Friday, January 16, 2009

Strib vs. PiPress: Who will be left?

The Twin Cities are more certain than ever to become a single-newspaper market. It’s just hard to predict which paper will survive.

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.


Blogger Racoon said...

Sufficient revenues and profits to support two newspapers in a community are artifacts of history.

Unfortunately, that seems undeniable for hardcopy newspapers distributed metropolitan-wide.

Retaining or regaining genuine competition (i.e. more than one metro newspaper) in a community will require a new cost structure in delivering the news. Hardcopy is just too burdened with cost.

But I'm not suggesting salvation lies in publishing on the Internet, where content all too quickly passes into the public realm, available to all comers at no cost.

Instead, an alternative method of delivery is called for -- and there's one out there, lying right under the industry's nose, yet in full view every second of every day. I find it baffling that no one in the industry seems to be able to see it.

7:29 AM  
Blogger Matt Day said...

The raw newsroom numbers show that the Strib is doing 'better' than the Pioneer Press. The Strib was always the larger enterprise, but the last three years especially have seen a higher percentage of newsroom cuts at the PiPress than its competitor.

Also, probably more interesting than the raw numbers associated with the downturn at both papers is the strategies they've came up with to try to stay viable. The Star Tribune has started hunting ad revenue in the suburbs and exurbs of the Twin Cities, flooding the metro with reporters to try and become a more regional outlet. The PiPress meanwhile has intentionally switched to an almost tabloid-style paper, eye-catching headlines, lots of graphics, and a sort of offbeat take on some coverage.

You're right in that there is not enough ad revenue in 2009 to support two papers in the Twin Cities, but maybe if each continues to sprint toward its newly claimed niche, they will be able to survive in their unique spheres when ('if') the market and advertising pick up again.

9:23 AM  
Blogger Clever Idea Widgetry said...

Why is there a presumption there will be one big winner? There will be a dozen of small winners and two big losers.

10:14 AM  
Blogger David Brauer said...

Alan, thanks for the talk yesterday. My hat tip and extension of your argument here:

11:11 AM  
Blogger Lisa Williams said...

Hi, Alan --

I find myself a little frustrated with the conversation around what's ailing newspapers. Most of what I hear is this: conventional ad revenues are falling, and Internet revenues aren't rising fast enough.

That's true as far as it goes, but I find it to be a wholly inadequate explanation for the trouble that the news industry, particularly newspapers, find themselves in.

So, I wrote a post about it. But I don't know too many (well, okay, any) people to tell me whether what I've written on the topic is hokum or not.

Any assistance would be gratefully welcomed. Link: The Journalism Bubble.

5:28 PM  

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