Monday, August 04, 2008

Chilling sign: Private publisher exit plans

The intentions of Copley Press and Advance Publications to explore the sale of two of their signature properties represents a discouraging new lack of confidence in the future of metro newspapers.

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.


Anonymous Anonymous said...

1. The problems at Blethen's Maine and Seattle properties provide an insight into the turmoil inside privately-controlled newspapers. Here is the latest:
and be sure to read the PDF of Blethen's affadavit.
2. I never worked for Advance publications, but I believe the no layoff promise applied only to employees who were non-union. My understanding is that Newhouse offered this pledge as a way of neutralizing union organizing drives.

8:07 AM  
Anonymous Anonymous said...

The pledge applies to non-union employees only. Regarding a future sale, my understanding is that Advance has pledged not to sell the paper if the conditions set forth are met by Oct. 1.

10:15 AM  
Anonymous Anonymous said...

With the recent purchase and availability of New Jersey Media Groups "Super Presses", I don't understand why a joint-cooperation merger hasn't been studied. As far as I can tell, this could help both ailing publications.

10:22 AM  
Blogger Davisull said...

Regarding Newark, as you note with Newsday off the table for combining operations with the News or the Post, the Newhouses may feel that there is a market for the Ledger to combine operations with a New York tabloid (given that Cablevision is now having stock problems, I wonder if they could make a play). I.e., is Rupert Murdoch interested in owning the Ledger for his own purposes? Given the pledge, it is impossible for them to lay off nonunion people; they can beg, "Please leave," but they will never force anyone out the door except for malfeasance.

Someone in Newhouse was quoted as saying that the reason the Ledger was for sale and none of the other papers was that it was incredibly reliant on classifieds. At the same time, today's Ledger had in it a big ad looking for ad sales people, so it is not "batten down all the hatches."

I am wondering if this is a way of saying (1) apres nous, le deluge (so stay with us and give us what we want) and (2) getting them out of their Trenton Times problem, where they wanted to create a statewide news operation but never quite pulled it off.

They could close the Trenton Times, Trenton would still have a daily newspaper (sort of), and the Ledger would no longer compete against its own sister newspaper in the high-end areas around Princeton. But that may be outmoded thinking. They may just be out of money. But the Ledger is the heart of the Newhouse newspaper empire and a lot of their operations (, the S.I. Advance) hardly make sense without it.

The San Diego one seems like simply the last step in the end of the Copley chain. David Copley has sold everything else off and I expect he just wants to not have to spend any more of his money on the newspaper. (Given the Weather Channel's success, nothing mandated that Frank Batten Jr. sell Landmark. He didn't want to spend any more of his time or money on the news business, which he didn't enjoy.) Would Copley have bailed on it along with the Midwest papers and the Breeze had he not been from San Diego? Who knows, but this 2005 L.A. Times story is still relevant:

6:48 PM  
Anonymous Anonymous said...

I don't know if the Star-Ledger is all that good of a candidate for combining with the N.Y. Daily News, Post or, if Cablevision bought it, Newsday, because the Ledger's focus is pretty much entirely on New Jersey. There's no Washington, D.C., or New York City bureau with which to combine forces. You could consolidate the sports departments (only one set of reporters needed to cover N.Y. teams), but that's about it, I think.

I think a much better candidate for combining with the Ledger would be the smaller Record of Bergen County, especially now that the Record is closing its main headquarters, leaving many of its reporters without an office: But North Jersey Media Group, which owns the Record, certainly couldn't afford the acquisition of the Star-Ledger right now.

The previous commenter may have been on to this point, if he was referring to some acquisition of "super presses" by *North* Jersey Media Group. I wonder if the Ledger and Record have considered combining forces in a joint operating agreement.

1:06 AM  
Anonymous Anonymous said...

I've lived in North Jersey for over 20 years and no one I know reads the Star Ledger despite its emphasis on an in-depth local news report. Why? Because it appears to be edited for old Jersey farts with Virgin Marty statues on the front law. On my block, there is a social chasm between those who have the Star Ledger out front in those yellow bags in the morning and those who have the New York Times out front in those blue bags.

7:40 AM  

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