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America’s Economic Collapse

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Disappearing Newspapers: The Latest Economic Casualty

February 2nd 2009

Social Trends - Newspapers

The next American commercial sector collapse is well underway, and indeed has been forestalling economic disaster for years. It is a bedrock of American democracy, enshrined in constitutional protection, and vital to an informed nation. Newspapers are next.

Start at the top. The New York Times is in trouble. When on January 20 Mexican multi-millionaire Carlos Slim Helu rode into Manhattan with a $250 million loan to The New York Times (that is, in addition to the 6.9 percent stake he lassoed in last year), the storied newspaper’s financiers breathed a sigh of relief—for the time being. But the Times’s building is still being mortgaged. "The Gray Lady" was likely to default on approximately $400 million in debt in May of this year, this woe added to $1 billion in other debt. That looming default could have forced what many consider one of America’s most prestigious newspapers to shut its doors, Michael Hirschorn recently wrote in the Atlantic.

A year ago the closure of an institution such as The New York Times would have been considered unthinkable. But the precarious structure of the massive Times’ debt has now exposed the inner workings of not only that publication, but also many others. Many readers were probably unaware of such dynamics in their daily newspaper. Now such facts are being openly discussed.

The New York Times was lucky in restructuring its debt. The same cannot be said for so many other newspapers around the country. Since the end of last year, the bad news about newspapers has been reported almost daily. The company that owns the Chicago Tribune, the Los Angeles Times, Baltimore Sun, the Orlando Sentinel, Newsday, and many other newspapers filed for bankruptcy December 8, when its smothering $13 billion debt service collided with declining print readership and advertising revenues to create a perfectly debilitating storm. Since that filing, Tribune Media newspapers have been announcing deep staff cuts, most recently the Los Angeles Times which in recent days shed 300 jobs. Tribune bonds are now trading at a mere 1.5 cents to the dollar.

In the beginning of January 2009, the Minneapolis Star-Tribune filed for Chapter 11 bankruptcy. The Washington Post has just announced that on February 15 it will close the print edition of its long cherished Book World. The Baltimore Examiner will print its last copy on the very same day. The Detroit Free Press, the San Francisco Chronicle, the Newark Star-Ledger, and the Gannett Chain which owns USA Today, and are among many newspapers that have admitted to extreme financial problems, announcing serious staff and publication cutbacks. Even Publishers Weekly suffered recent staff cuts which claimed its own editor-in-chief and longtime editor.

The concept of a free press is enshrined in the First Amendment of the U.S. Constitution: "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press." Thomas Jefferson wrote in 1787, "Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter." The Newspaper Preservation Act of 1970 was created to allow for an exception to antitrust law to enable newspapers to combine their business operations — mostly advertising, printing and circulation — while keeping the newsrooms separate.

Seattle and Tucson, both cities with newspapers facing closure, operate under such an exception, called a Joint Operating Agreement. These JOA’s can be contentious. But many feel the battle is nowhere more acrimonious than in Denver. Both the 150-year-old Rocky Mountain News and the better-positioned Denver Post (it has the printing presses) may not make it through the end of the year. In December, The E.W. Scripps Corp., owner of "The Rocky," as it is known, put the paper was up for sale, with bids being taken through mid-January. No possible buyers have been made public, and the city is bracing for closure any day. Adding to the mix, however, was an article published by the Rocky last week, reporting that the Post’s credit had dried up and the paper had borrowed $13 million from the umbrella agency that forms the JOA — asserting that the paper could not afford to pay off its obligations, including its payroll. Scripps viewed that as a violation of the JOA. The Post has called the story "factually inaccurate" and that the paper and the Denver Newspaper Agency would merge in the event of the Rocky’s closure, effectively erasing any debt.

It is such battles that inspired Editor & Publisher to run an editorial in its January issue suggesting that the Newspaper Preservation Act only prolonged the inevitable— and had done nothing to actually preserve newspapers. "JOAs are cynical marriages of convenience that last only as long as the partners feel like putting out two papers— and never happen when one publisher thinks he can win the newspaper war," stated the editorial.

So when the Hearst Corp., owners of the Seattle Post-Intelligencer, announced the paper had 60 days to find a buyer or it will likely be shut down, the city was shocked. Many observers had predicted it would be the Seattle Times, which is majority-owned by the local Blethen family, would have been bought out by Hearst — a right of first refusal clause in the Seattle JOA. Still the loss of the "P-I" will not be the sweet victory the Times has hoped for in this protracted newspaper war. Rumors are swirling that the city’s larger paper may be seeking bankruptcy protection as well.


"The Times has not filed for Chapter 11 bankruptcy," wrote Liz Brown of the Pacific Northwest Newspaper Guild on the organization’s blog. "I did say in an e-mail to everyone at the Times that our union is preparing for several worst-case scenarios, including the possibility that the Times might enter Chapter 11 bankruptcy." The P-I’s likely closure — and not many people appear to hold out hope that the paper will be saved in today’s economy — means the end of at least 125 jobs, meaning several Pulitzer Prize winners will likely join the ranks of the unemployed.


Recognizing the significance of the loss of the P-I, Seattle City Council members Nick Licata and Tom Rasmussen held a session in chambers on January 28 to discuss the possibility of a public-private hybrid business model, similar to what the Peoria Journal Star in Illinois is attempting to undertake, pending federal approval.

Meanwhile, many newspaper companies have taken what could be viewed as near-last resort steps to stay alive. Gannett, publisher of several daily newspapers around the country as well as the nationally distributed USA Today, is requiring all of its 31,000 employees take a weeklong furlough, without pay, during the first quarter of this year. The Seattle Times has taken the same tack, as has the Denver-based MediaNews Corp. for its California properties.

The Gannett-owned Detroit Free Press, one of that city’s two dailies, will not take the furlough, however, because both papers plan to cut their daily delivery to three days — a large cost savings in printing and delivery costs, but with the hazard that "it breaks the newspaper ‘habit’ for readers, especially for the most loyal over-50 set," wrote Jennifer Saba in Editor & Publisher.

An idea tossed around for the last two or three years, when Seattle’s two daily newspapers were battling out the now-renewed status of their JOA, was that the P-I could move to an online-only format. It’s an idea that staffers and Hearst, the P-I’s owner brought up again in January. Brown, of the Pacific Northwest Newspaper Guild, suggested at the Seattle City Hall round table it’s an idea still under consideration.

For many, it all raises the question: why must a newspaper be printed? For older readers used to a paper edition each morning, the answer may be obvious. Younger readers, from their teens on up, do consume news--they just do it online. The downside is that news-gathering organizations, whether extensions of a printed product or created specifically for the Web, have not figured out ways, no matter how creatively, to financially sustain Internet operations. But with a lot of journalists likely to be out of work in the coming months, many of them will inevitably attempt to figure out a way to make it happen — while retaining the objectivity upon which they staked their former employers’ reputations.

Joel Magalnick is editor of the JTNews, and a frequent observer of newspaper operations.


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