revenue in each quarter in 2008 and 2009, some quarters as high as a 28-percent drop. As the third-largest newspaper company in the U.S., McClatchy owns 30 daily newspapers, including the News & Observer in Raleigh and The State in Columbia, S.C., and 43 non-dailies.

In 2008 and 2009, the Observer was akin to the Titanic. But rather than see the sinking play out during a three-hour movie, we watched it happen over two years. When management announced in May 2008 that it would begin offering voluntary buyouts to employees to reduce its nearly 1,200-person workforce by less than 5 percent, that was just the tip of the iceberg. The most recent layoffs took place in January 2010; the Observer's current staff size is estimated to be at around 700 people, the result of six rounds of staff cuts.

"We suffered most in the last two years not because of the transition to online, but because of the economic crisis that's going on in the United States," said Ann Caulkins, publisher of the Observer since 2006, arriving here after holding the same post at The State. "We in the print business, in the newspaper business, had been looking at a very long-term transition of our cost structure to move to online and that transition could've been more gradual over many, many years. Because of the economic reality, that transition of our cost structure had to happen over about a two-and-a-half-year period."

Now, with a much smaller staff than it had two years ago, the Observer is still cranking out news stories. Meanwhile, predictions abound about where the newspaper industry as a whole is headed — some see daylight, others see darkness — and there are even more assertions as to what needs to be done to save it. If it can be saved.

Down a rocky road

"It's often been said that ... newspapers almost always feel a downturn before the rest of the economy feels it," said Rick Thames, the Observer's editor for the last six years. "And it was in December 2007 when they marked the beginning of the recession, as I recall, but they marked this after the fact. At the time, no one knew the recession was beginning. And we saw our business just — it was like the air just went out of the room — and nobody could quite understand it. It was like, 'What happened here?' Suddenly advertisers were skittish and worried, so we sensed it. But we didn't know that what we were seeing was the start of this Great Recession."

In 2008, layoffs and buyout offers came in May, June and September, creating a very uncertain environment for the Observer staff. The company had hoped to stave off reducing the workforce in the newsroom, fearing that it would hurt their core product, but no department was spared. Staff reductions came in news, operations, advertising, finance, circulation, information technology, administration, human resources and marketing. The company even made a slight decrease in the width of the newspaper to save on printing costs.

Despite the company's cost-saving measures, layoffs and buyout offers continued in 2009, occurring in March and October of that year and then again in January of this year.

Understandably, it was the layoffs in the newsroom that had the most significant impact, devastating a tight-knit group of colleagues, many of whom had worked together for several years.

"You can imagine, it's never fun during a time like that," said Glenn Burkins, the Observer's former deputy managing editor, who accepted a buyout in November 2008. "You have people who are concerned about their jobs, older people who've been around for a while who start to wonder if they will be able to retire at the company they love. You have younger people who worry that maybe they've chosen the wrong career. It's not fun. It's like layoffs anywhere. It was a time of tremendous stress and uncertainty."

The stress and uncertainty was too much for Jamie Johnson, a clerk/reporter who had worked at the Observer for nine years and, though only in her 30s, believed that this would be where she would eventually retire. But after seeing her co-workers begin to get laid off, and not sure if she would be next, she didn't want to find herself not knowing where her next paycheck would come from.

"I was afraid that I would be laid off and had a knee-jerk reaction that caused me to look for work in a completely different industry," Johnson said. After a couple of months searching, she landed a job with a utilities contractor.

"I never planned on leaving, and I was one of the people who said I was going to go down with the ship," Johnson added. "Because I loved working in the newsroom, and I loved the people that I worked with. But when it came down to it, I was more worried that I had a job and could pay my bills. And when I saw an opportunity elsewhere, I took it. And I've been second-guessing myself ever since. Because I miss it so much."

Thames wishes he still had his old staff in place. "It was difficult in that we had to say goodbye to some really valuable colleagues," he said. "In fact, we could never have enough people to do the kind of job we would love to do for this community in terms of covering all that is going on in it. So to lose jobs as we had to in order to remain a profitable business, that was a hard thing."

Readers have also missed seeing the bylines of prominent reporters and editors.

Departures over the last two years from the Observer include: Mary C. Curtis, an award-winning columnist who spent 14 years at the paper; Crystal Dempsey, who spent 20 years there starting out as a copy editor then moving up to style editor then to editor of two of the Observer's magazines; Tonya Jameson, the popular entertainment and political reporter; nightlife columnist Sarah Aarthun; Jeff Elder, a columnist who at the end of his 10-year tenure was writing about new media and social networking; Pat Sutherland, an 11-year copy editor who most notably coordinated the Carolina Panthers coverage; and numerous others.

"Everybody that we lost, we felt like we needed them," Thames said. "We didn't want them to go. Ultimately, some jobs had to be eliminated. It's just the sad truth of a very difficult time that we had to see ourselves through. I would say in that same period, we've had a number of people grow and become new personalities in the community. Some of them found other opportunities and have gone on and done great things."

Having to operate a newsroom with fewer employees led to the Observer partnering more with its sister paper in Raleigh. According to Caulkins, their goal is to reduce duplication in the work needed to produce certain sections for the two papers, which ultimately is a cost-saving measure. She says Charlotte takes the lead on the food centerpiece and the Monday science tech section; Raleigh does fashion and health centerpieces for both papers; they have one sports editor in Charlotte who manages the sports desk for Raleigh and Charlotte; and Raleigh's government editor manages that section for both papers.

Where have they gone?

Former Observer journalists can be found throughout Charlotte nearly as recognizable as former bankers. Unlike their broadcast peers, who are accustomed to bouncing around from market to market, newspaper journalists tend to stay in one city for numerous years. So even though no longer employed at the large, box-shaped building at the corner of Tryon and Stonewall streets, you can find many former members of the newsroom still in Charlotte making news.

Curtis is a freelance writer whose articles on PoliticsDaily.com are often among the most viewed on the AOL-owned site, and she does a "Keeping It Positive" segment each Wednesday morning on Fox News Rising. (Editor's note: Curtis also frequently contributes to Creative Loafing.) Dempsey turned her years of newsroom experience into a growing career as a freelancer and editorial consultant; then in July she accepted a full-time position as communications manager for the N.C. Blumenthal Performing Arts Center. You might find videos shot and edited by Jameson appearing on a number of news and entertainment websites. Aarthun's opportunity actually took her to Atlanta, where she's now a news desk editor for CNN.

And perhaps no one has ventured out so far, yet remained so close, than Burkins. When deciding to accept a buyout from the Observer near the end of 2008, he decided this would be a great opportunity to dive into the direction he felt news is heading.

"[My leaving] was as much about my own personal aspirations as anything else," Burkins said. "But also, I did start to wonder if I'd be able to retire as a journalist. I'd always assumed that I would retire as a newspaper man, probably running my own paper somewhere. And I started to wonder if that would be possible, and if that job would be something I really wanted. When you spend so much of your time trying to manage a decline, it pulls away from the things you love, like journalism and producing good stories. I'm a dreamer by nature; I'm a builder by nature."

And what he built is Qcitymetro.com, a website devoted to news of relevance to Charlotte's African-American community, launched in December 2008. The site, which Burkins described as the hardest and most fun thing he's been involved with during his career, has grown each month in both content and visitors. He recently launched a wedding-oriented sister site, QcityBride.com.

In January, Qcitymetro.com joined an online partnership with the Observer and four other local websites. The project is funded with a grant from a Knight Foundation initiative known as J-Lab: The Institute for Interactive Journalism, which promotes the use of digital technologies for delivering news and information. The Observer applied for the grant, and it calls for the newspaper and its five partners to share content and explore ways to cover stories together.

"They can use four of my stories per week, and I can use four of their stories per week," Burkins said of his partnership with the Observer. "We worked together on CIAA coverage, on the 10-year anniversary of the disappearance of Asha Degree, who was the little girl who disappeared in Cleveland County, and they used a lot of my content from my coverage of the Jinwright trial. We've worked on things together and that's been fun."

Going "hyper-local"

The Observer's partnership with Qcitymetro.com is one of several ways the paper is attempting to expand its local coverage. The industry has termed this approach "hyper-local," which is news and information relevant to small communities that have typically been overlooked by traditional news outlets.

The hyper-local push by the Observer is evident on the Web, but it's also present in the printed paper. Over the past year, the Observer has launched four community newspapers: Lake Norman, Cabarrus, and two for South Charlotte. They appear every Wednesday as sections in the print edition and are distributed in the geographic areas they cover. For non-subscribers of the Observer, the community paper is also delivered as a free newspaper to homes in that area.

"We're really excited about that because we know that our readers need all kinds of news, but one kind of news they desperately crave — and it's difficult to deliver — is the very local community news," Thames said. "And by that I'm talking about a neighborhood level. That news, we believe we're beginning to deliver with our community newspapers. It's not all the news that people need, but it's a layer of news that they do need and they want. We've watched these papers, and the reaction from readers has been phenomenal."

While newspapers nationwide have been embracing the hyper-local concept, not everyone in the industry is fully convinced of its potential.

"Local has not been thought out entirely; there are some problems with it," said Tom Rosenstiel, director of the Washington, D.C.-based Project for Excellence in Journalism. "One is that the big metro papers have a hard time being hyper-local. They really can't; as they're shrinking their staffs in the face of declining revenue, they cannot cover all of the suburban communities that surround the center city. Listservs and weeklies and others may actually be able to be more hyper-local than a daily can.

"Community isn't simply a geographic thing," Rosenstiel continued. "It's also a community of interests, a community of people you know. In the modern era, not only with cars but even more so with digital technology, we don't live within the confines of a zip code. I think the thinking we've seen from Wall Street, from some economists, and from the news industry about what hyper-local means may be very literal and very simplistic. I think there's a long way to go to see how that notion of localism will really work in the marketplace, and whether it's economically viable or whether it is just something that seemed good in a consulting report."

For every reason why a new initiative or form of technology might be a solution to the newspaper industry's problems, there are just as many reasons as why it won't work. Largely, the newspaper industry is in experiment mode, desperate to find measures that will help it regain lost revenue.

"Newspapers are actually seeing their audience grow if you combine their print editions and their Web traffic," said Rosenstiel, who has spent more than 30 years as a journalist. "The future of newspapers would be much bleaker had their audiences migrated to other news sources. So the question facing the industry is can they monetize the audience, not can they regain the audience. And that's a much easier thing to consider. There are a variety of options, but most people would agree only on one thing, which is there probably is not one solution. Many different revenue models coupled together could represent something significant."

A tangled Web

If you're a regular visitor to CharlotteObserver.com, then you notice that stories are published and updated throughout the day, many times after midnight. Newspapers, once viewed as slow in comparison to up-to-the-minute television newscasts, have now become a go-to source for breaking news.

"Generally, our news cycle is from about 4 a.m. to about 2 a.m.," Thames said. "There are only about a couple of hours when we aren't looking for what's going on. It's pretty exciting because for many years, newspapers were the dominant media in their markets, but we weren't really the source of information for people who were looking for immediacy. Immediacy was all about broadcast. With the introduction of the Web, newspapers have now regained that, and we can now compete for immediacy as well as for context."

The Web is also allowing the Observer to connect more with readers and, it hopes, increase the reader's experience. The Observer's staff, these days, probably spends more time on social media sites than a college student home for the summer with no job.

After growing its social media presence over the past couple of years, the Observer unveiled a social media directory on its website in June. The page lists links to and descriptions of the nearly 20 Facebook accounts the newspaper operates, ranging from "The Charlotte Observer Photography" Facebook page to the one devoted to MomsCharlotte. The directory also links to more than 30 Twitter accounts, two-thirds of which are "personal" accounts by staff reporters and editors.

"Is it a challenge to be able to work across all of these platforms?" Thames said. "It's a bit of a challenge, but I've been proud of our staff at how they have engaged with this. They really understand that this is important to their pact with our readers, to be where our readers need us to be. If our readers choose to be on Facebook or to be largely on Twitter, then we'll produce journalism that they need there."

All of this in the face of sliding circulation. The latest six-month circulation report, released in April by the Audit Bureau of Circulations, showed that the Observer's daily circulation decreased by 11 percent to 166,546, and Sunday circulation fell by eight percent to 226,030. By comparison, in the Carolinas, the Raleigh News & Observer's daily circulation declined 12 percent, the Greensboro News & Record's daily circulation fell 17 percent, and The State's decreased by 14 percent.

Some of the Observer's circulation decline could be attributed to the price increases the paper imposed last year, which would be an unfortunate irony considering it was a move to increase revenue. The newsstand price of the daily paper rose from 50 cents to 75 cents, and the Sunday paper increased from $1.50 to $2.

But the Carolinas' newspapers are faring better than papers in other parts of the country. During the aforementioned auditing period, the San Francisco Chronicle's daily circulation dropped 22.7 percent, the biggest decline of the nation's 25 largest newspapers.

With the decline of newspapers' circulation, some analysts have suggested that some papers reduce the number of days they publish in print, abandoning the traditional concept of a daily newspaper. While many papers may not feel they're in such dire need, they also don't want to end up like the Rocky Mountain News. Denver's once-thriving daily newspaper saw its circulation peak in 2006 with a daily circulation of 255,000. But three years later, in February 2009, after quarter after quarter of declining revenue, the Rocky Mountain News folded after 150 years of operation. In a less dramatic example, but equally devastating to the print industry, the Seattle Post-Intelligencer killed its print publication and became online-only in March of last year. The Hearst Corporation-owned paper reduced its newsroom from a staff of 160 to 20.

Then take Detroit. Not only is there rarely any good news coming out of the Motor City these days, the last couple of years have been bad for the city's newspapers. Hit by some of the highest unemployment and home foreclosure figures in the country, it's logical that newspapers would also suffer. The Detroit News and the Detroit Free Press both decided last year to reduce the number of days they home-deliver papers. The two papers are delivered to homes on Thursdays, Fridays and Sundays. On Mondays, Tuesdays, Wednesdays and Saturdays, the papers are only sold on newsstands, and those print editions have substantially fewer pages than the papers published on delivery days. A year later, both papers are touting the move as relatively successful, citing how the savings on newsprint and distribution costs have helped reduce the number of layoffs in the newsroom.

"Basically, most American newspapers make almost half of all their money from the Sunday paper, especially the ad revenue," Rosenstiel said. "So if the readers could get used to the idea of a one-day-a-week print paper and a six-day-a-week online paper, that model would be acceptable to readers. That's a model that makes some economic sense. You cut your costs — delivery and printing costs all through the week — and you're still able to generate significant advertising revenue from print on Sunday. But the reason I think that's only a theoretical idea at this point is we don't know if the Sunday paper would survive without all those other days. Would people still want to read a Sunday paper in print if they fell out of the habit of having a print product all those other days? Or would going to six days a week online and Sunday for print just destroy your readership base entirely?"

Ultimately what we may find with newspapers is a "to each his own" approach. What may work for a newspaper in one city might not work for a paper in another city. But if you look at what's happened with the papers in Denver, Seattle and Detroit, what they all have in common is that they were in two-newspaper towns, meaning for decades their cities published two competing daily newspapers. In Denver, The Denver Post, and in Seattle, The Seattle Times, are proving to be resilient now that they're the sole daily papers in their cities. Perhaps this will bode well for one-newspaper town Charlotte.

In its recently released second-quarter 2010 earnings report, McClatchy's ad revenue decreased by 8 percent for the April-June period, its lowest rate of decrease in more than three years. Perhaps it's a sign that the hemorrhaging is nearing an end.

Caulkins insists that the Observer continues to have a healthy product.

"People have a misconception about our base of print customers," she said. "We still have a very large base of print customers, so it's not that we don't have those people left. We still have those people, and we have a nice advertising business in the print publication as a result of that good circulation. But what we have to do simultaneously is also develop an aggressive online business at one time."

In one example of that online business potential, in late June, McClatchy signed a national agreement with Groupon, an increasingly popular shopping website that offers discounts from businesses in local markets, to distribute exclusive content to its newspaper websites in 28 markets. Visitors to those websites will see Groupon deals not available on Groupon.com.

As for how much business and revenue newspapers will be able to generate online, that remains to be seen; but what we do know for now is that the activity is there. Facebook just surpassed the 500-million mark in number of users. Nearly one million of those are adults living within 50 miles of Charlotte. Many of those are Observer readers.

And some are former staff.

"... When I left in June 2008, I immediately got on Facebook and saw all these people I knew from working at the Observer ... Because that's how I stay in contact with all those folks," said former clerk/reporter Johnson. "I still do keep in contact with a lot of folks from the Observer ... what we miss are the people and the environment — before the business climate changed."