Are Newspapers Going out of Business?

Imaginary Conversation set in the year 2015:

Son: Dad what's a newspaper?

Father: Well son, not so long ago people used to buy sheets of paper that were sold daily. Printed on these sheets were reports of recent events that were going on in the neighborhood, the nation and the world.

Son: You mean people had to pay money for a piece of paper so that they could find out what was going on?

Father: Yes, son.

Son: Then what happen to the newspaper when they were finished reading it?

Father: It was thrown away, and you could buy another one the next day. That's how many people found out what was going on.

Son: Dad, paper was made from trees, right?

Father: Yes, son.

Son: So you are saying people would cut down trees, make paper and put words on it so that people could find out what was going on and then throw it away?

Father: Yes, son

Son: Dad, people back then must have been stupid. They went to all that trouble when all they had to do was turn on their computer. That just doesn't make sense to me; I mean to kill all those trees.

Father: Well, you see son.....

Son: Dad did YOU ever buy a newspaper?

The above conversation may not be as far fetched as it sounds. Today the nation's newspapers are in serious trouble. Many of the best known publications are struggling and some have sought bankruptcy protection:

The Journal Register Co., publisher of the New Haven (Conn.) Register and other newspapers, filed for Chapter 11 protection Saturday, Feb. 21, 2009 joining at least two other publishers that turned to bankruptcy court in recent months amid slumping advertising revenue and circulation.

The publisher has been struggling for months with sagging circulation and advertising revenues and a massive debt, which pushed its credit rating into junk status. The company's stock, which traded as high as $23.875 a decade ago, was removed from the listings of the New York Stock Exchange in April 2008 and traded for less than one cent on Friday Feb. 20th.

The publisher reported $596 million in assets as of Nov. 30 and $692 million in debt, including unpaid interest. Revenue has fallen more than 20 percent since 2006, the company said in the court filing. The Journal Register owns 20 daily and 159 non-daily newspapers, serving greater Philadelphia, Michigan, Connecticut, the greater Cleveland area and parts of New York state. It has about 3,500 employees.

"We intend to emerge from the Chapter 11 process stronger, leaner and more financially viable in the current environment. ... Our business will continue its normal operations and we will publish content as usual throughout this process," Chairman and Chief Executive James W. Hall said in the statement.

To many that may just be wishful thinking. The Journal is not the only publisher to fall on hard times. Newspapers around the country have struggled to pay rising costs for newsprint and personnel as competition from the Internet lured away ad dollars and subscribers. Woes in the housing and auto industries and in the job market also have curbed ad sales.

The Chicago-based Tribune Co., which owns the Los Angeles Times, Chicago Tribune, The Sun of Baltimore, The Hartford Courant and other dailies, as well as 23 TV stations, sought bankruptcy protection in December. The Star Tribune of Minneapolis followed suit in January.

On Thursday, Feb. 19th the New York Times suspended dividend payments to shareholders in an effort to preserve cash. Just three months prior the Times cut the quarterly payment to 6 cents per share, from 23 cents. Suspension of the dividend payments is estimated to save the company $133 million annually.

"In light of the economic climate and the challenges facing the media industry, the trustees believe that the board's suspension of the dividend is in the best interests of all shareholders," the trustees of the Ochs-Sulzberger Family Trust said in a statement.

Shares in the company fell 20 cents Thursday to close at $3.51. The stock has plunged by more than 80 percent during the past year. Due mainly to a decline in advertising sales, the Times has been struggling to raise cash to pay its debts. Advertising revenue fell by $268 million compared to 2007. To compensate for this loss the Times has raised prices and cut jobs. The company has $350 million in loans coming due over the next two years. Total debt stood at $1.1 billion at the end of 2008.

The New York Times Co. is trying to raise another $225 million by selling and leasing back its new, 52-story headquarters in midtown Manhattan and scrape up more money by selling its 17.8 percent stake in the group that owns the Boston Red Sox. that could bring in another $140 million to $160 million. According to industry analyst Ken Doctor of Outsell Inc:

"It looks like the recession is deepening, so it looks like they concluded they have to batten down the hatches and save every nickel they can."

The Times has already taken money from the Mexican billionaire tycoon Carlos Slim to the tune of $250 million at a 14% interest rate with options to increase his share in the company from 6.9% to 17%. Times President Janet L. Robinson said the cash infusion will be used to refinance existing debt and will provide the company with increased financial flexibility.

“The New York Times needs money in the next few months, and Slim has it,” said Shannon K. O’Neil, a Latin American expert at the Council on Foreign Relations in New York.

All this spells serious trouble at the nation's top newspapers. Whether or not they can weather the storm remains to be seen. However, as advertising dollars are moving more and more towards online businesses, the print business will find itself in increased competition for those dollars. Most newspapers have a web presence but tend not to pursue advertisers online as aggressively as they could. This attitude is changing, as some print publications like the Christian Science Monitor are going online only. In fact many publications may following this example and get out of the print business altogether. In that case maybe 2015 will be here faster than you think.

There is one more question that was burning in the mind of our imaginary "2015 child":

Son: Daddy

Father: Yes, son

Son: Daddy is it true that cars used to run on gasoline?

Maybe, just maybe our world is changing faster than we realize.