Remember the New York newspaper strike of 1962-’63? I don’t. I turned 4 just before it started, and I wasn’t a newspaper reader at the time. But this 114-day event may be speaking to us through history.
The strike by the typographers’ union was about changes in printing technology, but it brought all sorts of simmering newspaper-industry issues to the fore: suburbanization of readers, the impact of television, and the fact that New York, at the time, had more daily newspapers than it could reasonably support (I think there were seven). Lots of folks apparently lost the readership habit during the shutdown; New York’s newspapers lost about 500,000 in combined daily circulation that they never got back. The New York Mirror folded shortly afterward, and more papers went down before the ’60s ended.
History unfolds in ways we can’t always foresee, but it tends to move in fits and starts, not gradually. Malcolm Gladwell talks about “tipping points,” which is a good term for it. If a phenomenon is ready to tip, a historical catalyst can push it over. The newspaper strike killed some dailies in the 1960s. Will the current recession do it in 2009, or 2010? I think, unfortunately, that the chances are pretty good.
The Chicago Tribune is converting to tabloid for street sales, while keeping the broadsheet format for home delivery and single-copy sales outside the city. The newspaper says it will be unique in offering its product in both formats. Industry observers say a switch to all-tabloid is likely at some point, while initial reader reaction, at least on the blog cited above, appears negative. Just rearranging deck chairs on the Titanic? We’ll see.
Lee Enterprises, publisher of the St. Louis Post-Dispatch and lots of other papers, has just issued its 10-K report. Filed with the Securities and Exchange Commission, a 10-K is the formal version of a company’s annual report, minus all the glossy photos and PR spin. The form can be dense, but it’s the place to go if you want to know what’s really going on at a publicly held company.
The news at Lee is not so good. The company took on lots of debt to buy the Post-Dispatch in 2005, and now it’s struggling with that burden.
Lee’s exact words are that its debt burden threatens the company’s existence as a “going concern.” If you think that sounds ominous, you’re right.
Debt isn’t always a bad thing, mind you. It can underwrite expansion and growth. But when a company takes on debt in anticipation of growth that doesn’t materialize, it can find itself in trouble in a hurry. (It’s easy to see parallels between this and a homeowner who takes on a whopping subprime mortgage, with the assurance that he can always refinance when the value of his home soars to the stratosphere.)
Lee also faces delisting from the New York Stock Exchange. As of today, four dimes and a penny will buy you one share of Lee stock.
Lee’s debt saga is similar to the one Sam Zell is going through with the Tribune Company. As with the Tribune, the company’s struggles don’t necessarily mean the newspapers will cease to exist. But it’s easy to predict breakups, reorganization, cost-cutting — and a much more sober assessment of newspaper valuations in the future.