Bankruptcies show newspapers are teetering

updated 7:52 p.m. ET Feb. 23, 2009

NEW YORK - With the four owners of 33 U.S. daily newspapers seeking bankruptcy protection in the past 2 1/2 months, even more upheaval looms for an industry clearly gasping for survival.

Analysts doubt those newspaper companies will be able to emerge from bankruptcy protection without agreeing to lenders' demands for radical changes, such as switching some of their newspapers exclusively to online delivery.

Of course, the newspaper publishers already have been mulling dramatic makeovers, including scrapping their print editions, and it's still not clear whether their creditors can come up with any better ideas. But that probably won't discourage exasperated lenders from trying to shake things up.

"These first few bankruptcy filings are like the canaries in the coal mine," said John Penn, a bankruptcy lawyer in Fort Worth, Texas. "It's almost a certainty that they are going to have to change their business models because the old ones aren't working."

Newspaper publishers say the filings won't have any immediate effects on their day-to-day operations, and the 33 affected newspapers likely won't close en masse as part of any reorganization.

Still, the industry's troubles were underscored over the weekend with separate bankruptcy protection filings by New Haven (Connecticut) Register publisher Journal Register Co. and by the owners of The Philadelphia Inquirer and the Philadelphia Daily News.

They followed a December filing by Tribune Co., whose media stable includes the Los Angeles Times and the Chicago Tribune, and January's filing by the owners of the Star Tribune in Minneapolis. Other publishers could seek bankruptcy protection in the coming months, too, as advertising prospects for 2009 remain bleak.

"There's a fairly high degree of uncertainty," said Rick Edmonds, a media analyst with the Poynter Institute.

He said the filings put "the future in the hands of the courts. Creditors will have a fair amount to say."

Newspapers across the country have been cutting jobs, trimming newspaper widths and making other cost cuts to help offset reductions in advertising revenue, but for many, those efforts still haven't gone far enough to stop the bleeding.

All four publishers turned to the bankruptcy court for help as their debts became unbearable amid a two-year slump in advertising revenue that has been worsening as the recession stifles spending. The owners of the Philadelphia newspapers, the Minneapolis newspaper and the Tribune Co. all borrowed heavily to finance buyouts that were completed during the early stages of the advertising downturn.

If those loans didn't have to be repaid, some of the newspapers would be making money.

The Philadelphia Newspapers LLC says the Inquirer and Daily News would have made $36 million last year under an accounting measure that excludes interest payments, taxes and several other non-operating items. This year, the Philadelphia newspapers project earnings of $25 million under the same yardstick, according to bankruptcy court documents. But the privately held newspaper company had about $390 million in debt.

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