Why Newspapers are Dying (not what you think)

Dan Gross has an excellent discussion of why so many newspapers are going belly up. No, its not the internet — though “every time a newspaper company closes or files for bankruptcy, someone is quick to hammer another nail in the coffin of the printed word.”

The actual reason is really boneheaded moves by really dumb management. Slate:

“Let’s review. Sun-Times Media is the name given to the company formerly run by convicted felon Conrad Black. Black and his colleague, Publisher David Radler, who confessed to his crimes, improperly took tens of millions of dollars in fees from the company and caused it endless legal heartache…

In 2007, legendary real estate investor Sam Zell decided that a talent for good timing in flipping office buildings made him an expert on the ailing newspaper industry. In December 2007, he closed on the $8.2 billion purchase of the Tribune Co., which owned the Los Angeles Times, the Chicago Tribune, and the Chicago Cubs. Zell put down just 4 percent of the purchase price—$315 million—and borrowed much of the rest, leaving the company with a $13 billion debt burden. This deal was the purest expression of the “dumb money” mentality . . . Tribune Co. filed for bankruptcy Dec. 8, 2008.

Two of the other large newspaper companies that went bust in recent months have similar back stories. A bunch of private-equity types bought the company that owns the Philadelphia Inquirer and Philadelphia Daily News in June 2006, borrowing about $450 million of the $562 million purchase price. The company filed for Chapter 11 bankruptcy protection in late February but not before paying top executives $650,000 in bonuses in December. Among those getting a bonus: Brian Tierney, the former public relations executive who was one of the architects of the deal. The Minneapolis Star Tribune, which filed for Chapter 11 in January, was another private-equity train wreck. About two years ago, Avista Capital Partners bought the paper for $530 million, loading well over $400 million of debt onto the company.

In other words, the newspaper companies that have failed wholesale were essentially set up to fail by inexperienced managers who believed piling huge amounts of debt on businesses whose revenues were shrinking even when the economy was growing was a shrewd means of value creation.”

I often rail on the MSM, so let me say something non-critical for a change.

Its easy to notice all of the high profile banlkruptcies, we often over look the non events — the papers getting by, transitioning to the internet, serving local audiences.

Blame selective perception . . .


Don’t Follow Wealthy Investors, Part 14 (February 2008)

Paper Money
Newspapers aren’t assets to be flipped, leveraged, and stripped.
Daniel Gross
Slate, Wednesday, April 1, 2009, at 4:19 PM ET

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