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A no-newspaper town?

Last week, I mused about the repeated speculation that Pioneer Press owner Dean Singleton’s Media News Group might acquire the sinking Star Tribune and make us a one-newspaper town. Ex-Strib editor Tim McGuire, former head of the American Society of Newspaper Editors and now an Arizona State journalism professor, added this coda on his blog:

NOTHING I hear on the newspaper grapevine indicates to me that Singleton has the borrowing wherewithal to pull off such a deal.  The grapevine may be withered and sour, but such a move would stun me.

McGuire was apparently on to something. Yesterday, news broke that the Moody’s had downgraded Media News’ debt to the lowest possible rating short of default.

That puts it one step above the Strib, which has defaulted on payments to its lenders. The Minneapolis paper’s owner now threatens bankruptcy next month.

I know I stuck an alarmist headline on this thing, but a couple of things to understand before we go too crazy. First, default is not bankruptcy — not right away, anyway. Second, as a company spokesperson told Editor & Publisher’s Mark Fitzgerald:

“MediaNews Group is in compliance with all debt covenants, as has always been the case, and expects to do whatever is needed to stay in compliance during these difficult times.”

Media News argues that its biggest lender is not a bank but its partner, Hearst Corp., a fellow (private) media company. The last time Media News faced default, it simply sold Hearst some Connecticut papers, reduced its debt, and remained in compliance with its loan agreements.

Could St. Paul be conveyed to Hearst if the financial dance is repeated? After all, the PiPress is reputed to be one of Media News’ better-performing.

Anything’s possible, but one argument against is that Hearst had other Connecticut papers, but none in Minnesota.

I’ve mused upon a dark-horse scenario where Hearst — a much bigger and more diversified media conglomerate — gets the PiPress and somehow combines it with the Strib. But I’ll be the first to admit I’m only laying down a marker in case this long-odds bet comes in.

I don’t know Hearst’s financial health, or its willingness to take on more of Media News’ problems. The companies appear joined, but in a hellacious ad climate like this, their interests might diverge. I also don’t know how much of Media News’ debt is held by non-Hearst interests who might be less amenable to a deal.

And of course, Media News can always “do whatever is needed” and cut its way to loan compliance. As I’ve often noted, its no-layoff agreement with the PiPress’ newsroom union ends Dec. 31. For locals, that’s the scariest prospect short of bankruptcy.

Comments (7)

  1. Submitted by Duke Powell on 12/12/2008 - 06:47 am.

    What the Strib needs to do is spin off its Sports page and dump everything else. They would make money selling sports. Make Lileks the editor.

  2. Submitted by paul johnson on 12/12/2008 - 08:58 am. hit 7 million unique ISP’s in November, and StarTribune continues to sell over 500,000 Sunday papers each week. I know this because I am a media buyer for a local retailer.

    I fail to understand your assertion that StarTribune is losing readership. Local TV news, radio, etc. would kill for those numbers.

    I know there are a lot of angry ex-Strib writers over there, but try to put this in it’s proper perspective.

    There is a revolution going on in how people communicate (get news, access music and entertainment, etc). All of the ‘old media’ is being effected.

    The real dinosaur is local television news. If I want news updates, I go to Weather? Sports? Who watches local news anymore.

    And I predict your 2009 bankruptcy narrative will be with Clear Channel radio. The new owners assumed HUGE debt in the summer of this year, and radio revenues have fallen double digit this year. With their #1 advertising category – auto dealers – failing I would expect a bloodletting to follow. How will they manage that HUGE debt?

    Your narrative should not be newspapers vs. the internet, but rather newspapers are a bellwhether of things to come with all OLD media!!!


  3. Submitted by Annalise Cudahy on 12/12/2008 - 09:17 am.

    The problem is that the business model is broken. Following readership assumes a constant $/reader in ad revenue, which isn’t the case anymore. Cutbacks by automakers, among others, is the problem. Newspapers are not seen as a source of advertising value compared to other outlets OR advertising is being cut back across the board.

    They must find a new revenue model, or they will die.

    I discussed some of this in my blog today, a piece called “News Hole” (URL above).

  4. Submitted by David Brauer on 12/12/2008 - 09:17 am.

    Paul – thanks for the insightful note. I should probably add to my bio that I’ve never worked or applied for a job at the Strib. My biases are my own but are not informed by a bad workplace experience there.

    This piece didn’t mention readership at all, though when I have referred to it, I try to delineate “print readership.”

    Since that’s where 80-90 percent of the revenues come from, that segment is important to staying in business. Because the big problem remains: print revs are currently falling faster in total-dollar terms than online is rising. (And online CPMs may be declining faster than online audience is rising.)

    Do I think we’ll be a no newspaper town? Not really; we’re too literate and a half-million people still read a daily paper between the two of ’em. But if we have two ownership groups in bankruptcy or default, there’s a hell of a lot of uncertainty.

    I agree wholeheartedly about TV and radio, have covered their struggles and am planning more. But frankly, they have less impact on local journalism than newspapers, so that’s where my passion (as a reader, not ex-employee) lies.

    Thanks again for careful reading and insightful comments.

  5. Submitted by John Reinan on 12/12/2008 - 09:17 am.

    As an ex-Strib writer (and not an angry one), it’s quite refreshing to hear a note of optimism from a knowledgeable source.

    And no, that’s not a dig at you, David. But it’s the first time I’ve heard anything from an advertising source in this whole ongoing newspaper discussion.

  6. Submitted by paul johnson on 12/12/2008 - 09:57 am.

    Duely noted David! Thank you for your insight.

    I like reading the Strib each morning over breakfast as most of my friends do. I wish them the best!

  7. Submitted by Rick Ellis on 12/12/2008 - 09:59 am.

    I want to throw out a different scenerio. Given that the Pioneer Press owns the memorable URL, might it not make sense to use that domain to build a bigger online presence?

    One possibility: the Hubbard family’s commitment to the web side of their business is marginal at best. So why not roll the Hubbard online sites (like the ones for KTSP and their radio stations) into Hubbard would probably be thrilled to just take a cut of the ad revenue and not have to worry about any of the back end operations.

    And a stronger web presence would give the Pioneer Press a formadable revenue position down the line. For that matter, I would consol them to also work to bring some of the region’s smaller weekly newspapers and other sites into the fold. It wouldn’t be an easy transition, but it would make the web site the region’s major player, especially given the fact that the TV station sites are facing cutbacks of their own.

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