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Gloom and doom

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Illinois

* The problems ain’t getting any better…

Want to buy a newspaper company? No? You’re in good company.

The Chicago Sun-Times is the kind of trophy that once appealed to deep-pocketed buyers. It has a big audience in a big market, a storied name, and stars like Roger Ebert and Robert Novak. The Sun-Times Media Group, owner of the flagship paper and dozens of smaller suburban papers, said in February that it wanted to sell assets or maybe the entire company. The chief executive, Cyrus F. Freidheim Jr., said May 8 that “a large number of parties” had asked to see the books, and that the company expected to field offers by the end of that month.

Since then, silence.

This is no isolated case. While all publicly traded newspaper companies have seen their share prices fall in the last year — drops of 50 to 70 percent are commonplace — some have tumbled so far that any number of bargain hunters could snap up a controlling interest, despite the credit squeeze. But they haven’t.

* Remember a few years back when Yusef Jackson put together a group that offered to pay $850 million for the Sun-Times? Back then, the paper and its properties were only worth about $440 million. Now, the company is worth less than ten percent of that. The stock has been de-listed from the NYSE, it has closed several papers, laid off a ton of employees and the flagship paper is a bit on the, um, thin side.

* But GateHouse has more immediate problems…

GateHouse Media is likely to default under its credit agreement unless it can negotiate an amendment to its covenants or get a cash injection from its largest stakeholder, Moody’s Investor Service says in a report downgrading the community newspaper publisher’s credit and probability of default ratings.

* Billy Dennis notes that one of the ways out is for the conglomerate to sell off papers. But as the top story here shows, nobody wants to buy newspapers right now. This was reinforced by an interview BD did of former Merrill Lynch analyst Lauren Rich Fine…

There are no named buyers for papers right now. Landmark properties have been on the block since the beginning of the year. Big papers like Newsday attract big money buyers who can afford to lose a few bucks. If there are wealthy philanthropic people in Peoria or some corporation with a heart or passion for democracy, they are the likely buyers. No way to value the paper due both to lack of data and no sense of how close we are to the buyer. Being unionized isn’t necessarily an issue as a buyer can buy the assets, close the doors, de-unionize and tell folks to reapply for their job.

* GateHouse is likely on the verge of being delisted from the NYSE, but you’d never know it by reading one of the company’s papers. It’s a virtual blackout, which is one reason why so many people are so worried about the negative impact of media consolidation. If you rely solely on a GateHouse paper for your news, you have no idea that the company is in the toilet. Thank goodness for people like Dennis.

posted by Rich Miller
Monday, Aug 4, 08 @ 9:24 am

Comments

On a positive note, check out Google shares this quarter.

Comment by The 'Broken Heart' of Rogers Park Monday, Aug 4, 08 @ 9:46 am
It’s sad to see because I like the idea of lounging on the couch with my paper-and-ink news and spending quality time. I liked writing for newspapers in the past. I like the permanence of a hard copy that can’t be secretly edited.

However, the writing appeared on the wall a long time ago, and like the ancient Babylonians, the newspaper magnates didn’t heed the warning.

News travels quickly these days, and if newspapers are to survive, they will need to offer a depth and/or breadth that electronic services cannot provide.

Comment by Fan of the Game Monday, Aug 4, 08 @ 9:51 am
Didn’t they just buy the SJ-R, relatively speaking? Seems like an opportunity for some of the present old timers and former old timers who were let go to put together an employee buyout and try to take the local papers back and return them to their roots.

Comment by Ghost Monday, Aug 4, 08 @ 9:59 am
Zell missed a golden opportunity to flip the LA Times right away to Geffen, Burkle, or Broad. He could have gotten a decent premium for the publication and the property right away, and used that money to pay down some of the first year debt. Sale of the paper and the property today would likely be at a significant discount

Any smart bidder for the Cubs would move through the process; taking two steps forward and one back for as long as possible. As sand slips through the hour glass Zell becomes more desperate for cash in order to feed the beast and avoid defualting on the JUNK bonds.

The organized labor for this industry is so 80’s. The issue is no longer wages and work rules; although pensions and retiree health care will continue to linger.

Todays media industry problem related to production costs (labor, paper, ink, packaging and distribution) is that these are stranded costs that are no longer an essential ingredient to delivering the traditional version of the finished product. The number of people buying traditional newsprint format is rapidly imploding, and will continue to do so, perhaps at an accelerated pace.

People no longer want the old model. What they want is a 10 minute Tribune; specifically tailored to the subjects most relevant to them personally. They want it delivered directly to their PDA for immediate access, and they want integrated supporting video wherever appropriate and available. They want it updated regularly throughout the 24 hiur news cycle day, with linked RSS feeds and personalized updates sent to them by e-mail for “Breaking News”. They want a comprehensive and user friendly “search” function to be able to seek out issues of interest, sortable based on both elapsed published time and keyword based relevance.

People want objective un-biased informaton which allows them to form their own fact based and informed opinions, rather than to be told what to think by intellectually elitist editorial writers that pontificate from on high, to tell us what we should think.

Th convergence of “blog” and “news” can be seen in the interest in people to participate in a communal discussion through immediate feedback and comments, not just to the publisher, but also so other readers can review this and contribute collectively to a discussion as well (i.e. topix.net, etc.)

The newspaper as we used to know it is dead! The fact that people will pay almost $1.00 per day for Capital Fax; with supporting subscriber blog access, but will no longer pay .50 cents for the Tribune is all the evidence you need.

Comment by Jake Lingle Monday, Aug 4, 08 @ 10:37 am
==A year ago, the conventional wisdom was, ‘Yep, there are problems out there, but there’s still significant value.’ Now, it’s ‘Run away.==

Amazing how the ‘experts’ missed this one. There is nothing left now than to wait for the bankruptcy filings–the only way they will sell now (to former employees or other groups) is with the debt gone. I hope the newspaper magnates enjoyed the ride, because it is gone forever. As the old saying goes, ‘The Stone Age didn’t end because of a shortage of stones.’ As with most extinct industries (buggy whip maker, leech doctor, IL GOP) a more efficient way of doing something evolved.
I hope some papers survive, but its going to get uglier.

Comment by Vote Quimby! Monday, Aug 4, 08 @ 10:38 am
Jake Lingle,

You don’t speak for all newspapers readers. I’m a young (

Comment by South Side Mike Monday, Aug 4, 08 @ 11:00 am
…that’s not quite true, but you have to read between the lines.

“If you rely solely on a GateHouse paper for your news, you have no idea that the company is in the toilet.”

The community-activist-publisher of the Rocford Star ’suddenly’ (my term) decided to ‘retire’ a couple of weeks ago; he’s already gone. Just keep watching for the Gatehouse-papers management changes.

Comment by Actually... Monday, Aug 4, 08 @ 11:07 am
Jake,
I agree on the first part of what you say. The business model is changing (just as it is in many industries, GM and Ford come to mind) because expenses are up and their credit/revenue estimates were way off. Maybe from seeing too many dollars signs based simply on size.

After the 10 minute Tribune comment you lost me. I do not want to live off PDA or any other electronic version. I spend plenty to time (propably too much) in the electronic world and have for years. News over IE or a handheld is just boring. You can only look at a screen so much. Blogs are great, but tring to make sense out of some of the goofy things people say is a hassle or chuckle (you pick). Got a morning WSJ and local paper. Hope it stays that way for a long time even though I know changes are coming.

Comment by zatoichi Monday, Aug 4, 08 @ 11:27 am
The internet is killing the print media as a for-profit industry. If it is going to be saved (assuming it’s even worth saving), anti-trust laws need to be relaxed in order for them to band together to force online subscriptions for readers and a reasonable advertisment policy.

Even that may not be enough because of the likes of CNN, Fox News, etc., where people could still get national news online, and because they could get local news from blogs and other sites.

It may just be that, as the newspaper put the town crier out of business, the internet may have done the same to the newspaper.

Tree-huggers delight: think of the millions of trees that will be saved at the expense of tens of thousands of jobs!

Comment by Snidely Whiplash Monday, Aug 4, 08 @ 11:42 am
Save a tree by reading newspapers online.

Comment by Madison County Watcher Monday, Aug 4, 08 @ 11:50 am
Yes the publisher of the RR Star retired suddenly, but no stories there why——–except to spend time at the cabin in WI.

Comment by Anon Monday, Aug 4, 08 @ 1:15 pm
Let me confess something. I ENJOY opening up a newspaper, scanning and/or reading articles, reading features and ads and sports. It gives me a little bit of quiet time on a train, at my office, at my kitchen table.

With me it is a built in behavioral trait.

Why don’t newspapers simply promote that type of behavior?

Comment by Louis G. Atsaves Monday, Aug 4, 08 @ 1:25 pm
I second the sentiment expressed by Mr. Atsives.
I’m much more comfrotable reading hard copy than a computer screen. I can’t ever imagin readind an e-book and I find e-education lacking somehow.

Probably it’s a seriuos generational difference between me and the younger set who grew up playing video games and looking at monitors.

On the brighter side, the unfortunate demise and dumbing down of newspapers and other hard copies publications constitutes a tremendous opportunity for entrepreneurs like Rich Miller seeking profitable niches in specialized subjects that may not have much appeal to Red-Eye readers.

Comment by Captain America Monday, Aug 4, 08 @ 4:07 pm
Listening to Jake justify “10-Minutes Of News” on a PDA (sounds very Orwellian doesn’t it, aside from who’s in control?) because of rising print costs made me stop to THINK about why I love print so much besides the quiet time and accompanying cup of coffee–AND why, if forced to read a paper on-line, I prefer a PDF file v. one of those horrid point & constantly click layouts.

It’s because the mere act of being “forced” to “page” through static print often exposes me to some little article or opinion or even hidden “fact” in a headline article that intrigues me because it often introduces a new perspective or problem to ponder. (That’s probably also the reason why one of my 6th grade teachers, Mrs. H, made us subscribe to and read the Trib each day in homeroom and why I’m a news junkie today.)

The concept of “10 Minute News” on a PDA has also made me realize why the whole “Print Is Dead” thing terrifies me: I can’t imagine having to sit through dinner with an entire generation of young and middle-aged adults who were raised only on MySpace, hyperlocal media, and carefully selected “news” beamed to their little PDAs.

Not only would it have the potential to be quite dull, but I’d be afraid of accidentally introducing a current topic that someone might consider “too stressful” to even consider (hence having programmed their electronic device, Tivo, etc., etc. to block it out of their lives entirely) and watching him/her have a meltdown at the table.

Luckily, Jake’s wrong about kids. They might be parroting the whole “Print is Dead” thing, but watching them, it’s obvious that there’s still a large population out there who consider the major papers their primary news sources (either in print and/or on-line, with updates coming through on PDAs as well–as SUPPLEMENTS.

They haven’t completely fallen yet for the full “only what matters to me and what I want to hear (preferrably about me)” advancement in our society.

Perhaps Zell should consider an “innovative” spin on taking a part of the Trib “underground”.

Comment by Anonymous Monday, Aug 4, 08 @ 8:56 pm
BTW, Rich, completely off topic, but have you considered a topic re: Gwenyth Paltrow’s new commercial? Not from the perspective of Ds or Rs or McCain v. Obama, but the impact ex-pats could have on the election? More national, I know, but could make for some interesting discussion. Hope you don’t mind the suggestion.

Comment by Anonymous Monday, Aug 4, 08 @ 9:30 pm
+100. Respect.

Comment by funnygirl Thursday, Aug 7, 08 @ 8:22 am