Media: Local philanthropist may be PJS’s best hope if GateHouse tanks, analyst says
NOTE: GateHouse Media, the parent company for the Peoria Journal Star, TimesNewspapers and other dailies and weeklies in Illinois and other parts of the country, today saw the price of its stock drop to 56 cents a share before closing at 72 cents. The same stock once sold for more than $20 a share. The company is at serious risk of being delisted from the New York Stock Exchange and there’s speculation the company might have to declare bancruptcy and sell off it’s assets.
Lauren Rich Fine was a newspaper analyst and the managing director-corporate strategy and research for Merrill Lynch, New York, before retiring to become Practitioner in Residence at Kent State University’s College of Communication and Information. She also is a member of the Advisory Board of the Poynter Institute. I contacted her to get her perspective on the GateHouse Media mess and how it might affect the Peoria Journal Star.
Peoria Pundit: It wasn’t all that long ago that GateHouse seemed like the next big thing in the newspaper industry. It was gobbling up newspapers left and right. Was what happened just part of the general downturn in the newspaper business or was it due to GateHouse’s business model in some way?
Lauren Rich Fine: During a period of economic growth coupled with low interest rates, GateHouse’s strategy made sense. They could use the ample free cash flow they were generating to pay dividends, pay interest, and reduce debt. When cash flow gets squeezed by an economic downturn, the leverage can be catastrophic. Personally, I was surprised by the success of the IPO. The short answer is, all newspapers are suffering so it isn’t surprising that Gatehouse’s are as well, but having an increased debt load compounds the pain, much as it is doing with McClatchy and others.
PP: What are GateHouse’s prospect’s for surviving? And what do you think the company’s next steps are?
LRF: I don’t know the company well enough to comment. It depends on whether they go into bankruptcy and/or can financially restructure fast enough.
PP: The Peoria Journal Star is actually one of GateHouse’s largest newspapers in terms of circulation. Can the Journal Star be sold off, and how much would GateHouse get, do you think? What about smaller dailies and nearby weeklies? Who would buy then in today’s market? The JS bought a brand new printing press a year or two before the GateHouse purchase and presumably owns money on it still. Also, the JS is union. Do these issues complicate matters?
LRF: There are no named buyers for papers right now. Landmark properties have been on the block since the beginning of the year. Big papers like Newsday attract big money buyers who can afford to lose a few bucks. If there are wealthy philanthropic people in Peoria or some corporation with a heart or passion for democracy, they are the likely buyers. No way to value the paper due both to lack of data and no sense of how close we are to the buyer. Being unionized isn’t necessarily an issue as a buyer can buy the assets, close the doors, de-unionize and tell folks to reapply for their job.
PP: Wouldn’t any new buyer also want to cut costs, too?
Of course.
PP: On a more philosophical note, what does the decline in value of newspaper companies say about how much Americans value the newspapers? Is all this just part of the eventual migration from print to online?
It is probably both indicative of the migration but also the change in how consumers get their news; more opinionated sites are doing well, like Drudge, huffpo [Huffington Post], etc. Also, economics at play: Excess supply, unchanging to declining demand.
Tags: GateHouse, Lauren Rich Fine, Peoria Journal Star
Local philanthropist, eh? Too bad Henry Slane is dead. Most individuals wealthy enough to buy it would be hard pressed to resist the temptation to slant news coverage in favor of their particular agenda. Several local people toyed with the idea of buying the paper back when Copley had it for sale, but decided they didn’t know enough about the business. That was probably a wise decision.
“Too bad Henry Slane is dead.”
That’s exactly what I was thinking when I was reading this, Sam. But he is.
When Henry Slane and Publisher John McConnell appeared in the cafeteria in fall 1995 to announce the ESOP had become untenable because so many people were taking early retirement, I must admit that I felt betrayed. I didn’t cry, but there WERE tears in that room, some from managers.
“We made too much money, and now we’re broke” was how I described the Slane/Mac explanation at the time. My feeling of betrayal was somewhat salved when I saw how much money Helen Copley was going to pay for my tiny piece of the Journal Star.
Skeptics at the paper thought the ESOP was engineered from the beginning to make managers rich and then to be liquidated. In retrospect, the trustees were smarter to sell too early rather than too late.
Greater minds that mine have failed to find a way for newspapers to prosper in these times. But I still think it’s about content — both in print and online — and taking chances. The industry is still run largely by people who have no desperate interest in experimentation, because the worst thing that could happen to them is suddenly to find they are unemployed multimillionaires.
If people are willing to pay upward of $100 a month for a high-end cable TV package (and even a crummy package costs more than half that), they will pay for a newspaper that has something they really want and can’t get elsewhere.
The penultimate graf should start: “Greater minds than mine …” Which proves that newspapers, blog commentators and former copy editors need copy editors.
Damn, I though you were going to name a specific local philanthropist! Do any cities own their own newspapers – not that Peoria has the money. Just thinking out loud. If your taxes are supporting it, people might read it.
BUT if Peoria ran a newspaper like they run their schools – this would mean the end for sure.
As far as total migration to screen/internet from print – I honestly just don’t see this ever happening. Well, not until screen technology can be held like a paperback novel, carried around like a newspaper or magazine, and doesn’t have the light that makes your eyes hurt after too long. I can spend hours, nay days, reading a book – straight, no breaks. But pretty much everyone has to take a break from the assault, however minimal, that is any electronic screen.
Oh, and… newspapers, magazines, etc won’t totally fold either, for now. They just have to find the method by which they can exist, make money, keep readership level. What that is, I have no idea.
anyone seeing any possibilities out there? for newspapers and such to continue and stay relatively healthy?
There is a lot of blame to go around for the demise of the journal star. I would start by considering the collective effect of the 7 deadly sins practiced by not only the employees, owners and managers, but also people in the Peoria Community who were given “cover” while those who didn’t have friends at 1 Journal Plaza were persecuted.
Gary Sandberg was right all along to put that paper at the bottom of Jelly Bean’s birdcage and not give them any interviews. Who’d have thought a decade ago that Gary would outlive the Journal Star!!!
Bill, if the Urinal Star goes out of business, I will make it to the post mortem blogger bash. I feel that more than anyone you and CJ have done more to expose the incompetence and untruthfulness just by the quality article sand transparency of your editorializing that you have publish week for the last several years.
Insert sound of ax grinding.
[...] And, of course, Billy Dennis has been outdoing himself in his coverage, even getting an interview with analyst Lauren Rich Fine. [...]