Financial pressures squeeze U.S. newspapers
By Leah McBride Mensching, Wednesday 11 June 2008 at 20:36 :: General :: #1772 :: rss
Making investments and focusing on the long-term used to seem like a good idea for private newspaper companies in the United States, but financial pressures are putting the squeeze on owners in the short-term, which is putting futures in peril, Fortune reported Tuesday.
Take, for example, Brian Tierney, who, with a group of investors, bought the Philadelphia Inquirer and sister tabloid Daily News, for US$515 million in 2006. At that time, the equation seemed simple: invest more money into the newspapers to boost circulation and revenue. But two years later, that strategy hasn't worked, and Standard & Poor reported last week that Philadelphia Media Holdings missed a June 1 interest payment on a mezzanine loan and is in violation of its covenants on its senior debt, according to the Fortune article, posted by CNN Money.
Sam Zell at the Tribune Co. is also making some tough decisions, selling Newsday and other assets, such as the Chicago Cubs baseball team, as well as cutting into staff numbers and even the amount of content at Tribune-owned newspapers, such as the Chicago Tribune and Los Angeles Times, all in an attempt to cover a $650 million debt repayment in December, as well as another payment of $750 million due in May next year.
“Tierney and his peers are discovering that there's little benefit to being a private newspaper company owner - at least when you've borrowed a lot of money to become one, your business prospects keep getting worse, and credit is generally hard to come by anyway,” the Fortune article stated. “It took years of mediocre financial performance before Knight Ridder's equity investors rebelled and forced the company to put itself on the auction block. In today's environment, lenders are likely to be a lot less patient.”
Buying large metro dailies that were losing ad revenue and circulation and taking them private is even more difficult today, as the U.S. economy slumps even further, cutting into already weak real estate, employment and auto classifieds in print, and stunting their growth online. Meanwhile, the poor economy is also worrisome to lenders, who are less likely to cut ailing businesses any slack, Dave Novosel, senior analyst at Gimme Credit, told Fortune.
Huge amounts of debt, an ailing economy and readers migrating from print to online means owners now have to get really creative. So what are they doing?
“A little of this, a little of that,” Fortune stated.
Zell is revamping content to ad ratios in Tribune newspapers and cutting staff, Philadelphia media is also cutting staff, but also adding online division positions, each trying to figure out the right combination for their markets, debt loads and a myriad of other variables.
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