Fascinating piece in AdAge this week. It turns out that newspapers, as a business, are doing quite well -- kicking out 10 to 20 percent returns, which ain't chopped liver.
On the other hand, the companies that own newspapers are debt-laden swine. They took on too much debt in fat times, as national chains swept up local owners. If you can keep using cash flow to pay off debt service, you're cool. But anyone who's played Hot Potato knows what happens when the buzzer goes off.
Compare and contrast Hearst and Philadelphia Newspapers. The latter went Chapter 11 recently -- too much debt -- while saying operations are fine. But Hearst's apparently imminent closings of the San Fransisco Chronicle and the Seattle Times, shows that media companies will have a choice: kill the papers or restructure their overall operations. Since the latter runs the risk of wiping out equity, expect far-flung media companies to impose pain on their newspapers. But smaller companies, focused on their own papers, may turn out just fine.
