Over the last few weeks, the newspaper industry has entered a new period of decline. The parent of the papers in Philadelphia declared bankruptcy as did the Journal Register chain. The Rocky Mountain News closed and the Seattle Post Intelligencer, owned by Hearst, now publishes only online. Hearst has held off closing The San Francisco Chronicle after making massive cuts at the paper. The property still may not be profitable. Advance Publications has announced a mandatory 10-day furlough and a pension freeze at nearly all of its daily papers outside Michigan. In Michigan, the company is closing the Ann Arbor News, the daily in that city, and significantly cutting back frequency of newspapers in Flint, Bay City and Saginaw. At other papers across the country changes have been made to save money. For example, The Washington Post is merging its business section into the first section of the paper. The San Diego Union-Tribune was sold to a private equity group at a price rumored to be only $50 million.

The 24/7 Wall St. analysis was criticized by a number of papers on this list and other analysts who follow the newspaper industry. But, not one of the ten papers would say that it would  stay open for the next 18 months. Papers who told us that they were making money would not answer the question of whether their profits were based on GAAP or some bogus measurement like adjusted EBITDA. None of the papers would answer that simple question.

24/7 Wall St. created a list of the ten major daily papers that are most likely to fold or shut their print operations and only publish online. The properties were chosen based on the financial strength of their parent companies, the amount of direct competition that they face in their markets, and industry information on how much money they are losing. Based on this analysis, it is possible that eight of the fifty largest daily newspapers in the United States could cease publication in the next eighteen months.

1. The Philadelphia Daily News. The smaller of the two papers owned by The Philadelphia Newspapers LLC, which recently filed for bankruptcy. The parent company says it will make money this year, but with newspaper advertising still falling sharply, the city cannot support two papers and the Dally News has a daily circulation of only about 100,000.  The tabloid has a small staff, most of who could probably stay on at Philly.com, the web operation for both of the city dailies. The parent company of the papers said it makes money but would not answer if that was on a GAAP basis or whether its P&L was hit by a large write-down in the value of its assets.  As of March 30, the tabloid Daily News will be published as an edition of the broadsheet Philadelphia Inquirer.

2. The Minneapolis Star Tribune has filed for Chapter 11. The paper may not make money this year even without the costs of debt coverage. The company said it made $26 million last year, about half of what it made in 2007. The odds are that the Star Tribune will lose money this year if its ad revenue drops another 20%. There is no point for creditors to keep the paper open if it cannot generate cash. It could become an all-digital property, but supporting a daily circulation of more than 300,000 is too much of a burden. It could survive if its rival the St. Paul Pioneer Press folds.  A grim race.

3. The Miami Herald, which has a daily circulation of about 220,000. It is owned by McClatchy, a publicly traded company which could be the next chain to go into Chapter 11. The Herald has been on the market since December, but no serious bidders have emerged. Newspaper advertising has been especially hard hit in Florida because of the tremendous loss in the real estate market. The online version of the paper is already well-read in the Miami area and Latin America and the Caribbean. The Herald has strong competition north of it in Fort Lauderdale. There is a very small chance it could merge with the Sun-Sentinel, but it is more likely that the Herald will go online-only with two editions, one for English-speaking readers and one for Spanish.

4. The Detroit News is one of two daily papers in the big American city badly hit by the economic downturn.  It is unlikely that it can merge with the larger Detroit Free Press which is owned by Gannett. It is hard to see what would be in it for Gannett. With the fortunes of Detroit getting worse each day, cutting back the number of days that the paper is delivered will not save enough money to keep the paper open.

5. The Boston Globe is, based on several accounts, losing $1 million a week. One investment bank recently said that the paper is only worth $20 million. The paper is the flagship of what the Globe’s parent, The New York Times, calls the New England Media Group. NYT has substantial financial problems of its own. Last year, ad revenue for the New England properties was down 18%. That is likely to continue or get worse this year.  Supporting larger losses at the Globe will become nearly impossible. Boston.com, the online site that includes the digital aspects of the Globe, will probably be all that will be left of the operation. Several writers in Boston have said that the paper was worth $200 million or better.  If the daily in San Diego is only worth $50 million, the Globe is almost certainly worth less.

6. The San Francisco Chronicle. Parent company Hearst has already set a deadline for shutting the paper if it cannot make tremendous cost cuts. The Chronicle lost as much as $70 million last year.  Even though the company could lower its costs, the northern California economy is in bad shape. The online version of the paper could be the only version by the beginning of 2010.

7. The Chicago Sun Times is the smaller of two newspapers in the city. Its parent company, Sun-Times Media Group trades for $.03 a share.  Davidson Kempner, a large shareholder in the firm, has dumped the CEO and most of the board. The paper has no chance of competing with The Chicago Tribune. The PR firm for Davidson Kempner contacted 24/7 Wall St. to say that they were not responsible for the CEO being dismissed. The board they helped put in did.  Davidson Kempner did not even bother to mention whether the paper would stay open or not.

8. NY Daily News is one of several large papers fighting for circulation and advertising in the New York City area. Unlike The New York Times, New York Post, Newsday, and Newark Star Ledger, the Daily News is not owned by a larger organization. Real estate billionaire Mort Zuckerman owns the paper. Based on figures from other big dailies it could easily lose $60 million or $70 million and has no chance of recovering from that level. The CEO of the paper, Marc Kramer, put out a press release saying that 24/7 Wall St. had not talked to anyone at the paper. He clearly had no way to know that. He also said that the Daily News was doing great things. He did not directly address the issue of whether the paper would stay open and Zuckerman was silent on the entire matter.

9. The Fort Worth Star Telegram is another one of the big dailies that competes with a larger paper in a neighboring market—Dallas. The parent of The Dallas Morning News, Belo, is arguably a stronger company that the Star Telegram’s parent, McClatchy. The Morning News has a circulation of about 350,000 and the Star Telegram has just over 200,000. The Star Telegram will have to shut down or become an edition of its rival. Putting them together would save tens of millions of dollars a year. 24/7 Wall St. got calls from a reporter at the paper, maintaining that it was profitable. Then, Jill “J.R.” Labbe, its deputy editorial page editor at the paper, wrote a piece saying that the Star-Telegram is not going away. She also said that the paper was profitable. Her publisher had told her so. We asked if the profit was based on GAAP. She said she would check, and never got back to us.

10. The Cleveland Plain Dealer is in one of the economically weakest markets in the country. Its parent, Advance Publications, has already threatened to close its paper in Newark. Employees gave up enough in terms of concessions to keep the paper open. Advance, owned by the Newhouse family, is carrying the burden of its paper plus Conde Nast, its magazine group which is losing advertising revenue. The Plain Dealer will be shut or go digital by the end of next year. The Plain Dealer criticized our methodology and wrote a piece which essentially said the paper was doing fine. That means that the 10-day furloughs and a pension freeze put into effect were just for fun.

Douglas A. McIntyre

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