Monday, December 29, 2008

West and Clear’s 2008 in review #4: Star-Telegram struggles

By Steve Smith of West and Clear

For the newspaper industry, 2008 dawned with many industry experts predicting it to be the shakeout year – the inevitable layouts and belt-tightening were going to separate those who would help shape a new future for the industry and those who would be simply looking for a new line of work.

However, I don’t think anyone really imagined how bad it would be. For the Star-Telegram, the shakeout meant rounds of layoffs that resulted in a mass exodus of some of its best talent, the wholesale kneecapping of morale, the sale of the newspaper’s annex to the Fort Worth Club and putting the “for sale” sign on the paper’s downtown headquarters. Insert obligatory Amon Carter spinning in his grave reference here, please.

But, as bad as 2008 was, 2009 looks to be even worse. Why?

* Major newspapers will tank: Imagine a major U.S. city without a newspaper. It will happen in 2009. The first one to fall? Minneapolis looks like a lock.

* The monopolies will begin to crumble: Tribune has already filed for bankruptcy. Could the S-T’s parent company, McClatchy, do the same? When McClatchy bought the former Knight Ridder papers that included the S-T in 2006, it paid $4.5 billion and took on $2 billion in debt. That debt is now rated at junk-bond status and shares of the company (NYSE:MNI) have fallen more than 90 percent from their 52-week high of $13.31 per share on Dec. 26, 2007. As of Friday’s close, McClatchy was at 81 cents a share, giving it a market capitalization of $66.8 million. And that’s an improvement from its all-time low it hit on Christmas Eve. No one thinks McClatchy is on the verge of bankruptcy filing, but the company’s financials are hardly sound.

* The parting out will accelerate: Much like you do with an old car that is beyond repair, the industry will begin to see if the sum of the parts is worth more than the whole. When McClatchy quietly put The Miami Herald up for sale earlier this month, it was a clear example of how far this industry has fallen. Once considered one of the flagship papers of the Knight Ridder chain, the Herald had been such a low performer in both chains for so many years and that now the paper’s primary value is considered to be in its prime waterfront real estate. Expect chains to attempt to spin off more individual properties to shore up the balance sheet. However, few buyers will materialize. And the lack of liquidity has little to do with it. After all, it’s cheaper to wait and buy after the bankruptcy. Anyone at 400 West Seventh Street who still harbors the fantasy of the Basses riding to rescue in fit of civic altruism should remember this.

So what should the Star-Telegram expect in 2009? With statements like these from McClatchy CEO Gary Pruitt, it’s tough to be too upbeat. Do these comments mean that more layoffs are in the cards?

The morale-killing staff reductions the S-T has experienced this year have hardly improved the product. It’s a vicious cycle — revenue and circulation decreases, staff is cut, quality suffers, fewer people subscribe and then the whole process starts over. In spite of that, the paper continues to commit blatant acts of journalism occasionally. Case in point: the JPS series by Darren Barbee, Anthony Spangler and others appears to have brought about real change at the county hospital. Will reportage of this caliber even be possible with more cuts?

One comment I hear from newspaper people is the refrain that newspapers are too essential to fail, they are too critical to the fabric of a community to go away. I used to believe that, too. But now I think it is bullshit. Can they fail? You bet your ass. Is that detrimental to the community? Quite possibly. Is that a bad thing? Well, as someone else put it, the feared loss of civic value is not the basis for a business. The newspaper industry is in the same boat as the auto industry or the recording industry: it’s not the market’s fault that your business model doesn’t work anymore. Like those other two industries, the whole thing may need to collapse before any real change occurs. So far, there’s more scrambling to maintain the status quo than there is real innovation.

That’s going to change in 2009, and it’s going to suck for a lot of people. What’s the most likely outcome for the Star-Telegram? I’ll talk about that on Wednesday with my predictions for the new year.

Pegasus News content partner - West and Clear

Related stories

• West and Clear’s predictions for Fort Worth in 2009 (Dec. 31, 2008)
• Fort Worth Star-Telegram sells another building (Dec. 31, 2008)

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• The Media > Print Media