THE CAPITAL CRISIS IN THE NEWSPAPER INDUSTRY DEEPENS

Recent weeks have not been kind to newspaper company finances, with lost value and unhappy investors plaguing publicly traded firms.

The Journal Register Co. was delisted from New York Stock Exchange because it share price remained below $1, reducing its market capitalization about $12 million, less than one-fifth the capitalization required to be traded on the big board. The Sun-Times Media Group stock also continued trading below $1 and its market capitalization dropped to $61 million, drawing a delisting warming from the New York Stock Exchange.

Although those firms have hardly been notable as the best managed firms in recent years, their problems in inspiring investors are symptomatic of difficulties facing newspaper firms in the market.

Meanwhile, Moody’s Investors Service lowered the New York Times and McClatchy Co. debt ratings and lowered the Gatehouse Media even further in the junk category.

Other firms are also having problems with capital related issues. Rumors are rampant that the Sulzberger family is seeking new protective mechanisms or partners for the New York Times Co. following its continued battles with shareholders and dissident shareholders gaining seats on the company board. A similar ugly proxy battle is underway at Media General.

About a half dozen public firms have now hired advisors to determine their “strategic options,” the business euphemism for seeing if there is any hope of selling properties, restructuring, or getting out of the business.

All this is happening not because the newspaper industry is untenable—public companies return an average of 17 percent last year—but because most are carrying enormous debt and have no believable plans for future growth and development. As a result, investors are demanding cost cutting, debt reduction, strong returns, and high dividends so they can recoup their investments.

The trouble with this scenario is that it continues stripping newspaper companies of the resources they need to develop new initiatives and businesses should their management gain some vision, become entrepreneurial, and have some inspired ideas that might enthuse investors.

What newspaper companies badly need today are not mere managers, but company leaders with the strength, enthusiasm, and vision to rebuild their companies. If they don’t start soon, they will lose too many resources to be able to do it in the future.