Monday, February 23, 2009

Bankruptcy could kill Philly Daily News

The bankruptcy filing of Philadelphia Media Holdings could deliver the deathblow to the Philadelphia Daily News.

The gritty and colorful tabloid – whose circulation is about a third of its sibling, the Philadelphia Inquirer – is the most logical place for publisher Brian Tierney to find the significant operating savings that will enable him to restructure the debt that has overwhelmed his young media company.

Tierney and the investors who helped him buy the papers in 2006 all but certainly lost their collective investment of about $150 million when Philadelphia Media Holdings on Sunday filed for Chapter 11 bankruptcy protection. The filing, which seeks to protect the company from creditors owed some $412 million in debt plus additional accumulared interest payments, is the fourth by a major publisher in three months.

Journal Register Co. sought bankruptcy protection on Friday, the Minneapolis Star Tribune sought protection in January and Tribune Co, sought protection in December. The relative financial health of certain other publishers is detailed in the most recent iteration of the Default-O-Matic.

Although the Philly Daily News has a loyal following with an average of 97,694 copies per day, the costs of producing a second title may be something Tierney no longer can bear in the worst environment for newspaper advertising in history. The long-running secular declines in readership and advertising have been aggravated by the continuing deterioration of the global economy.

Closing the Daily News would enable Tierney to achieve across-the-board savings on everything: editorial, production, marketing and circulation. The shutdown of the Daily News presumably would give management the ability to eliminate certain positions mandated today under contracts with the unions that produce and deliver its papers.

Most of the savings probably would be go toward repayment of the company’s debt in the new deal that Tierney has said he hopes to craft with his lenders. When the economy turns around, any surplus profits generated by the surviving Inky could be used to fund such potential strategic projects as suburban weeklies or online and mobile initiatives.

Although shuttering the Daily News would be painful, Tierney has an advantage in the evident familiarity that a substantial number of Daily News readers have with the Inky. The Inky’s circulation swells to 556,426 on Sunday from 300,674 during the week, suggesting that a fair number of Daily News readers take the Inky on Sunday.

To ease the transition for Daily News readers, the Inky would prominently feature signature features and writers from the Daily News and might even consider publishing a tabloid edition of itself for six months. The Chicago Tribune recently began printing a tab version of itself to boost street sales and mimic the format of the competing Chicago Sun-Times.

FOOTNOTE: Things aren't all glum in Philly. Forbes Magazine reports that it discovered in the bankruptcy papers that Tierney got a 38% pay raise two months ago to $850,000.

9 Comments:

Anonymous Anonymous said...

Except that Tierney LOVES the Daily News. On the day that more than 70 people were laid off at the Inquirer in 2007, he strolled through the Daily News newsroom proclaiming that it was a good day to be at the Daily News.

12:15 PM  
Anonymous Anonymous said...

Amen to that, plus tabloids, whose subway and bus-riding readers appreciate sports, obits and local news, haven't been as slaughtered as their broadsheet brethren during this whole mess. It would be a shame for the city of Philadelphia if either paper dies.

2:09 PM  
Anonymous Anonymous said...

That's one way to figure the math. There's another way, too, and that works in favor of the Daily News. Figure that on week days, Tierney is now selling more than 400,000 papers, with one paper selling strongly in the city, and the other in the suburbs. You'd have to really think about giving up a quarter of your circulation, more or less. More than pride there, the advertisers would see it too.

2:25 PM  
Anonymous Anonymous said...

Tierney and the Inquirer were bitter enemies before the purchase. Having worked at the Inquirer for a number of years I can tell you they are a cheap outfit. Unless you were a part of the well paid downtown staff, it was a dead end. They don't practice what they preach in the way of equal pay and seniority.

3:18 PM  
Anonymous Michael said...

The Daily News, not being dependent on classified advertising, or other weak categories such as department stores, looks relatively stronger now than before.

7:12 PM  
Blogger nick said...

the Dallas Times Herald and the Times Mirror Corp. intended to kill The Dallas Morning News In 1977, the Times Herald actually nipped ahead of the News in the extremely valuable Sunday circulation figures, selling 322,093 newspapers every Sunday to the News' 321,167. In the three-year period between 1977 and 1980, pretax profits at the Dallas Times Herald increased by over 100 percent, from $8 million to $18 million The A. H. Belo Corporation, the Dallas-based company that owns The Morning News that it had bought most of The Times Herald's assets, including presses and circulation lists, for $55 million

11:03 PM  
Blogger T Heller said...

'[they don't] practice what they preach', 'pride', 'shame', 'bitter enemies', 'subway riders', 'tabloids', a big pay increase for the owner before filing bankruptcy....

All the makings of a great novel are there (if it can make it beyond the obits column.)

12:06 AM  
Anonymous Anonymous said...

The problem with your theory, which may have made sense a decade ago when the Inquirer was a cash cow, is that the Daily News now has a higher profit margin than its bloated big step-sister. It also sells more papers within the city limits and on newsstands. And on the company's Web site, philly.com, its far smaller, more agile staff draws a greater number of readers from its limited resources than the dinosaur still walking the Earth upstairs.

5:49 AM  
Anonymous Anonymous said...

There's something important that often gets missed in this debate about closing The Daily News: As long as both papers exist, Tierney and Co. are paying two reporters to write the same story.

I'm a faithful, daily subscriber to both papers. But after reading The Inquirer first, it is a rare day when I find something in The Daily News' pages that I haven't already seen in The Inky.

Closing The Daily News wouldn't have to mean laying off every last reporter. Fold the editorial operations into The Inky, and you'll have a big-city daily with almost twice the number of reporters The Inky has now. Gaping holes in coverage could be filled. Enterprise work could find a space for incubation. And with some careful branding strategy, The Daily News' readers could be brought along for the ride.

Regardless of which paper is better or more profitable, one thing is certain: In this environment, paying two reporters to write the same story isn't competition. It's stupidity.

3:26 PM  

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