The WSJ reports that Tribune has retained Lazard to help restructure its debt and that Tribune may seek Chapter 11 Protection. A month ago I met Bruce Toll (Toll Brothers) at a cocktail party. Toll is the Chairman of Philadelphia Media Holdings and had helped lead the deal to buy the Philadelphia newspapers from McClatchy. He was very pessimistic about McClatchy’s ability to avoid bankruptcy proceedings and disclosed that Philadelphia Media itself was really in no position to continue meeting its debt obligations.
Meanwhile Henry Blodget continues to track the travails of the NYT and I encourage you to make sure you read his posts today and in the future
Whither These Friends
While the automobile industry commands most media attention these days, the rapid demise and potential reinvention of the newspaper business will likely be a huge story in 2009. Major cities in America may find that the newspaper of record no longer exists or emerges from a restructuring with a far leaner news gathering organization. At best, diversified newspaper companies such as the NYT, Hearst, Cox, Gannett, Tribune and others will have to sell off valauble assets to restructure the balance sheets. Goodbye television stations and baseball teams.
The good news is that the Chapter 11 process or other debt restructurings could pave the way for new ownership and reduced debt service. Plenty of debtholders will settle for 30 cents on the dollar to get something in what they perceive to be a dying newspaper industry. So new equity participants could get in inexpensively with significantly less debt on the balance sheet.
Here’s what’s interesting about this dynamic. In some communities — Philadelphia, Minneapolis, and New Orleans to name a few — newspapers play a central role in people’s lives that takes years to establish. Even young people in these communities appreciate the newspaper brands of these towns and that awareness could be utilized to grow a local business that is central to people’s lives. These companies also have one of the few sales organizations capable of selling at the local level. Citysearch wants that capability. Yahoo has partnered with newspapers around the country because they couldn’t grow that same competency. Local advertising remains remarkably untapped and newspaper companies still may be able to retain and nurture that business.
Interestingly, this bad economy might be the saving grace for the newspaper industry. Debt holders want something and the need for restructuring may bring more innovation to the beleaguered category. Recent history has been brutal. Tribune has struggled in LA and Chicago. The Philadelphia Inquirer,like so many others big dailies, has been unable to stanch the bleeding subscriber base, and many of the big newspaper companies carry debt levels that required healthy classified and national advertising franchises to service.
The few times I’ve visited Detroit it’s felt like dead city walking. Old buildings, bored employees, little diversity, marginal passion. I’m sure I have not seen all that Detroit has to offer, but the car industry feels tired. When I visit newspapers they may have much of the same physical architecture, but they crackle with energy. They have experimented, they still want to win. The car industry may not be able to find its way back in this brutally global marketplace. But the newspaper industry can find their way. Pray they do. Bloggers need newspapers to help set the agenda so they can frame it. People need newspapers to ensure that institutions private or public do not run completely amok.
Think the financial crisis is bad? Imagine what it would be like if nobody was reporting on it.
Filed under: economy, finance, media | Tagged: Automobile Industry, Bits, Boomtown, Bruce Toll, Chapter 11, Chrsyler, debt restructuring., Ford, General Motors, Kara Swisher, Lazard, local advertising, New York Times, Philadelphia Inquirer, Philadelphia Media News, Rupert Murdoch, Sam Zell, Saul Hansell, Tribune, Wall Street Journal | 1 Comment »