How to restructure MediaNews into a digital enterprise with a future
Not very surprisingly, my former employer, MediaNews Group, is in workout. Surprisingly, this could turn out to be an opportunity to craft a truly new kind of news enterprise. Bear with me.
As reported first by the New York Times, later in the Wall Street Journal and in the Denver Business Journal, the country’s fourth-largest (by circulation) newspaper publisher has won a forbearance agreement from the lenders to which it owes $1 billion, plus or minus spare change. The lending group, led by Bank of America, is allowing MediaNews to skip its March 31 debt payment while it “attempts to reorganize its capital structure.”
This confirms that MediaNews is in default — forbearance agreements are designed to postpone foreclosure, and lenders don’t threaten to foreclose unless the borrower is in default of one or more loan covenants. Covenants breaches can entail failure to maintain certain balance sheet ratios rather than actually being short of cash, but they’re serious issues and call into question the ability of the enterprise to maintain its “going concern” status.
As it happens, I’ve had the personal pleasure of going through the workout process (in connection with the travails a small newspaper group now owned by MediaNews), and it’s not fun. I’m sure MediaNews CEO Dean Singleton (that’s him in the picture) never thought he’d find himself in this situation.
So, how do you restructure $1 billion in debt? The workout team at Bank of America will be looking for cash — as much cash as the banks can get to pay down the notes. Ultimately, the banks may need to take a haircut (write down the value of the loan), but first they’ll squeeze as much cash out as can be gotten. Usually in these situations, cash is raised by selling assets, but MediaNews’ assets consist mainly of newspapers, and newspaper buyers are non-existent today, for all practical purposes. The banks know this, Dean Singleton knows this, so what’s the solution?
In my mind, rather than trying to sell individual newspaper properties at fire sale prices (which might get the banks 10 or 20 cents on the dollar), the company should slice itself into horizontal business units, which would raise cash while creating a truly digital enterprise capable of moving forward and paying off a discounted level of debt. Here’s what the restructuring would entail:
- A sale of the company’s printing plants, packaged with its considerable commercial printing customer base. Some of this infrastructure is aging, but the company has built some state-of-the-art plants in recent years. These assets would be attractive to various regional printers looking to expand.
- A sale of all other real estate, perhaps with partial leasebacks. The core digital enterprise to be retained won’t need all that office space.
- A sale of all non-newspaper assets, like its Anchorage TV station and Texas radio stations.
- A restructuring of the remaining business as a fully digital, online-first news organization operating in all of the company’s existing markets, with strategic options to expand into neighboring markets.
- A separation, Cedar-Rapids style, of the content creators and online editors from the print product creators. (As Gazette Communications is discovering, this is a monumental culture shift, but an essential one for every news enterprise to get through.)
- A reduction of publishing schedules in all markets to one or two days per week. Most of the advertising currently spread across six or seven publishing days can be nudged into one or two editions that are profitable. In the status quo, even the profitable newspapers are losing money several days a week — something that’s not often analyzed or monitored.
- A five-day commuter-style tabloid in selected markets like Denver, the Bay Area and Salt Lake City.
- A slew of niche publications with both original and repurposed content.
- Exploration of opportunities for paid online content, not for the core news content now being published, but for new high-value content areas that can be developed out of the new content creation group.
On the sinister side, all of this could be done by completely liquidating the existing company, laying everyone off and rehiring selected troops into one of several new companies, as is being done in Ann Arbor. This might provide an opening to negate union contracts, and given the less-than-cordial historic relationship between MediaNews and its unions, that tactic is entirely possible. And who knows, perhaps it’s preferable to the current regime of furloughs, layoffs, concession demands and other chiseling.
The economy will not come riding back to rescue MediaNews, or any other newspaper publisher, even when the current slump comes to an end. The problems are permanent; they transcend the business cycle; the revenue decline (as a share of total U.S. ad dollars) has gone on for 50 years, and only a fundamental reinvention of the business provides any hope of saving it.
There’s a small chance that MediaNews will be bold enough to attempt this kind of radical scenario, and then there’s an even smaller chance that it would succeed. But without the attempt, the company is staring across the Bank of America’s workout table at bankers who want to get paid, and get paid soon; who are not concerned about journalism or communities or employees; who will be satisfied with 20 cents on the dollar in a simple breakup scenario if the company can offer no strategic plan to navigate its way to a higher valuation. It’s worth a shot.
10 comments:
Trackbacks:
-
Singleton’s MediaNews ragtag newspaper empire hangs by a thread — Is that so bad « The end of elite liberal media empires and rise of citizen journalism
[...] Nieman Journalism Lab: A former MNG editor outlines one approach to a restructuring. [...]
-
How to restructure MediaNews into a digital enterprise with a future :Newspaper Ad Rate
[...] Continue reading this post at Nieman Journalism Lab. [...]
-
Could strategic bankruptcies be needed to transform newspapers? » Nieman Journalism Lab
[...] offer relating to $1.15 billion in bonds that met little acceptance. MediaNews Group (number 6) arranged a forbearance agreement with lenders back in April, indicating a technical default as well. MediaNews is privately held and [...]
-
Singleton’s next chapter: Can he steer MediaNews to a digital future? » Nieman Journalism Lab
[...] revenue tanked not long after the final big deals with McClatchy and Hearst, and MediaNews found itself in workout last April. Given the complexity of its financial structure, it’s not surprising that it took [...]
Interesting. I would add to your bullet, “…A reduction of publishing schedules in all markets to one or two days per week.” and, “use those print products as a guide and promotion to what is online. Making readers in print go online to get the full, expanded, participatory, fully interactive story.”
This plan makes sense to me, particularly the reduction in print schedules. I believe it won’t be long before the “Michigan” strategy spreads across the country.
Most newspapers will soon switch to one-day-a-week printing – probably Saturday – which still provide a means of distribution for free-standing insert on the weekend.
Besides, most papers make roughly half their money on a single day now – Sunday. If they eliminated the cost of producing the other six days, it could work out in their favor.
@Bernie Re: good point, and have a look at my prior comments on that score;
http://www.niemanlab.org/2009/02/hearst-medianews-you-can-invent-the-future-in-san-francisco/ — that weekly print product can in fact be a guide to ALL other media, just as it has always been: the online world, radio, TV, cable, film, theater, travel, books, art, life.
And, I like your new paintings.
Given Friday night’s stunning news that the New York Times Corp. has threatened to shut down The Boston Globe in 30 days unless there are substantial concessions by the Globe’s unions, Martin’s scenario for MNG is not outlandish.
While I don’t really think the Globe will be shuttered, the fact that this threat was launched after 50 positions were eliminated through buyouts and layoffs means the NYT is dead serious about doing this.
These are truly desperate times. There is zero chance of MNG making a financial comeback in its present form. There is little left to cut or consolidate.
The websites, particularly in their smaller properties, are still hamstrung by a lack of equipment and resources to do a credible job replacing the paper and ink product.
Without a radical reworking of MNG along the lines that Martin suggests, coupled with the needed investments in people and technology to pull it off, MNG will be the latest newspaper company headed to oblivion.
Well, that did not take long.
My prediction, all along, has been that Dinky Singleton would declare bankruptcy by July 2009.
He just finished a beautiful game of poker with Scripps and got them to fold first and shut down the Rocky Mountain News.
But, even a monopoly in Denver is obviously worthless.
Now, I feel like a fool for renewing my Denver Post subscription.
Some things of merit here, and some that I think are not. Disclosure: I’m a Media News employee in San Jose.
Let me start with @Bernard Re’s comment: “Making readers in print go online to get the full, expanded, participatory, fully interactive story.” That’s just plain arrogant. It’s as silly to be thinking about forcing print readers to go online as it has been for news orgs to be trying convince folks who don’t want print that they really do. How about we start by asking them what they do want and go from there, rather than forcing them from one platform to another?
On that note, that’s why partial week print runs (like in Detroit) are dooomed. Folks who want the print version, want the print version. It’s an integral part of their day. And they choose it over online news, even though the latter is free. Yes, only about three days are profitable, but having a seven-day run keeps those folks around for the profitable days. You can’t just assume advertisers and readers will shift behaviors just because we want them to…
There it, at most news orgs, little overlap between print readers and online readers. So going to online only format also means you’re choosing between two sets of readers. The print version may be less profitable than it was, but it’s probably still bringing in more cash and profit than online. Why discard that?
To a couple of Martin’s points:
*Selling plants and real estate are a good idea. But this not exactly a seller’s market.
*I’m not sure how many non-newspaper assets MediaNews has. But I can say that in the Bay Area, the highest media consumption point for people is in their cars. We should be figuring out a way to get out stuff on the radio, rather than going away from it.
*For that same reason, commuter editions won’t work here. They’re better for highly dense urban areas. That said, I like the idea of reinventing the print edition to create several different versions. Maybe an afternoon edition that gets dropped for free in some of the cafeterias at big high tech companies?
*I think Cedar Rapids is one of the most important media experiments in the U.S. right now. They’re well worth watching, and I think on the right path for creating a new newsrooom dynamic.