Media

The Future of Some Newspapers Is Worse Than It Looks

New York Times Co. (NYSE: NYT) said it will cut about 100 jobs in its newsroom. Supporters of the paper say that it continues to have one of the largest news gathering organizations in America. With the expense cuts, the future of the Times is fairly bright, particularly with a relatively strong balance sheet. Some portion of the rest of the industry is not as well off. Drops in revenue combined with debt loads are not a formula for much more than extinction.

First among the most troubled newspaper companies in America is McClatchy Co. (NYSE: MNI), which took on an extraordinary amount of debt to roll up large newspaper companies. While falling revenue may be a survivable situation for some of the industry, at least for now, McClatchy has to find a way to survive, or sell itself off in pieces.

In the second quarter of this year, McClatchy’s revenue fell to $292 million from $302 million in the same period last year. Operating income fell to $27 million from $30 million. The figures would seem fine, if McClatchy did not have a debt load that made it pay $33 million in interest expense. McClatchy’s long-term debt is $1.5 billion. The grimness of its problems is reflected in its market capitalization, which is only $294 million, and its stock price, which is down 49% over the past six months.

ALSO READ: 10 Companies Cutting the Most Jobs

McClatchy needs to outrun its interest expenses, in terms of its operating profit. As revenue, and probably with that operating profit, continue to erode, the chances of that become less and less likely. One example of another troubled company that could not survive on its own is the Journal Register, which filed for bankruptcy twice. It eventually became part of Digital First Media, the second largest newspaper company in America, based on circulation. Digital First Media is now for sale and probably will be auctioned off in pieces.

Another anchor dragging on McClatchy is the size of some of its dailies. These are based in several large metro markets, which means they face unending competition. Among these are the Miami Herald and the Fort Worth Star-Telegram. A break-up of McClatchy may not yield enough to cover its long-term debt, since these properties would likely bring low bids.

The newspaper industry has two futures for the time being. Each is based on balance sheets. Heavy debt puts McClatchy in the section of the industry that cannot operate its way out of trouble.

ALSO READ: 10 Best Technology Companies to Work For

Take This Retirement Quiz To Get Matched With An Advisor Now (Sponsored)

Are you ready for retirement? Planning for retirement can be overwhelming, that’s why it could be a good idea to speak to a fiduciary financial advisor about your goals today.

Start by taking this retirement quiz right here from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes. Smart Asset is now matching over 50,000 people a month.

Click here now to get started.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.