Thursday, December 04, 2008

The outlook is rocky for The Rocky

Sad to say, the days of the Rocky Mountain News are numbered. And the number of days probably is about 90.

In a toxic environment for newspapers exacerbated by the worst recession in two generations, it seems highly unlikely that a buyer will emerge to sustain the feisty tabloid put up for sale today by its owner, the E.W. Scripps Co.

While Scripps and everyone else would be tickled if someone turned up to buy the paper, the announcement more likely is the death knell for the oldest newspaper in Colorado.

That's because a new buyer not only would have to be willing to pay Scripps a reasonable price but also would have to be prepared to fund an operating loss that is expected to reach $15 million this year and potentially could grow in the future.

The purchase of the Rocky by even a well-heeled third party would be further complicated by the fact that the Rocky cannot function as a standalone newspaper.

As the partner in a joint operating agreement with the Denver Post, the Rocky and POst share such crucial chores as selling ads, printing the papers and delivering them. The two respective newsrooms are the only truly independent parts of the operation.

Given the circumstances, the only logical buyer for the Rocky is the Post, which is owned by MediaNews Group. Inasmuch as MediaNews already publishes one newspaper in Denver and doesn’t need any more operating losses, the only reason Media News would buy the Rocky is to shut it down to save the costs of producing it.

In buying the Rocky, MediaNews would have more to gain than any other buyer, because the purchase would give it unrivaled control of the market. Thus, it could afford to pay $1 more than any other prospective buyer and still come out ahead.

In a typical transaction to unwind a JOA, the surving publication agrees to pay the departing parner an annuity for a number of future years.

The offer to sell the Rocky to all comers, which expires at the end of the year, helps insulate Scripps and MediaNews from any accusations that the sale was improperly anticompetitive under the antitrust statutes. When the search comes up empty, then Scripps likely will move forward with the sale to MediaNews.

Before a sale can take place, federal law requires that a company employing more than 100 workers must give its employees 60 days notice when a plant is targeted for a shutdown.

Add together the time it takes to hunt for buyers and the notice period required prior to a shutdown, ant it appears the Rocky has only about 90 more days to live. Ironically, its closing would come weeks before its 150th anniversary in April.

(CLARIFICATION: In my original version of this post, I estimated the number of days at 60, because I did not include the time it would take to hunt for an alternative buyer.)

When the ritual is complete, the Denver JOA almost certainly will be terminated, just as nearly a score of similar arrangements have succumbed in other markets over the years.

Three of the most recent JOA shutdowns were at the Scripps-owned properties in Albuquerque, NM; Birmingham, AL and Cincinnati, OH. If you know your ABCs, you know that D, as in Denver, unfortunately is next.

15 Comments:

Blogger fish said...

yes, but what does MediaNews use for cash/credit for this purchase? they are one of the most heavily leveraged companies in the U.S. right now. and their Denver news operations has got to be sustaining comparable losses to the Rocky.

3:00 PM  
Anonymous Anonymous said...

E.W. Scripps is not a "junior" partner in the JOA. It is an equal partner.

3:16 PM  
Anonymous Anonymous said...

The Cincinnati Post didn't really succumb to anything except time; it expired after 30 years as designed.

The patient was in no condition to go on living however.

3:46 PM  
Anonymous Anonymous said...

I have a question: If Scripps is losing $15 million per year does that mean Media News is losing $15 million per year also, assuming the two companies are 50-50 partners ?

4:12 PM  
Anonymous Anonymous said...

MNG runs the JOA now, but it's a rotating responsibility. Using that to say that the Post is the senior partner is not the same as saying, for example, that the Seattle Times is the senior partner in that JOA. Two different things. But that's splitting semantic hairs at this point.

4:52 PM  
Blogger Newsosaur said...

Per the above, I have fixed the post to correctly that that the partnership is equal.

4:57 PM  
Anonymous Anonymous said...

Actually, you and one of the commentors has got the JOA situation completely wrong. Scripps is the senior partner in this 50-50 deal, since the Rocky agreeed to pick up the advertising and circulation staffs to continue the JOA.
This also raises an interesting question. If the JOA is dissolved, the Denver Post has no circulation and advertising staff to continue operations, and also no press.
Another consideration is that the collapse of Denver also brings down the Boulder Camera, since that paper shut down its own printing plant and became part of the RMN-Post printing operation last year.
I also would not rule out a possible sale to Phil Anschutz, a billionaire Denverite with a taste for newspapers with his Examiner chain. Indeed, if the Examiner is looking for an available press in Denver, it might have its prayers answered within months.

6:40 PM  
Anonymous Todd Engdahl said...

The RMN is not the senior partner. The business staffs are part of the Denver Newspaper Agency, a separate corporate entity that is owned half-and-half by Scripps and Media News. The business staffs of the two papers were merged at the time of the JOA in 2001, but many of those people have been washed out by relentless cost cutting and downsizing.

8:09 PM  
Anonymous Anonymous said...

RMN is an equal partner in the JOA, but Scripps is by far the healthier partner of the two owner/operators. Indeed, MNG does not have the cash or, judging from its press release of this evening, even the willingness to acquire the RMN. This situation is fluid and quite unpredictable. If EWS has not yet lost the desire to "own" the Denver market, despite today's statement, it may actually prevail in the Mile High City.

9:03 PM  
Anonymous Anonymous said...

Why does all this feel like re-arranging deck chairs?

9:19 PM  
Anonymous john reinan said...

I've seen speculation elsewhere that Gannett could get involved in some kind of swap or deal involving a trade of Denver for Detroit: Singleton winds up with sole control of Detroit, Gannett gets Denver.

I have no idea whether this is feasible, just pointing out that others are raising it as a possibility.

4:34 AM  
Anonymous Anonymous said...

Looks like someone has won a pyrric victory here. I can't see how Billy Dean has the resources to carry on in Denver alone. It would be a different story in economic good times, but with this downturn, he needs someone with deep pockets to operate the other side of the JOA or he is finished. Scripps famously doesn't bluff (it walked away from the Pittburgh Press because the unions accused the company of bluffing), but if Billy Dean acknowledged he can't make it alone, would Scripps continue with the Rocky as the only paper in Denver?

7:07 AM  
Blogger Linda F. said...

MediaNews is in control of the Denver JOA; Scripps is along for the ride. I doubt MediaNews will leave Denver for Detroit in the midst of an auto industry meltdown, but that doesn't mean Gannett and Dean won't cut a deal. They already collaborate in California and elsewhere. Also, MediaNews is being challenged by the (Bush) Dept. of Justice in Charleston, W.Va. for engineering the potential shutdown of the JOA there. They have to be careful because of DOJ scrutiny in this deal. In York, Singleton found a shill (in this case a previous owner) to buy the weaker paper to make it look like they were still operating separately. My guess is something similar will happen in Denver. In any case, bad news all around for journalism and journalists in the Mile High City.

7:44 AM  
Anonymous Anonymous said...

What's the point of MediaNews buying anything? Why would they want to own a market they're losing money in?

I assume that, like everywhere else, both newspapers have been bleeding readers and advertisers so it doesn't make any sense to me that the Post considers RMN any kind of competition. Unless you're talking about a race to the bottom.

8:24 AM  
Anonymous Aparna said...

It would be a different story in economic good times, but with this downturn, he needs someone with deep pockets to operate the other side of the JOA or he is finished.

10:02 PM  

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