Saturday, December 6, 2008

The dominoes are falling

As mentioned here last week, it's year-end crunch time. I predicted we would see, during December and January, a rash of tactical, non-strategic moves by newspaper owners aimed at conserving cash and postponing the inevitable. It's only been four days, but so far we have the following:
  • As many as 2,000 more layoffs are announced at Gannett, as chronicled by Jim Hopkins at Gannett Blog.
  • E. W. Scripps, after informing MediaNews Group, its JOA partner in Denver that it plans to shut down the Rocky Mountain News, puts up a for-sale announcement in case there's a white knight out there somewhere. Dean Singleton, MediaNews CEO, issues a memo making it clear he believes the Rocky will be gone.
  • McClatchy announces an auction of its flagshap paper, the Miami Herald
  • Fitch Ratings tells us that newspapers in "several cities," meaning major U.S. metro areas, may simply shut down
  • Martin Peers at the Wall Street Journal, agreeing with me that major change is in the offing, suggest that MediaNews, Lee and Freedom should consider merging, and that Tribune could be broken up, with California pieces going to MediaNews and Florida pieces to McClatchy—oh, but, whoops, McClatchy is selling the Herald. In any case, Peers may think that some consolidations are "logical," but combining newspaper operations yields slim pickings, usually limited to shared back-office functions. You can't combine the key functions of news gathering and advertising sales in widely separated local markets.
  • UPDATE 12/07 8:57 pm: Sam Zell's Tribune hires Lazard Freres and other advisers to help stave off bankruptcy. Since most of the Tribune's newspapers are major market metros, this helps confirm my suspicion that most of the top 50 papers in the country are now in the red. Lazard is also handling the presumed liquidation of Journal Register Company.
Meanwhile, Dennis Kneale at CNBC predicts that in 2009: "Print media will survive. In fact the Old Media may have a surprise resurgence of sorts, as advertising price cuts bring back sponsors and once-torrid online ad sales continue to slow down."

Huh? This would be price cuts on top of a two-year sales decline of 21.3% (first nine months of 2008 versus same period in 2006, according to the NAA)? Unless Kneale is expecting boom times during 2009, it's inconceivable that rate cuts of, say, 10% would result in revenue growth for print.

The real answer for newspaper companies continues to be genuine strategic restructuring into digital enterprise models. Either they do this themselves, or the door is open for startups to do it, in large and small markets across America. (Several thousand laid-off journalists are already thinking about the latter option.)

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