The Journal Register Company (JRC), whose extensive portfolio of local and regional U.S. news titles includes the New Haven Register and The Trentonian has filed for Chapter 11 bankruptcy.
Parent company Digital First Media (DFM) confirmed the news on Wednesday and also revealed that it was to sell the company as soon as possible. It is hoped that an auction and sale will be finalised within the next 90 days and 21st CMH Acquisition Company, an affiliate of the Alden Global Capital hedge fund that owns the JRC, has already signed "a stalking horse bid" for the company
Under the direction of DFM’s CEO, John Paton, the Journal Register Company has been steadily making a name for itself as one of the leading innovators of the U.S. news industry. Paton’s firmly held conviction that the future will see print newspapers give way to digital models has seen JRC’s investment in digital ventures rise during his tenure. Since 2009 digital expenses at the company have risen by 151 percent, at a time when general expenditure was greatly reduced.
Wednesday’s announcement marks the second time in three years that the JRC has sought Chapter 11 bankruptcy protection. In 2009, debts of $629 million, plummeting advertising and falling circulation forced the company to take undergo an extensive restructuring process that saw it emerge from bankruptcy after only six months.
Now Paton, who was appointed to JRC’s board in August of 2009, just after the company had emerged from the Chapter 11 process, is insisting that the previous attempt at reorganising the publisher’s economic foundations did not go far enough. While discussing this week’s bankruptcy announcement on his personal blog, Paton writes: “The Company exited the 2009 restructuring with approximately $225 million in debt and with a legacy cost structure, which includes leases, defined benefit pensions and other liabilities that are now unsustainable and threaten the Company’s efforts for a successful digital transformation.”
Impressive digital figures at JCR were no compensation for poor print performance. Digital revenue between 2009 – 2011 has seen growth of 253 percent, but print advertising revenue – which represents more than half of the JRC’s revenue, has decreased by 19 percent in the same period. JRC’s woes are indicative of a larger trend afflicting the news publishing industry, and the company has been more adept at meeting the challenges thrown down by the digital transition than other media outlets, as JRC’s Matt DeRienzo highlights: “JRC’s print advertising revenue has declined at almost exactly the same rate as the rest of the newspaper industry over the past two years, while its digital advertising grew much faster than the rest of the industry. Through its focus on the web, video and mobile, the company did a better job than the rest of the industry in replacing print losses with digital growth. It remains very profitable on an operating basis.”
It would be easy to see JRC’s decision to file for bankruptcy as proof that digital revenue is not enough to keep news organisations afloat, but Paton’s comment about legacy obligations points to a rather different explanation. News publishers were, in the main, unprepared for the dramatic economic downturn that hit newspapers at the beginning of the century. As Nieman Lab’s Joshua Benton points out, some executives saw the revenue slump that hit the industry as part of a cycle that would eventually lead to a new golden age of newspaper sales. We now know that the chances of that happening are next to zero.
Consequently, forward-looking news companies that were once dependent on print revenue find themselves in the position of investing in new (digital) business models that are not as immediately lucrative as print, at the same time as supporting a sprawling infrastructure inherited from the days when revenues, offices and staff numbers were twice the size they are today. Despite being saddened at seeing the company return to the bankruptcy courts, JRC’s Digital Transformation Editor, Steve Buttry, acknowledged that “a company restructuring for a digital focus […] needs to shed the cost structure of the past.”
JRC has sought to reassure its employees by issuing an FAQ sheet clearly stating that, until a sale has been finalised, it will be business as usual at the office. Jobs, salaries and expenses will remain unchanged before a new owner is found, though no guarantees can be offered for after the company has been taken over.
Although it may be cold comfort to staffers unsure of what will happen once the 90 days put aside to find a buyer are up, the publisher’s strategic bankruptcy action could be the levelling force it needed to be able to lay down stronger foundations for a digital first future. If JRC is able to shed the financial structures it adopted in the years when print was in its prime and adopt a new outlook based on more modest digital revenues, “digital first” could, as Benton puts it, "move from a slogan to a corporate name to a foundation of the company’s business structure.”