Just a few years ago, back when the Minneapolis Star Tribune was still a family-owned newspaper, running the business side was mostly about watching the money flow in from advertising and circulation.
These days, it's about watching the money flow out, and yesterday, in what can only be read as the latest ominous sign for major-city dailies, the Star Tribune's publisher halted payment on debt acquired just last year when the paper was bought from the McClatchy chain.
The paper's new owners are attempting to restructure their debt obligations.
With the current credit crisis, what's been a tough market for local newspapers has become even more so. With consumers cutting back on spending and unable to get credit, local businesses are taking a direct hit, and they're cutting back even further on their advertising.
Also facing a credit crunch is the Gannett chain, the nation's largest, which yesterday was put on a credit watch by Standard & Poor’s Ratings Services after drawing on a revolving credit line as the commercial paper market went south. Gannett, which carries $2 billion in commercial paper debt, saw its total revenue slip 9.5 percent in August.
Gannett is just one of a number of chains struggling to meet its debt obligations. Others include McClatchy and Tribune. Some are attempting to negotiate easier terms in light of the souring ad economy, and their creditors can either agree to do so or force them into bankruptcy, an unattractive option for both sides.
But at some point some papers are likely to tumble into bankruptcy anyway.
New data released last week by TNS Media Intelligence shows that local newspaper advertising fell more than 7 percent in the first half of 2008, and there are no signs local advertising will be on the mend anytime soon.
Most forecasters see the current ad slowdown extending into 2009 or beyond. Much of the hurt will be in local media.
Facing the hardest struggle are traditional mid- and large-city dailies, and adding to their worries is the credit crisis, which is sure to lead to higher interest rates.
Most have already slashed staff, in some cases dramatically, sending tens of thousands of longtime employees out onto the streets.
The worry is the cuts will become even more dramatic as the ad economy continues to sour.
Back in May, Media General offered buyouts to half the workers at its Tampa holdings, which includes the Tribune and a TV station. The company would not say how many it hoped to chop from its workforce of 1,300 but it appeared to be a substantial number.
At the time, analysts saw more such cuts coming.
“If the economy continues to bottom out, combined with the reduction of classifieds and some of the other slowdowns, the pressure on revenues is pretty dramatic,” Rick Edmonds, a media business analyst at the Poynter Institute for Media Studies in St. Petersburg, told Media Life. “Papers have to get expenses in line with revenues. I think we’ll see some pretty substantial cuts in the next several months.”
