It's owners, not papers, that are the problem

WHEN three of America's greatest dailies - the Los Angeles Times, the Chicago Tribune and the Baltimore Sun - plus the rest of the mighty Tribune Group fold into Chapter 11 bankruptcy, then obituaries for newspaper publishing itself flow fast and glib, generating gloom that washes as far as Fleet Street. Added to that comes news that the New York Times itself is to mortgage off its spanking new building to deal with next year's debt dilemmas.
But (courtesy of Forbes magazine and sundry statisticians) consider what Sam Zell, the Tribune Company's latest owner-cum-wizard-financier, blames on this 'perfect storm' of a credit crunch. In the third dire quarter of 2008, the Tribune company still had an operating cash flow of $90m on $1bn in revenue. And, within that, the 10 papers it owns made $13m on $654m revenue.
That's not fatal. That's still tolerable trading business in the teeth of recession. Except that the $8.2bn media empire Zell took private control of 12 months ago for only $300m of his own money is $13bn in debt, largely made up of leveraged wheezes from Old Sam's almanack of amazing takeovers. So its creditors are in the soup, alongside pensioners who won't get their money and employees who ploughed good dollars after bad. It's a horror story full of human misery. But it has very little to do with curse of the internet or similar standard rationales of decline.
Simply, here is a fine collection of famous-name titles and TV franchises run slap into Lake Michigan by panicky sellers and optimistic buyers. There'll surely still be papers in Chicago, Baltimore and LA when it is all over, and they'll still make money. But the road to Zell was paved with lousy calculations. He bought, and has now essentially sold out, the Tribune company as though it were another a plot of land to plonk his rented caravans on.
The central problem isn't the internet (a dampener on profits and spreader of uncertainty, at worst; not the end of everything). The problem is newspaper ownership flawed by misplaced ambition and short-sighted management.
Sam Zell may be the hardest case on the block, but dozens more share his pathway to the pits. Why is the New York Times having to turn its new home into a crutch? Because it has a $400m debt repayment due next spring, and this is the only way left to meet it. Why are the Denver Post and 53 other MediaNews-owned dailies in such straits? Because their debt is eight times earnings, before tax. Why did Trinity Mirror, Britain's biggest chain, drop out of the FTSE 250 last week? Because its shares have tanked - down to a seventh of recent value.
It's easy, in such dire circumstances, for satire merchant Jon Stewart to ask 'What's black and white, and completely over?' The death of the newspaper itself has never seemed nearer. Yet keep hanging on to those exceptional circumstances of exceptional idiocy. Keep remembering that it's not one damned thing that has caused this crisis, but one damned thing after another.
And remember, too, what a little old-fashioned journalistic nous can still achieve. Newsweek magazine looked at the Wall Street Journal post-Rupert Murdoch the other day and pronounced it 'a fusty paper revitalised'. Cue Mr M himself, delivering a familiar lecture. 'The newspaper, or a very close electronic cousin, will always be around. It just may not be thrown on your front doorstep the way it is today.'
Now that, of course, may be wrong, too. But there's no telling at this point who's right. You can say that the chains have made a hash. Yet you can also say that, even now, some papers - take the FT, Guardian and Sunday Times from November's ABCs - are gaining rather than losing circulation. And the Sun trumpeted its biggest ad revenue issue ever a few days ago.
Which analysts saw that coming? Not Deloitte, whose prophecy of one in 10 US papers and magazines going to the wall made headlines last week. Not any of the high-priced gurus who advised Sam Zell, either. Call it, rather, an imperfect storm: and don't rush for the lifeboats.

Unseasonal greeting for the BBC's gifts
Pause, as the BBC offers a sackload of presents to its public-service rivals, and scratch your head over the process. Here's the know-how to make your own iPlayer, plus regional newsrooms to share with ITV, and Worldwide partnerships to keep Channel 4 happy. Newspapers won't need to pay for TV listings any more, and - in the wake of a quiet Telegraph deal - they'll be able to use BBC video on their own websites. Santa, you might suppose, has arrived a little early this year.
But no... C4 sees no 'immediate and financial sizeable upside here'. Other newspaper groups grumble about what the Telegraph's getting. The BBC Trust points out that it hasn't even blessed the plan yet.
There's general cynicism over the perception that Auntie is desperately trying to stop her licence fee being top-sliced away in the public service review that Ofcom has set in motion. And so a big offer turns into another sour shouting match.
There's the process problem. In any kind of sane commercial deal, the interested parties wouldn't be snarling at each other outside Ofcom's office. They'd be talking quietly in private. Newspapers would find they could have what the Telegraph's got, too. ITV might discover real prospects of newsroom sharing. And C4 could put its thinking cap on, rather than reach for the cold water bucket.
There could, in short, be careful negotiation, with the chance of partnerships properly explored: and maybe a deal at the end for Ofcom to sanctify, rather than impose.
Alas, though, all we seem to have is a shrill bidding session with instant appeals to the umpire. Partners in the so-called 'broadcasting community'? Not while all open roads lead to the regulator, and any true business discussion lands you straight in the ditch.

Worldwide news, local tragedies
The good news, as the year winds down, is that only 86 journalists around the globe died in the cause of duty. Only? Remember 2007, when 173 were shot, stabbed, blown up or otherwise killed. But there is bad news alongside such modest relief.
The journalism department at Cardiff University has begun producing extremely valuable analyses of International News Safety Institute figures, recording who's died where in what circumstances - and, more and more, the slaughter seems local. The 15 (and still counting) dead in Iraq this year are all local journalists.
Indeed, as you move round danger spots - India, Afghanistan, Somalia, China, Russia - you see clearly who's first in the firing line: largely, not Western correspondents with proper training, return air tickets and a circumspect editor, but local men and women serving local media, murdered in the alleys they call home. (The figures after eight months were 57 locals to five internationals, and that balance doesn't seem to have shifted.)
Anna Politkovskaya was not alone. From Mexico to Pakistan, it's brave men and women who turn over society's stones who then lose their lives. They die trying to tell the truth - 1,360 of them in the last 12 years, on INSI's reckoning. Carve their names with a salutary pride.

Craig Brown 'wittiest writer in Britain'
Craig Brown 'is the wittiest writer in Britain', according to Stephen Fry. He is also the most recently unemployed, after an utterly bizarre Telegraph decision to dump him. Lose 50 more journalists in a crunch? Re-summon Charles Moore to the colours and get him columnising twice a week? Such things may be reasonably understood when the devil drives. But Brown (who probably says nice things about Fry, too) is a pearl beyond price, a funny man of infinite resource. On any rational view, he's the last chap you should push overboard. But 'he was very expensive,' says a defensive Telegraph hand. Or perhaps he meant this was a very expensive mistake.

Source: Guardian UK

The Newspaper Bubble, Too, Has Burst

The bankruptcy filing of the Tribune Company on Monday is just the latest, largest evidence that the American newspaper industry is suffering the hangover from an immense buying spree in 2006 and 2007 at what turned out to be the worst possible time for the buyers, just as the business was about to enter a drastic decline.
Newspapers would be in trouble either way. The steady leak of advertising and readers from print to the Web has become a widening torrent in this recession year. Most newspapers remain profitable, but the margins are dropping fast, with the industry losing about 15 percent of its ad revenue this year.
But the companies in the weakest condition are there largely because they borrowed a lot of money to buy papers, often at inflated prices, and the biggest of those deals were struck in 2006 and early 2007. Tribune’s was the biggest of those deals, $8.2 billion to take private the company whose assets include The Los Angeles Times, The Chicago Tribune and 23 television stations, a transaction that almost tripled the company’s debt.
In the year before that takeover was announced, the McClatchy Company bought Knight Ridder, including papers like The Miami Herald and The Kansas City Star; the MediaNews Group bought several papers, including The San Jose Mercury News and The Pioneer Press in St. Paul; investors in Philadelphia bought The Inquirer and The Daily News; a private equity firm, Avista Capital Partners, bought The Star Tribune in Minneapolis. Smaller companies like GateHouse Media bought up dozens of local papers.
If it were possible to unwind those deals, “the business would still be in pretty difficult shape,” said John Puchalla, a vice president and senior analyst for Moody’s Investors Service.
“It wouldn’t have changed the downturn,” he said. “But it sure would have changed the vulnerability to the downturn. Ten to 15 years ago, most newspapers were carrying a pretty low amount of debt. But companies have levered up over time, and in the last couple of years, some companies pushed it too far.”
Most newspapers still have earnings before interest, taxes, depreciation and amortization that are equal to 10 to 20 percent of their revenue. That is down from 20 to 30 percent in the middle of this decade, but tolerable — if not for the burden of making debt payments.
The Star Tribune, the Philadelphia papers and the Journal Register Company, publisher of The New Haven Register, have all suspended debt payments while trying to reach sustainable new terms with their lenders. Executives at the Minneapolis paper have talked of bankruptcy.
McClatchy and MediaNews have succeeded in paying down their debts to more manageable levels, but they also had to negotiate new terms this year with their creditors. Freedom Communications, which publishes The Orange County Register, recently warned that it might not be in compliance with the cash-flow requirements in its debt covenants.
Credit ratings for nearly every newspaper company judged by the major ratings agencies have been downgraded well below investment grade.
“I think there will be more pressure on these companies, and more bankruptcies,” said Dave Novosel, senior analyst at Gimme Credit, a research firm.
Some newspaper companies would like to merge with others in the same region, but have been barred from doing so by media ownership regulations. A 2006 deal in the San Francisco Bay Area between MediaNews and one of its investors, the privately held Hearst Corporation, which publishes The San Francisco Chronicle, was blocked on that basis.
Putting papers up for sale, as several troubled companies have done, will not solve the industry’s problems, said David C. Joyce, a media analyst at Miller Tabak & Company, a small investment banking firm.
“Selling assets also means selling off cash flow, and they need that cash flow to service the debt,” he said. “And any sales would be fairly close to fire-sale prices, because people aren’t buying assets, especially in the newspaper business.”
There are some exceptions to this story, including the Gannett Company, the largest newspaper chain in the country. Companies like Gannett that do not have a lot of debt, and did not make major new newspaper acquisitions in recent years, are in much better shape than their peers, despite sharp revenue declines.
Looking back, what happened to newspapers in 2006 and 2007 directly paralleled the bubble in the housing market, with similar results.
“There was very cheap credit available,” despite risks that should have been obvious to everyone, Mr. Novosel said. “The banks were willing to lend, and people were willing to buy at these prices because they figured if asset prices kept going up, they’d be fine.”

Source: NYT