Philadelphia Inquirer and Daily News file for Bankruptcy
February 23, 2009 3:32 AM Subscribe
Philadelphia Inquirer and Daily News file for Bankruptcy, this happens 3 years after Will Bunch of the Daily News starts a cross discipline conversation about the future of news organizations culminating in a conference where Jeff Jarvis hailed as the moment when 'the war ends' between bloggers and journalists.
Disclosure, I assisted putting together the conference and worked at Philly.com five years ago. My thoughts are with with my friends at the paper and for my city. While this is largely due to the fundamental shifts that have been occurring to any businesses built on the distribution of information, as Clay Shirky predicted back in 1995, that the Innovator's Dilemma was at play, there is no way I can't see this as missed opportunities, shortsightedness (demand for immediate returns on investment) on the part of management, and denial on the part of some, I feel for those who have been in, and continue to be in the struggle. There are many there who have been fighting the good fight all along. Who weren't in denial. And I hope their stories get told.
Disclosure, I assisted putting together the conference and worked at Philly.com five years ago. My thoughts are with with my friends at the paper and for my city. While this is largely due to the fundamental shifts that have been occurring to any businesses built on the distribution of information, as Clay Shirky predicted back in 1995, that the Innovator's Dilemma was at play, there is no way I can't see this as missed opportunities, shortsightedness (demand for immediate returns on investment) on the part of management, and denial on the part of some, I feel for those who have been in, and continue to be in the struggle. There are many there who have been fighting the good fight all along. Who weren't in denial. And I hope their stories get told.
While this is largely due to the fundamental shifts that have been occurring to any businesses built on the distribution of information...
except that it really isn't. every business is constantly changing and as a result requires constant investment of thought and money.
this is about a corporate culture that thought the newspaper business had a guaranteed 20% net profit every year and massively consolidated the industry through leveraged buy-outs to suck out those profits, building a mountain of debt that couldn't be supported when there was a downturn in ad revenue.
there's a pattern here, running across many U.S. industries...
posted by geos at 6:06 AM on February 23, 2009 [5 favorites]
except that it really isn't. every business is constantly changing and as a result requires constant investment of thought and money.
this is about a corporate culture that thought the newspaper business had a guaranteed 20% net profit every year and massively consolidated the industry through leveraged buy-outs to suck out those profits, building a mountain of debt that couldn't be supported when there was a downturn in ad revenue.
there's a pattern here, running across many U.S. industries...
posted by geos at 6:06 AM on February 23, 2009 [5 favorites]
What's the predictable outcome of a large newspaper filing for chapter 11, assuming the debt restructuring happens successfully? Dramatic reductions in operations, basically? And if that fails, we (being the public) wouldn't really know up until chapter 7 is filed and the business is liquidated, generally speaking, right?
Also, what's the likelihood of the paper completely exiting the business? Is it low because another buyer would usually always pick up the business? Has a large metro paper disappeared completely in recent years?
Just curious how those things play out. I see from the first link that the Minneapolis Star-Tribune also filed for bankruptcy proceedings, and that's a no-doubt large metro paper, just as the Inquirer is. Here in Portland Maine, the local paper's owner (Blethen, of Seattle) is in negotiations to sell to a new buyer at something like less than five to ten percent of the previous price paid a decade ago, which was apparently $200 million.
posted by Jubal Kessler at 6:14 AM on February 23, 2009
Also, what's the likelihood of the paper completely exiting the business? Is it low because another buyer would usually always pick up the business? Has a large metro paper disappeared completely in recent years?
Just curious how those things play out. I see from the first link that the Minneapolis Star-Tribune also filed for bankruptcy proceedings, and that's a no-doubt large metro paper, just as the Inquirer is. Here in Portland Maine, the local paper's owner (Blethen, of Seattle) is in negotiations to sell to a new buyer at something like less than five to ten percent of the previous price paid a decade ago, which was apparently $200 million.
posted by Jubal Kessler at 6:14 AM on February 23, 2009
Well, I think that there are fundamental shifts that are happening with the media industry, especially newspapers. Yes, every business is constantly changing and needs to adapt, but something specific is going on with papers, people aren't really buying them anymore.
If you look at say, a hospital, they are not going through a fundamental shift in their business right now, there may be some changes that they need to adapt to, but nothing earth shattering.
I do agree with the statement that guaranteed 20% profit is not realistic.
posted by hazyspring at 6:16 AM on February 23, 2009
If you look at say, a hospital, they are not going through a fundamental shift in their business right now, there may be some changes that they need to adapt to, but nothing earth shattering.
I do agree with the statement that guaranteed 20% profit is not realistic.
posted by hazyspring at 6:16 AM on February 23, 2009
Steve Volk's article about the Inky debacle in this month's Philly Mag gives a lot of background on many of the extraordinarily bad executive decisions made before the downturn in the economy that helped the paper arrive at this point.
posted by The Straightener at 6:29 AM on February 23, 2009 [4 favorites]
posted by The Straightener at 6:29 AM on February 23, 2009 [4 favorites]
The Inqy and Daily News stopped being real newspapers quite a while ago. The recent coverage of the "Bonnie and Clyde" case and the Larry Mendte/Alycia Lane scandal are more gossip blog than news reporting, and it's a rare day that you can actually log onto Philly.com and find an actual news story in the prime real estate. It's more a travel/visitor's bureau/local gossip site than anything else. Moreover, the Inqy has cut its staff to what amounts to a sports page and a few columnists, and uses wires to fill out the paper.
Stu Bykofsky recently suggested (perhaps somewhat in jest) that Philly.com and other newspapers stop offering content for free online to help pad the coffers that are being worn thin by shrinking ad budgets. "If we dare charge, you might be thinking, freeloading online readers will skip the Inquirer and Daily News. They may, but they won't get the local news we cover like a blanket," he said. I sent the link along to a friend and said "he's right; we'd look somewhere else for the news if Philly.com started charging. The trick is, we'd actually FIND news wherever we went."
I feel bad for the fine reporters who'd lose their jobs if the papers went under, but I can't help but feel that it's the management's comeuppance for getting rid of all the staff that filled the paper with actual news.
posted by sjuhawk31 at 6:41 AM on February 23, 2009 [1 favorite]
Stu Bykofsky recently suggested (perhaps somewhat in jest) that Philly.com and other newspapers stop offering content for free online to help pad the coffers that are being worn thin by shrinking ad budgets. "If we dare charge, you might be thinking, freeloading online readers will skip the Inquirer and Daily News. They may, but they won't get the local news we cover like a blanket," he said. I sent the link along to a friend and said "he's right; we'd look somewhere else for the news if Philly.com started charging. The trick is, we'd actually FIND news wherever we went."
I feel bad for the fine reporters who'd lose their jobs if the papers went under, but I can't help but feel that it's the management's comeuppance for getting rid of all the staff that filled the paper with actual news.
posted by sjuhawk31 at 6:41 AM on February 23, 2009 [1 favorite]
To lend some credence to idea that they shrunk payrolls while maximizing profits: read this analysis.
posted by kmartino at 7:24 AM on February 23, 2009
posted by kmartino at 7:24 AM on February 23, 2009
Yes, every business is constantly changing and needs to adapt, but something specific is going on with papers, people aren't really buying them anymore.
I don't know if it's me or what, but the Inquirer used to have a lot more meat on its bones. When I last read it (December 2008) it was very thin and mostly consisted of wire service clips — the quality of the product has gone down over the years as unionized staff were fired. Perhaps people are reading less printed material than they used it, as well, or general illiteracy rates are increasing. And then you have Philadelphia Weekly, City Paper, Craigslist etc. sucking away huge amounts of local ad revenue. It's just not the right environment for 20% profits.
posted by Blazecock Pileon at 7:34 AM on February 23, 2009
I don't know if it's me or what, but the Inquirer used to have a lot more meat on its bones. When I last read it (December 2008) it was very thin and mostly consisted of wire service clips — the quality of the product has gone down over the years as unionized staff were fired. Perhaps people are reading less printed material than they used it, as well, or general illiteracy rates are increasing. And then you have Philadelphia Weekly, City Paper, Craigslist etc. sucking away huge amounts of local ad revenue. It's just not the right environment for 20% profits.
posted by Blazecock Pileon at 7:34 AM on February 23, 2009
something specific is going on with papers, people aren't really buying them anymore.
You know that phone company commercial with the old couple where the husband deadpans "I love you. And this time I mean it" ?
It occurred to me that a younger character wouldn't have been shown reading a newspaper.
posted by Joe Beese at 7:39 AM on February 23, 2009
You know that phone company commercial with the old couple where the husband deadpans "I love you. And this time I mean it" ?
It occurred to me that a younger character wouldn't have been shown reading a newspaper.
posted by Joe Beese at 7:39 AM on February 23, 2009
Jeff Jarvis, whistling past the grave. Has that man ever said or written one useful thing?
posted by Halloween Jack at 7:42 AM on February 23, 2009 [2 favorites]
posted by Halloween Jack at 7:42 AM on February 23, 2009 [2 favorites]
Jeff Jarvis, whistling past the grave. Has that man ever said or written one useful thing?
Not that I'm aware of. There is a great hunger on both sides of the debate to see the decline of newspapers as an inexorable process driven by technological and cultural change. Jeff Jarvis types love it because it gives them a platform from which to pass themselves off as insightful gurus of the future; the newspaper editors love it because it excuses them of charges of decades of mismanagement.
posted by game warden to the events rhino at 8:07 AM on February 23, 2009
Not that I'm aware of. There is a great hunger on both sides of the debate to see the decline of newspapers as an inexorable process driven by technological and cultural change. Jeff Jarvis types love it because it gives them a platform from which to pass themselves off as insightful gurus of the future; the newspaper editors love it because it excuses them of charges of decades of mismanagement.
posted by game warden to the events rhino at 8:07 AM on February 23, 2009
Also filing for bankruptcy this week, the New Haven Register. And I'm guessing these won't be the last papers to go bankrupt this year.
posted by Lazlo Hollyfeld at 8:16 AM on February 23, 2009
posted by Lazlo Hollyfeld at 8:16 AM on February 23, 2009
Oh noes! Cory Doctorow was right! (via) ... except he wasn't (yet?) ...
"This restructuring is focused solely on our debt, not our operations," chief executive officer Brian P. Tierney, who led the group that provided about $150 million of the purchase price three years ago, said in a news release. "Our operations are sound and profitable," said Tierney, referring to operating profits before interest and certain other costs.
Except for the advertising downturn, rising costs for newsprint, and the migration of readers to the Internet. Totally sound and profitable. Keep buying ads and papers! We'll be here for decades!
posted by filthy light thief at 8:32 AM on February 23, 2009
"This restructuring is focused solely on our debt, not our operations," chief executive officer Brian P. Tierney, who led the group that provided about $150 million of the purchase price three years ago, said in a news release. "Our operations are sound and profitable," said Tierney, referring to operating profits before interest and certain other costs.
Except for the advertising downturn, rising costs for newsprint, and the migration of readers to the Internet. Totally sound and profitable. Keep buying ads and papers! We'll be here for decades!
posted by filthy light thief at 8:32 AM on February 23, 2009
Here in Portland Maine, the local paper's owner (Blethen, of Seattle) is in negotiations to sell to a new buyer at something like less than five to ten percent of the previous price paid a decade ago, which was apparently $200 million.
And the thing is, if the Blethens can't close the deal, it'll probably push all their papers into Chapter 11 and possibly leave both Portland, ME and Seattle without a daily newspaper.
There is a great hunger on both sides of the debate to see the decline of newspapers as an inexorable process driven by technological and cultural change. Jeff Jarvis types love it because it gives them a platform from which to pass themselves off as insightful gurus of the future; the newspaper editors love it because it excuses them of charges of decades of mismanagement.
Thing is, the "disruptive technology" people are right, even if it's not the reason papers are in collapse. If media companies had been thinking about online from the beginning, they may have already solved the riddle of how to run a profitable news site. And had they done this, the collapse in print ad revenue wouldn't be hurting them nearly as much, or they'd already be in a position where they could phase out print with far less pain. And perhaps they'd also not be having this ghost dance attitude towards micropayments.
posted by dw at 8:53 AM on February 23, 2009
And the thing is, if the Blethens can't close the deal, it'll probably push all their papers into Chapter 11 and possibly leave both Portland, ME and Seattle without a daily newspaper.
There is a great hunger on both sides of the debate to see the decline of newspapers as an inexorable process driven by technological and cultural change. Jeff Jarvis types love it because it gives them a platform from which to pass themselves off as insightful gurus of the future; the newspaper editors love it because it excuses them of charges of decades of mismanagement.
Thing is, the "disruptive technology" people are right, even if it's not the reason papers are in collapse. If media companies had been thinking about online from the beginning, they may have already solved the riddle of how to run a profitable news site. And had they done this, the collapse in print ad revenue wouldn't be hurting them nearly as much, or they'd already be in a position where they could phase out print with far less pain. And perhaps they'd also not be having this ghost dance attitude towards micropayments.
posted by dw at 8:53 AM on February 23, 2009
Jeff Jarvis is a joke, and why the Guardian continues to pay him money is beyond me. His column today was a case in point: taking for granted the fact that no one will ever again by a print copy of a newspaper, he airily dismisses all other sources of online revenue, taking care to unsubtly drop in buzzwords he has invented. Ad sales? not working. Paywalls? Will cut off linkability and "Googlejuicebuymybook". Micropayments? Won't work. And at the end, there's his standard exhortation to embrace the online future and find new business models. He doesn't even hint at what those business models might be. Presumably, following the advice in his book, we're talking about a world where everyone makes money from advertising but no one has to advertise. A plan with no flaws. So it's the usual bout of sniping from the sidelines and gleeful hands-rubbing about the death of print.
You would have thought that he'd give up that Guardian column. Surely taking money from a newpaper and selling books are both expired business models? Come on Jeff, live the dream you're selling. What a waste of pixels that man is.
posted by WPW at 1:16 PM on February 23, 2009
You would have thought that he'd give up that Guardian column. Surely taking money from a newpaper and selling books are both expired business models? Come on Jeff, live the dream you're selling. What a waste of pixels that man is.
posted by WPW at 1:16 PM on February 23, 2009
Gah, this whole business is so depressing. Why can't the internet kill advertising and public relations, not books and newspapers?
posted by WPW at 1:22 PM on February 23, 2009 [2 favorites]
posted by WPW at 1:22 PM on February 23, 2009 [2 favorites]
It's been a long, long time since 'Blackhawk Down' was serialized in the Inquirer or they won a Pulitzer Prize. I started reading the Inquirer in 1966 or so. I cancelled my subscription last fall, after the latest rate increase. No magazine section or book review in the Sunday edition? It's pitiful. Tierney bought it as a vanity project.
posted by fixedgear at 1:31 PM on February 23, 2009
posted by fixedgear at 1:31 PM on February 23, 2009
Whatever technological and cultural shift may be at work here, don't forget the role of pure greed.
While Philly's newspapers reaped double-digit profits, the owner trimmed staffs repeatedly to cut labor costs. Then he raided the pension and imposed a 10 percent pay cut on all remaining employees.
Except himself. Forbesl reports that owner Brian Tierney boosted his own pay by 38 percent last year, to $850,000.
One of the reasons newspapers have been unable to adapt to all these changes is that the old model was essentially a monopoly that paid owners handsomely.
posted by sixpack at 1:44 PM on February 23, 2009 [1 favorite]
While Philly's newspapers reaped double-digit profits, the owner trimmed staffs repeatedly to cut labor costs. Then he raided the pension and imposed a 10 percent pay cut on all remaining employees.
Except himself. Forbesl reports that owner Brian Tierney boosted his own pay by 38 percent last year, to $850,000.
One of the reasons newspapers have been unable to adapt to all these changes is that the old model was essentially a monopoly that paid owners handsomely.
posted by sixpack at 1:44 PM on February 23, 2009 [1 favorite]
Do't worry, Don, and least we have Philly Beer Week to look forward to. The first one is on me
posted by fixedgear at 2:41 PM on February 23, 2009
posted by fixedgear at 2:41 PM on February 23, 2009
And at the end, there's his standard exhortation to embrace the online future and find new business models. He doesn't even hint at what those business models might be.
That's because he doesn't know; in fact, no one really knows.
All we know is the JOA monopoly newspaper run by a media conglomerate had two lethal flaws: they were dependent on the ad revenue monopoly provided by the JOA, and the license to print money that a big city newspaper provided allowed these companies to leverage up to their eyeballs.
Now between a recession crushing the ad market and the problems that come with being overleveraged, there's no way this model can squeeze through the narrow economic gap.
There's a solution out there. It either will require a shrinkage of newspaper companies to become more collaborative news platforms, or it will allow large media companies to deploy widely and live of hundreds of revenue streams. But these things are still beyond us. So, we're all feeling our way in the dark until the solution arrives.
But micropayments won't work -- they're too cost intensive. The "iTunes for news" idea won't work -- news is something you consume and throw out, not buy and collect and read again and again like a book. Paywalls have had very mixed results and tend to create walled gardens of information separate from the general news world. And charging for news online, no matter the route, always runs smack into the idea of economic substitution.
People like Walter Issacson want to put the worms back in the can. Jarvis and others are touting vermiculture. Neither of them are right.
posted by dw at 4:20 PM on February 23, 2009 [1 favorite]
That's because he doesn't know; in fact, no one really knows.
All we know is the JOA monopoly newspaper run by a media conglomerate had two lethal flaws: they were dependent on the ad revenue monopoly provided by the JOA, and the license to print money that a big city newspaper provided allowed these companies to leverage up to their eyeballs.
Now between a recession crushing the ad market and the problems that come with being overleveraged, there's no way this model can squeeze through the narrow economic gap.
There's a solution out there. It either will require a shrinkage of newspaper companies to become more collaborative news platforms, or it will allow large media companies to deploy widely and live of hundreds of revenue streams. But these things are still beyond us. So, we're all feeling our way in the dark until the solution arrives.
But micropayments won't work -- they're too cost intensive. The "iTunes for news" idea won't work -- news is something you consume and throw out, not buy and collect and read again and again like a book. Paywalls have had very mixed results and tend to create walled gardens of information separate from the general news world. And charging for news online, no matter the route, always runs smack into the idea of economic substitution.
People like Walter Issacson want to put the worms back in the can. Jarvis and others are touting vermiculture. Neither of them are right.
posted by dw at 4:20 PM on February 23, 2009 [1 favorite]
This strikes me as a horrible, vicious cycle. Newspapers can't bring in enough revenue, whether its from subscriptions and newsstand sales or advertising. So they cut the magazine, or the style section, and stuff in something like "Parade" that nobody wants to read in its place. And then readership goes down, because why do I want to buy a paper without interesting coverage, and the cycle repeats itself.
Washington Post just cut its Sunday book section to save money. But I'm not likely to ever buy the Sunday Post again.
posted by thecaddy at 4:58 PM on February 24, 2009
Washington Post just cut its Sunday book section to save money. But I'm not likely to ever buy the Sunday Post again.
posted by thecaddy at 4:58 PM on February 24, 2009
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posted by kmartino at 3:38 AM on February 23, 2009