The Trib is dead; long live the Trib?

The first domino has fallen.

The Tribune Co., publisher of what used to be some of America’s best newspapers and operators of 23 television stations, has filed for bankruptcy, citing nearly $13 billion in debt compared with $7.6 billion in assets.

Let’s make book: Who’s next?

Could it be McClatchy, the nation’s third-largest newspaper chain, which is looking for a buyer for its flagship, the Miami Herald? Or the New York Times Co., struggling with debt and trying to cop a $225 million mortgage on its year-old grand edifice of a headquarters in Manhattan to get more cash on hand?

Hey, how about Lee Enterprises, which owns 54 daily papers in 23 states? In the second quarter of 2008, Lee’s net income was down 87 percent to $2.8 million in part due to charges based on the falling value of its assets. What about Gannett? In October, Gannett said that “advertising revenue at its publishing business fell nearly 18 percent during the July-September quarter compared with the same period last year.”

Will it be E.W. Scripps, owner of the 149-year-old Rocky Mountain News, which Scripps offered to sell after reporting an $11 million loss through the first nine months of this year?

The newspaper business climate is the worst ever:

U.S. newspaper advertising revenue collapsed by nearly $2 billion, or 18 percent, in the third quarter, according to the Newspaper Association of America, an industry group. Even online ad revenue made a small U-turn for the second quarter in a row.

The year-on-year quarterly percentage decline is the worst since since the NAA has been keeping such records and represents an increasingly rapid deceleration that began in the third quarter of 2006, when total ad spending dropped 1.5 percent.

Tribune is filing under Chapter 11, which permits reorganization, rather than Chapter 7, which oversees liquidation of assets. Bankruptcy presumably provides equitable and fair treatment of all parties, but especially secured creditors.

But a reorganized Tribune — or any newspaper corporation or entity — following a bankruptcy proceeding is unlikely to produce fair and equitable treatment of 1) the public dependent on good, sound journalism or 2) the experienced journalists who produced that product who have been laid off or bought out over the past five years.

Won’t the emergent Tribune Co. — publisher of the Chicago Tribune and the Los Angeles Times, both journalistic shells of their former selves — merely be a reorganization of its current and failing business model? Will the idiot, er, “media titan,” who played a significant role in the Trib’s financial demise, still be in charge?

How about this crock ‘o’ candor from Sam Zell, who bought Tribune with other people’s money:

Over the last year, we have made significant progress internally on transitioning Tribune into an entrepreneurial company that pursues innovation and stronger ways of serving our customers. Unfortunately, at the same time, factors beyond our control have created a perfect storm — a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt. [emphasis added]

Newspaper companies, especially the larger ones, own regional newspapers. These are the newspaper that in the past have had the necessary resources and journalistic clout to effectively hold government (and let’s include corporations) accountable.

No more. These big metros — The Times, The Washington Post, the LA Times, the Miami Herald, Hartford Courant, Boston Globe, Dallas Morning News, Seattle Times and the Post-Intelligencer, the Rocky Mountain News, the Denver Post, and so many other great American newspapers — no longer produce what they once did. Oh, they win Pulitzers. But careful checks of the size of their geographical coverage, their shrinking news holes, the increasingly shallowness of beat coverage, the reduction of bureaus, the increase in one-source stories, and the diminishing readership area redefined by circulation cutbacks all lead to a public less well served.

Thus, the inability of regional newspapers to practice good journalism benefits those governments and corporations whose motivations may not always be in the public’s interest. The public’s the loser here.

Instead of improving those papers, corporations have turned them into cost-cutting enterprises, shedding staff and circulation. Now those corporations are actively seeking to unload big regional metros — The Boston Globe, the Miami Herald, the Rocky Mountain News — all to shed costs. If your daily paper is a big metropolitan daily, it’s for sale — you just haven’t been told that yet.

Anyone in the market for an entity that’s losing gobs of money, has fired or bought out its best artisans, and has produced no credible response to its problems other than cutting more costs? Think you can turn that entity around?

So what should we watch as this impending wave of bankruptcies washes ashore?

• Did top management get canned? Who replaced the outgoing miscreants?
• Did independent, local entities buy controlling interests in local and regional newspapers?
• Did different business models emerge?
• What role, if any, did courts play?
• What become of the experienced journalists no longer employed by newspaper corporations? (More on that in a future post. They’re doing some interesting things.)
• Would you buy a newspaper from the reorganized corporation?

The news biz as we’ve known it is about to go belly-up. What will replace it, and will the public benefit?

10 replies »

  1. The banks, the automakers, the newspapers…how long before aerospace? Giant retailers?

    The government?

    Quarterly projections. The Profits of Doom. Swallower of planets. The Profits of Doom.

    We bought the ticket, we’re in for one hell of a ride. (Wait till this shit starts happening in big Ag…)

  2. Must-read backstory today at Open Left regarding Tribune ownership and the FCC:

    OpenLeft link

    (I’d attempt an html link, but with no preview buton, I’m not going to risk it!. Hope the cut and pasted url works).

  3. I can’t help but think that the newspapers are like the Big 3: what they’re selling, fewer and fewer are buying.
    There’s lots of noise about the difficulties of new business models, new paradigms, and new media, but I think the newspapers have failed at their primary job, which is getting the truth to their readers. Certainly a big part of the rise of online news sites and blogs is that the old-line papers during the Bush years refused to speak truth to power or investigate and report honestly what was going on in Washington and the rest of the world. Instead, they followed their old business model, which was saying what those in power wanted them to say and expecting people to swallow it because there was no other source of news. Like the Big 3, these papers once had a virtual monopoly; when they wanted more revenue, they added bells and whistles, like celeb puff pieces and “lifestyle” sections. When the times and technologies changed, consumers suddenly could choose among the best domestic, foreign, independent and ideologically honest news sources, and could also go elsewhere for the best bells and whistles.
    The old guard stayed arrogant, never picked up their game to stay competitive and are now inexorably headed for collapse. They will either fail completely or be taken over and radically remade to provide what intelligent consumers want: the truth, or the closest version to it. Transcribing from the gaggle isn’t going to make it any more, nor will being a PA system for the Mighty Wurlitzer. The stakes are now too high and people, or at least those who read newspapers, are too engaged and sophisticated.

  4. Lex,

    The biggest of the big ag companies like Cargill and Louis Dreyfus remain private, and the public ones like Bunge and Continental remain very closely held. Big ag will always be there, regardless of the food prices. Unless there’s a total, absolute crop failure, there will always be food available thanks to the futures markets. The big farmers, the ones who farm 20-50 sections of land at a time, operate on thin margins, yet remain profitable due to scale. Big ag is well suited to handling all kinds of markets, as they operated during a 25 year bear market in grains and remained profitable. The grain companies like Cargill should be a model of what all companies should be like with their use of thrift, vertical integration, sound business practices, innovation, cost consciousness, and sense of mission.


  5. Jeff,

    I know that the biggest players in Ag are private and that they’ve got things pretty well sewed up with vertical integration…but they still depend on farmers. What’s corn been selling (for the farmer) for lately? Isn’t it in the $3.70/bshl range? That’s below input cost…which should ease with declining crude prices. Unless the farmer is owned by one of the big companies, there comes a point where it isn’t worth pulling the tractor out of the barn to sow the commodity crops.

    I’ve heard that propane shortages in the upper mid-west delayed a segment of the corn harvest. That’s something of a problem, but the larger problem is that with the corn in the field the farmers were unable to put down the winter fertilizer, which will significantly decrease yield for next season.

    I should have been more clear. It isn’t the corporate side of Big Ag that may be in trouble in the not so distant future, but the consumer end. From a horticultural standpoint we’re on a thin wire, high up, with a short balancing pole.

    And you forgot how heavily subsidized the grain companies are…

  6. Lex,

    Here’s corn farming 101:

    There are many types of seed corn that you can use. Prices range from as little as $45/bag to over $300/bag. The huge difference in price is in how the corn has been genetically altered. The more expensive the seed, the more things it is immune too, as well as being resistant to many various types of herbicides.

    The corn seed priced at $115 a bag is the best from a cost standpoint.

    Each bag will plant about three acres of land, assuming 38″ rows.

    Here’s what you have to do:

    In March, you disk the ground smooth — assuming you didn’t do it in the fall, which is actually a good thing to do, allowing the snow and moisture to break down the soil and the water to seep into the soil.

    You then spread fertilizer, a good mixture is 18-46-60 (N-P-K). This will cost around $44/acre and that’s last years price….prices are lower this year

    Next, you spread anhydrous over the land at a rate of about 120 lb/acre. This runs around $0.41/acre for the anhydrous and $0.01/acre rent for the tool bar, for a grand total of $0.42/lb which works out to be $50.40/acre.

    Then, when the soil temperature exceeds 50 F, you will plant the corn. When you’ve planted your corn, you now need to spray. You’ll do a run of Atrozine spray mixed with cutworm spray. This will cost around $14/acre.

    Here is where speculation really begins. If you plant too early, you’re taking a chance on having your corn come up and then getting hit with a late frost, possibly killing it. So maybe it’s better to wait to plant. But there are problems with that too. If you wait, then the spring rains come and you can’t plant because the fields are too wet, and by the time they dry, it’s possibly so late that your corn will be doing its main growing during the dry season and won’t get enough rain during its crucial “tassling” stage — when the corn is tassling, it is absolutely crucial that it gets water.

    Of course, these spring rains hold problems for the farmer who got his crop in early and didn’t get hit with the frost. In the spring, rain has a tendency to come in large amounts and all at once. It is not uncommon to see rainfall levels of 5+ inches in a week, sometimes in only a few days. Just as not enough rain can cause problems, too much rain causes problems.

    In the bottoms, where the land is the most fertile, moisture gathers. The creeks fill up and sometimes spill over the banks. The higher ground drains all its moisture onto the bottoms, too. This causes water to accumulate in the bottoms. And in these areas of accumulation (large puddles or overly wet muddy areas) the crops won’t grow.

    So you not only have to beat the frost, you have to beat the rains, and then the dry season.

    But let’s assume that you got your crop in successfully. What you have to do now is check on your fields every day to make sure that everything is going well.

    Mid-season, the farmer will have to spray again, this time with Post to control broadleafs, which runs around $6.50/acre. But if there’s a outbreak of fescue, the farmer will have spray Round-up, which will cost another $25/acre.

    So if you add all this up, and figure in all the different things that could happen, here’s what you come up with.

    $38/acre for seed (figuring in a few different “extra things”)
    $94/acre for N-P-K and Anhydrous
    $20/acre for spray

    For a grand total of $152/acre just to put a crop in. The farmer in question has 133 acres of good land. So it will cost him just over $20,000 just to put the crop in.

    The fuel costs to put in and take out the crop on a 133 acre farm should run $3500 and are declining.

    Now, keep in mind that it also costs you around $25/acre to spread lime on the ground — but you have to do that only every 3 – 4 years on average. But I think I’ve got enough “fat” built into the expenses above to safely assume that the cost of lime will fit in with these numbers.

    What about bad things happening? You need crop insurance, too. Sure you can go solo and hope for the best — but, losses hurt you more than gains help you! This is especially true of farming. You’re better off insuring your crop and giving up some profit so that you can ensure that you don’t get wiped out. Frost, hail, disease and pests can wipe you out. It’s always best to give away a portion of your profit to ensure that you don’t get wiped out.

    Further, you have to take into consideration the cost of equipment and the cost of repairs on that equipment. Farm equipment is really expensive and you simply can’t believe how things break on a farm. Farming is really, really hard on equipment.

    Now, on top of all of this, the speculating farmer has to further speculate with grain prices in the futures market.
    So let’s say for the sake of discussion that paying help, insurance and repairs is going to run a farmer an additional $5,000/year. A grand total of $28,500 to plant 133 acres in corn, or just over $214/acre.

    Now, lets look on the profit side of things.

    First, to just break even, assuming that he gets $3.10/bushel, he’ll need to bring to market just over 69 bushels/acre. Believe it or not, that’s not to hard to do.

    Realistically, a farmer expects to get around 125 bushels/acre on average if he has good land. Now, note the phrase “on average”. Some years, he’ll get far less than that, some years, far more .So it’s fair to say that a farmer will end up with an average annual range of 80 – 150 bushels/acre.

    At 125 bushels/acre, and assuming the farmer will get $3.10/bushel (of course, I have no idea what grain prices are gonna be in the future), he’ll gross around $51,537, which will net him out a profit of ~$23,000 for 133 acres. Not too bad!

    But looking at the ranges of 80 – 150 bushels/acre, the range in profit is $14,400- $33,000. That may not seem too bad, except when you take into consideration that a farmer can easily get $100 – $150/acre rent for his land, thus guaranteeing a profit of $13,00 – $20,000/year.

    Also, most farm land has some sort of government subsidy attached to it. The person who actually does the farming is the one who gets the subsidy. This amounts to around $10 – $25 acre (more or less depending on the land and circumstances).

    And keep in mind that in order to get that guaranteed profit (by renting his land), the farmer has to do absolutely no work whatsoever. So, on the margin, his true profit (profit from work – profit from no work) is much less, since by renting out their land and taking the risk free profit, he can free himself up for other, potentially, more profitable endeavors.

    Why would anyone want to rent the land? Farmers who rent a lot of land usually own a lot of big time equipment and farm a lot of land. Their profit margins are smaller, but they make up for it on volume.

    I rent out my farm land, and enjoy the guaranteed profit.


  7. I don’y know how a lesson on the Ag Industry (as corrupt as all the others) wound up in the comment section of a story concerning the decline of the newspaper industry, but…

    I suspect a big part of the newspapers’ problems come from eyeball competition, however, I wonder if part of the problem isn’t that the illiterate no longer feel it necessary to subscribe to daily in an effort to appear literate. If your neighbors aren’t pretending they can read by subscribing to a daily, you can quit pretending you can read.

    I mean using a real definition of literacy, like being able to read a lengthy article or short story and understand it, versus being able to comprehend the meaning of a single sentence (which is what we officially use), we’d probably have a 40% to 50% literacy rate in this country. “20% of the world population was illiterate in 1998 by the United Nations definition – the inability to read and write a simple sentence in any language.[3]” ( Using the “lengthy article” definition would place us somewhere on par with Bangladesh in literacy.

    Add this to the fact that newspapers have largely lost their credibility with those that can read, and the newspaper business goes under. C’est la vie.

  8. Thanks Bush and company..Fox is the one that started this lying,propaganda pay for play campaign and started the downfall..We will be fine, because from now on 1per cent of corp. media, govt. are not going to ensalve the other 99 per cent..Their house of cards is coming down..

  9. Rick said,
    “……lesson on the Ag Industry (as corrupt as all the others)”

    Can you quantify that statement, or is that mere hyperbole”