From two to one to zero

[Inky_Wretch]

NYT wonders when the first major metro no longer has a major newspaper ...

http://www.nytimes.com/2009/03/12/business/media/12papers.html?_r=1&hp

 

[Andy _ Kent]

Does anyone else have a problem with this passage from the article?:

The reality is that even though the economic climate is hard for newspapers, without their debt payments the publishers in bankruptcy would still make money, as do most newspapers around the country.

But profits are shrinking fast; taken together, major chains had an operating profit margin of about 10 percent in 2008, down from more than 20 percent as recently as 2004, according to research by John Morton, an independent analyst.

Again, still turning a profit of 10 percent, which in other industries is considered good.

 

[somewriter]

True, but most companies do have debt. And if their profit margin has gone from 20% to 10% in 3-5 years or whatever and their main revenue stream is falling off a cliff, they will have a heck of a time refinancing their debt. Like NYT, which had to give a bunch of the company to that Mexican dude and then sell the building it just built.

 

[txsportsscribe]

but the debt was, in most case, caused by greedy corporate pigs buying up other papers/chains. and if not for that debt, individual papers would be hurting in a bad economy but not gushing blood the way many chains are, which would seem to give some hope that the print newspaper might have a brighter future if large chains go away and are replaced by local ownership.

 

[Andy _ Kent]

True, but most companies do have debt. And if their profit margin has gone from 20% to 10% in 3-5 years or whatever and their main revenue stream is falling off a cliff, they will have a heck of a time refinancing their debt. Like NYT, which had to give a bunch of the company to that Mexican dude and then sell the building it just built.

I do understand, but something about the profit margin still bothers me as it pertains to the methods they are using to lower their debt. Putting hundreds and thousands of people on the streets at such a rapid pace does not seem the fair way to go. As someone else pointed out on a different thread, adding to the government's unemployment expenses should be reserved for those businesses that are either legitimately in the red or really on the verge. Companies still turning a profit, no matter how small, should have to exhaust all cost cutting measures, including significant salary cuts for the bigwigs, before laying off the worker bees.

 

[Johnny Dangerously]

Hard to argue with that.

 

[RickStain]

I think, though, that this shows that without the last two years of cuts, newspapers wouldn't be turning a profit at all, and at the time we all thought they were unnecessary cuts as well.

In fact, when you consider what ad revenue is looking like for 2009, a 10% profit in 2008 is probably a loss with the same expenses this year.

 

[DanOregon]

I figure at least a few companies will take advantage of the recession and job worries by really putting their spurs to their employees.

 

[Andy _ Kent]

I think, though, that this shows that without the last two years of cuts, newspapers wouldn't be turning a profit at all, and at the time we all thought they were unnecessary cuts as well.

In fact, when you consider what ad revenue is looking like for 2009, a 10% profit in 2008 is probably a loss with the same expenses this year.

Rick, again, let's look at the correlation. The quality of the product has gone downhill faster because of the cuts, which likely has hastened the loss of profit along with the economy. And to lop off hard-working employees when you are turning a 20 percent profit is even more despicable.

 

[RickStain]

I think, though, that this shows that without the last two years of cuts, newspapers wouldn't be turning a profit at all, and at the time we all thought they were unnecessary cuts as well.

In fact, when you consider what ad revenue is looking like for 2009, a 10% profit in 2008 is probably a loss with the same expenses this year.

Rick, again, let's look at the correlation. The quality of the product has gone downhill faster because of the cuts, which likely has hastened the loss of profit along with the economy. And to lop off hard-working employees when you are turning a 20 percent profit is even more despicable.

I see the correlation. I'm not buying the causation. I don't think a better product would have reversed the ad flight.

Now, as far as being despicable, I agree.

 

[Bob Cook]

Does anyone else have a problem with this passage from the article?:

The reality is that even though the economic climate is hard for newspapers, without their debt payments the publishers in bankruptcy would still make money, as do most newspapers around the country.

But profits are shrinking fast; taken together, major chains had an operating profit margin of about 10 percent in 2008, down from more than 20 percent as recently as 2004, according to research by John Morton, an independent analyst.

Again, still turning a profit of 10 percent, which in other industries is considered good.

Newspapers claiming they're making money without debt payments remind me of one of my father's favorite sayings: if the queen had balls, she'd be the king. Heck, I can claim I have a lot of money left in paycheck, if not for those pesky debt payments. Yet someone I don't have the cash on hand.

The problem in this economy with those debt payments is that they can't be renegotiated. And with profit margins going down, it's not like investors are going to pile up on newspaper stocks when their peak price was based on a perpetual 20-30 percent profit margin.

 

[Joe Williams]

We wouldn't have had a subprime lending crisis if all homes were owned by people who didn't have to take out mortgages for them.

I'm not for one moment absolving the "owners" who actually were just speculators and private-equity types who bought newspapers with borrowed money, and now are letting them go belly-up without their other investments or personal fortunes being jeopardized in any way. The big difference is, a bank will still take your or my house. But who the hell wants a newspaper these days, at these prices?

 

[Bob Cook]

We wouldn't have had a subprime lending crisis if all homes were owned by people who didn't have to take out mortgages for them.

I'm not for one moment absolving the "owners" who actually were just speculators and private-equity types who bought newspapers with borrowed money, and now are letting them go belly-up without their other investments or personal fortunes being jeopardized in any way. The big difference is, a bank will still take your or my house. But who the hell wants a newspaper these days, at these prices?

Maybe not at these prices, but you can't underestimate the power of the brand name. At least when the San Francisco Chronicle calls, the person on the other line knows what it is. That alone isn't going to save seven-day-a-week printed papers, but it's something that can be leveraged. Into what, who knows?

 

[rpmmutant]

Even if a newspaper or newspaper chain is making a 10 percent profit, but needs to make at least 20 percent to pay off its loans, then the newspaper is working in a business model with diminishing returns. I would imagine most newspapers owners were used to 30 percent profits and leveraged their debt using that threshold. Thus the dilemma. A 10 percent profit margin is healthy for most businesses, except those that need to make 30 percent to pay off their loans.

 

[pressboxramblings07]

Like the rest of the country, the newspaper industry is starting to pay for spending money it didn't have to begin with.