Strib vs. PiPress: Who will be left?
You would think the Minneapolis Star Tribune is the weaker of the two, having filed for bankruptcy after being in default on its loans for about half a year. Not so fast.
The Strib bankruptcy relieves the paper from having to service a too-heavy load of debt at a time of shrinking sales and profits. In other words, the Strib just escaped exactly the burden that still most likely afflicts its rival, the St. Paul Pioneer Press.
Because the PiPress is privately owned and does not release its financial results, we can only guess that its business has been battered as badly as that of the Strib, whose operating profit fell 56% in 2008 to $26 million.
If the PiPress is hurting as much as the Strib, then it also could file for bankruptcy to cut its debt and reduce its operating costs, right? Not so fast.
Owned by the heavily leveraged MediaNews Group, the PiPress was purchased in a $1 billion, four-newspaper deal that links its fate to the intricate complex of newspaper partnerships that MediaNews operates in Los Angeles and Northern California.
A default or bankruptcy at the PiPress almost certainly would trigger similar events across the MediaNews empire. Because Gannett, Hearst Corp. and Stephens Media have invested heavily in MediaNews, it is conceivable that a MediaNews default or bankruptcy could require the investors to either put up additional cash to backstop MediaNews or potentially face default themselves.
With the papers in the Twin Cities seemingly locked into an indefinite war of attrition, the initial advantage could go to the Strib, whose bankruptcy represents an opportunity to lower its expenses by renegotiating its debt, union contracts, leases and other costly obligations.
Though the Strib would emerge in the early going as the more streamlined of the two pubishers, it would have less margin for error than the PiPress if the newspaper business were to continue to deteriorate. In a sustained economic downturn, the PiPress presumably could draw on the vast resources of the potent investors in MediaNews.
So, it’s hard to pick a winner. Or predict when the denouement will come.
One thing seems all but certain: There won’t be a joint-operating agreement in the Twin Cities.
The model has been discredited by the recent or pending demise of the No. 2 paper in the JOAs in Albuquerque, Cincinnati, Denver, Seattle and, as of tonight, Tucson.
The reason JOAs aren’t working any more is that the ferocious and sustained contraction in the demand for newspaper advertising has left barely enough revenue in most metro markets to support a single newspaper.
Sufficient revenues and profits to support two newspapers in a community are artifacts of history.