Chilling sign: Private publisher exit plans
The potential sale of the San Diego Union-Tribune and Newark Star-Ledger at the worst time in the history of newspapering can mean only one thing: The publishers don’t think the business will get any better.
If they did, they would slash expenses, hunker down and quietly prepare to sell their papers during the next rebound in the economy.
With the publishers deciding, instead, to pursue potential exits at a time buyers are few and far between, the irresistible conclusion is that they foresee only a steady wasting of the assets they have held for multiple generations. Their willingness to consider dumping their papers at what most likely would be fire-sale prices amounts to a repudiation of the businesses that helped build their family fortunes.
Because Copley and Advance do not appear to be under pressure to divest assets to raise cash to pay down debt, they would seem to be in a position to wait for a more propitious time to sell. Their lack of patience suggests a lack of confidence that better days lie ahead, at least with respect to these two properites.
Unlike Journal Register, GateHouse Media and Tribune, these privately held publishers are not known to be over-burdened with debt they are struggling to repay at a time revenues are shrinking at double-digit rates.
The Newark and San Diego papers have been held so long and historically appear to have been run so profitably that the initial investments in them have long since been paid off.
The relative absence of debt also means that the private publishers aren’t committed to the rigid profit targets associated with the aggressive loans that funded recent acquisitions by MediaNews Group, Philadelphia Media Holdings and the Minneapolis Star Tribune.
Presumably, the Newark and San Diego papers could be operated indefinitely with lower margins than companies like Gannett, Lee Enterprises or McClatchy need to pay dividends, cover interest payments and try to reverse Wall Street's unprecedentedly negative opinion of their stocks.
Advance already has proven capable of subsidizing the Star-Ledger with the profits flowing from its magazine, cable television and other media enterprises. The parent company for some time has been funding losses in Newark that could be as great as $40 million a year, according to Donald Newhouse, the president of Advance.
But the plan to explore the sale of the paper explicitly signifies that the controlling family is not only approaching the limit of its charity but also has lost faith in the possibility of an eventual turnaround.
While the short list of potential buyers would seem short indeed, it is conceivable that the Newark paper could be of interest to Cablevision, the new owners of Newsday, whose Tri-State cable-TV interconnect coincides relatively closely with the paper’s footprint in New Jersey.
A case could be made for consolidating the Star-Ledger’s operations with those of one or both of the New York Post or New York Daily News. This outcome would become more plausible if the dueling tabs move forward on their reported discussions about combining their printing, distribution and back-office activities.
In better times, Newark would have been a candidate for combination with the Philadelphia newspapers, but the financial condition of that fragile, free-standing acquisition all but rules it out as a potential buyer for either the Star-Ledger or even its sister paper in Trenton.
San Diego’s traditional strength has been its dominance over an isolated, usually booming city in a delightfully desirable corner of the world. The collapse of San Diego’s overbuilt housing market has carved a major hole in not only its classifieds business but also just about every other advertising category.
The glorious isolation of the Union-Tribune will be a negative, however, when it comes to enticing any buyer who can achieve meaningful efficiencies by combining ad sales, content generation, production or distribution. Unlike the Star-Ledger, which has a decent of number nearby papers with which it could merge, the San Diego paper has no obvious potential partner in the neighboring vicinity.
While it is difficult to think of Copley Press as a struggling entity, the company does not have the deep and diversified profit centers that companies like Advance or Hearst have tapped over the years to fund their struggling metros.
Thanks to its magazine, broadcasting and other businesses, Hearst, like Advance, has been subsidizing for some years losses that exceed $1 million a week at the San Francisco Chronicle.
The recent ouster of chief executive Victor F. Ganzi at Hearst may be a signal that yet another long-time newspaper family is running out of patience. If so, the Chronicle could become the next big-name paper to get kicked out of a well-feathered family's nest.