UNTIL SEPTEMBER 11, the megacorporations that own most of the nation’s news organizations were squeezing, slashing, and downsizing. Since the attacks on the World Trade Center and the Pentagon, these same corporations have, to their credit, pursued a virtual open-checkbook policy, allowing their news divisions to spend whatever it takes to cover the war on terrorism.

Now it’s gut-check time. Will media executives invest in the journalistic resources needed to cover a complex, worldwide story that is likely to drag on for years? Or will they, once things have returned to normal (whatever that now means), resume their cost-cutting ways?

More spend, less thrift JUST A FEW months ago, the Boston Globe's corporate parent, the New York Times Company, was ordering drastic cuts - and many on the staff was seething over the perception that their purpose was merely to fatten the Mother Ship's coffers. The New Hampshire Weekly supplement was shut down. The Sunday Focus and Books sections were shrunk. And 185 employees, about one-fourth of them in the newsroom, accepted early-retirement incentives and left (see "Squeezing the Globe," News and Features, June 8). Since September 11, though, there has been a reversal of priorities, if not necessarily of fortunes. With five reporters stationed in the Middle East and Central Asia, and with dozens of reporters and editors covering the ongoing story both locally and across the country, the Globe has staked out a national presence. "There's a recognition that this is going to cost us money," says editor Marty Baron. "We're going to cover the war, and all the aspects here in the United States as well, for as long as we have to. I think this organization recognizes that our mission is to cover the news." The Globe's rival, the Boston Herald, has also had a difficult year. According to the newspaper Banker & Tradesman, publisher Pat Purcell this summer took out a $10.5 million mortgage on the Herald's headquarters at One Herald Square - no doubt to help cover the expense of purchasing Fidelity's 100-plus community newspapers for an estimated $150 million. Although the Herald, as a smaller, more locally oriented paper, has not put the same resources into covering the war on terrorism as the Globe, it has produced some first-rate reporting, especially on stories with a Boston angle. Nevertheless, managing editor Andrew Gully acknowledges that the paper is "in an extremely difficult position" financially, a position made more precarious by the costs and falling ad revenues associated with September 11. Currently, he adds, the paper has about seven unfilled newsroom slots - and is not about to fill them anytime soon. The first stop on the radio dial for many Boston news junkies is WBUR Radio (90.9 FM), Boston University's public-radio powerhouse. By offering both National Public Radio programs and its own content, such as The Connection from 10 a.m. to noon and a new, as-yet-unnamed interview-and-call-in show from 7 to 9 p.m., WBUR has made itself indispensable. But though it doesn't face the same pressure to turn a profit as a commercial station, it still has to keep the money rolling in. According to spokeswoman Mary Stohn, the public is responding: in the on-air portion of its most recent fundraiser, listeners donated $540,000 - some $140,000 above goal. But the station has lost underwriting money since the dot-com collapse of last spring, and its costs are rising; Stohn says the new evening show alone costs some $15,000 per week. Says general manager Jane Christo: "The economic pressures are enormous. We are overspending our budget and we don't know where the money is coming from, but we have to spend whatever is necessary. There's no time in my lifetime that this has ever been more important." The news operations of all of Boston's local television stations have been under pressure since September 11 - especially New England Cable News, with its 24-hour schedule. Already a borderline operation, NECN lost enormous amounts of money during the first week, when it, like most broadcasters, eschewed advertising. "September 11 cost NECN a great deal of money," says NECN chief executive Phil Balboni. "It's a lot of added strain on the staff, because you're going live all the time." Balboni adds that "coverage of this extraordinary event is an unavoidable responsibility for those of us in the news business." But, more ominously, he warns that at some point there will be "further pressure to reduce costs elsewhere." - DK

Despite a drop-off in advertising revenues that, even before September 11, was reportedly the most severe since the Depression years of the 1930s, the financial pressures facing the media are largely artificial. With Wall Street addicted to media-company profits of 20 percent and above, corporate executives have been cutting not to stave off losses but, rather, to maintain profits.

John Morton, a financial analyst who specializes in the newspaper business, puts it in perspective when he notes that newspaper companies rang up an average profit margin of 19 percent for the first six months of 2001. "It’s all relative," he says. "It’s not like newspaper companies were losing money. It’s just that they weren’t making as much as they were accustomed to."

Of course, the squeeze has unquestionably gotten worse since September 11. According to the New York Times, the three major networks lost about $500 million in ad revenue during the first few days after the attacks, when they broadcast commercial-free news 24 hours a day. The news media as a whole may have already spent $100 million beyond their budgets.

Advertising Age reports that analysts are revising their already-pessimistic forecasts downward: after having previously predicted a modest rise in ad spending in 2002, most now believe the decline will continue. Media corporations such as the New York Times Company (whose holdings include the Boston Globe), Knight Ridder, Gannett, and Reuters have reported miserable third-quarter earnings in recent weeks, with downward trends accelerating since the terrorist attacks.

But media companies, over the long term, remain highly lucrative enterprises. More important, they hold a public trust, considered so vital by the drafters of the Constitution that they were given explicit protection in the form of the First Amendment. That public trust has never been more crucial than it is now. This is no time for media executives to obsess over quarter-to-quarter results.

Yet, given the need to keep their stock prices up, it’s hard to see how they can do otherwise. It’s a vicious circle, and it will require foresight and courage to break it.

PERHAPS THE most optimistic media observer is Tom Rosenstiel, director of the Project for Excellence in Journalism, who thinks September 11 may have signaled a shift similar to the transition from the frivolous 1920s to the serious ’30s and ’40s. In both the ’20s and the ’90s, the media were obsessed with celebrity and scandal. Now, just as they were 70 years ago, they are being forced to turn their attention to the unhappy realities of a changed world. Rosenstiel believes the media can rise to the occasion — although he cautions that there’s no guarantee that will happen.

Consider what has happened to CNN. Before September 11, the pioneering all-news channel was sucking wind. Its corporate master, AOL Time Warner, was cutting costs, and the channel was loading up on boneheaded talk shows to compete with the Fox News Channel, its upstart conservative rival. Since the attacks, the ratings of all three news channels — CNN, MSNBC, and Fox — have been up exponentially, with CNN, which still has the deepest reporting corps, leading the way. The network has reportedly been able to raise its advertising rates, which will pay for more reporting. And its chief executive, Walter Isaacson, has crowed publicly that his network has rediscovered its sense of mission.

Rosenstiel thinks that this is no fluke — that bigger audiences are here to stay, and that those audiences will pull in the advertising revenues needed to pay for better news coverage. And though he cautions that he doesn’t want to sound "Pollyanna-ish," he also thinks it might be possible to convince Wall Street that news organizations are better off putting more of their revenues into newsgathering and less into shareholder value. A pipe dream? Perhaps, Rosenstiel admits. But he notes that Wall Street, more than any other place in the country, was devastated by the terrorist attacks, and "they are going to have a different psychology now."

Besides, Rosenstiel asks, if supermarket profits, to cite one example, generally run five percent, why is it accepted as received wisdom that media companies must earn at least 20 percent? Those profit expectations, he says, are based on nothing other than "consensus." And the consensus can change.

Geneva Overholser, a Washington-based professor of public-affairs reporting for the Missouri School of Journalism and a leading critic of Wall Street’s unceasing demand for profits, says she hopes that the "impossibility" of reconciling high profits and in-depth news coverage "is so clear now that we will finally come face to face with the need to change the way we operate." She adds: "I don’t think the Street is just going to decide it will be different. We can’t keep up with the old profit pressures, and we’ve got to tell Wall Street a different story."

(Overholser, by the way, will be among the participants in a conference at Harvard on October 28 and 29 on "Paying for the Next News," sponsored by the Nieman Foundation and New Directions for News. The purpose, says Nieman curator Robert Giles, is to develop strategies to balance profit considerations with the public interest. For more information, go to www.newdirectionsfornews.com.)