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Who will be next? And is the mating of banko companies the look of the next year?

Dean Singleton bit the bitter bullet last week. After staving off bankruptcy for all of 2009, telling MediaNews execs that the company would not need to take that route, the company succumbed. MediaNews is following Morris into bankruptcy, both taking the neater, pre-packaged route, allowing quicker movement through the courts and, importantly, a continuity of leadership.

Put together the long list of bankruptcies – Star-Tribune, Tribune, Philadelphia Media Holdings, Journal Register, Sun-Times Group, Freedom, Morris, MediaNews and some smaller ones – and you’ve got quite a chunk of America’s dailies. With MediaNews – publisher of 55 dailies – joining the second-largest US news publisher Tribune, industry guesses now turn to whether Lee (NYSE:LEE), McClatchy (NYSE:MNI) and Gannett (NYSE:GCI) can get to the other side, without a game board stop on the banko square.

That other side, of course, is murky itself, but expect it to include more newspaper combos. Singleton, just as he was about to wheel his hard-built company into court, told the Wall Street Journal that he wanted to be the “aggressor” in the merger of newspaper properties. That’s an unlikely statement from most CEOs taking their companies into bankruptcies, but it’s pure Singleton irrepressibility [Excellent piece by MediaNews alum Martin Langeveld on MediaNews’ spirited 25-year rise at Nieman Lab]. After all, he and MediaNews president Jody Lodovic are set to emerge from the bankruptcy maintaining their management of the company (through a special class of stock) and with a 20% ownership stake, as other equity shareholders – including now-bitter, ex-partner Hearst, Skiffing off in its own direction, get nothing.

So imagine:

  • In the Twin Cities, the bankers who now own the Star Tribune decide to throw in their lot with Dean. After all, he’s a newspaper guy, and they’re not. Sure they’ve hired a new publisher with intriguing cred, but do they really have the appetite for a long-term turnaround?
  • In L.A., Tribune’s soon-to-be-owners similarly may have little interest in staying the course. Maybe a L.A. combination, involving the Times around lowered-cost, higher-efficiency publishing -- Singleton’s once and future trademark – is the way to go.

Anti-Trust, you say. Dean can find good attorneys to make the case that it’s hard to see how bankrupt entities can dominate a market!

For most of these companies, bankruptcy is just a re-set, a way of buying some more time, as new managers or old ones try to come up with a new strategy. Most of these companies bet on the come, taking on big debt, at what turned out to be an imprudent time. Sure, Sam Zell’s move was laughable on the face of it. The well-meaning Philly and Twin Cities gambits were both cases of misunderstanding the bargains the marketplace offered up. These weren’t distressed properties in a good industry; they were distressed properties in a distressed and distressing industry. For all, large debt is now seen as the anchor holding them back from a fresh start.

The economics are fairly straightforward.

Recall a year ago when company after company had fallen into a recession-ravaged operating unprofitability? Major staff, newsprint and operating cost-cutting, and the easing of recession, got them back into the black, month-to-month, many barely so. Yet debt service, once made possible by good cash flows from existing and newly acquired properties, has become a major barrier. Going-forward, within the new reality of the print-based news business, it’s proven widely unsustainable to both maintain a large enough business presence and pay off the debt. MediaNews will emerge with $165M in debt, one-sixth of what it had on the books in December, producing a debt service that seems much more doable. So, even in 2010, the bankruptcies continue.

Given the harrowing last year publishers experienced – a fifth of their business has disappeared in a single year, with little likelihood of much of it coming back – 2010 feels a bit better than 2009. Yes, it’s hard to know how accurate the feeling is.

Yes, this could be a plateau. Knocked down a couple of notches, but standing tall on solid ground, dailies could move forward. Or it could feel like a safe plateau and really be a ledge, a landing place offering temporary comfort.

That’s the vantage point, partly obscured by rock and clouds (the last visibility on budgeting was sighted around 2005, I think) as dailies make a slew of vital decisions that will determine their fate. Call it the Fog of Media War. There’s precious little wiggle room left, as publishers make such fundamental calls as:

  • Erect a paid content wall or not;
  • Bet on the tablet as the saving grace of the time, and decide what that bet means they have to do;
  • Throw in their lot deeper with the winners of the first-round news and ad aggregation, Google and Yahoo, or play them off against the Apples, Sonys, Comcasts, Bloombergs and others making next-round digital business moves;
  • Consort with Journalism Online, or Skiff, or Microsoft, and/or re-direct the original consortium, AP
  • Re-consider the basics, and economics, of content creation, as AOL-Demand-Helium-Associated Content-Examiner models upend long-established notions of professional journalism creation.

As 2010 rolls out, that’s just the top of my list of the real decisions that are in front of daily execs, in or out of bankruptcy. Tough decisions, and ones better assessed from a broad Far West plateau on a cloudless day, than on a ledge in the thick of a passing storm that’s left many clouds on the horizon.

Disclosure: None

Source: MediaNews, Bankruptcy and the Fog of Media War