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.
"Our debt is out of line with current economic realities," Brian Tierney, the Philadelphia newspapers' publisher and chief executive said in a recording posted online Monday.
Tierney predicted the 180-year-old newspapers will survive the current crisis, suggesting he believes the company will be able to re-negotiate the terms of its loans. "Years from now, people will look back at this time and say, 'You know what, we got through this challenge,'" he said.
Meanwhile, the owners of the Star Tribune say they have trimmed the newspaper's expenses by 21 percent, or $56 million during the past two years. The problem: the Star Tribune's revenue fell by 31 percent, or $110 million, during the same period.
To save even more money, the Star Tribune is seeking to invalidate a contract with its printers union as part of efforts to wring $20 million in annual savings from all unionized employees. Even if that's successful, it might not be enough.
"There are no easy solutions left because regardless of how much more (newspapers cut costs), their revenue is still going to be hurting," said Dave Novosel, an industry analyst with Gimme Credit.
The Philadelphia newspapers have reduced their expenses by about $75 million since new owners took them over in June 2006. Any additional cuts won't involve layoffs or wage reductions among the newspapers' roughly 4,600 employees, said Jay Devine, a spokesman for the Philadelphia newspapers.
Even as the newspapers finances deteriorated, Tierney received a 38 percent raise in December that boosted his annual salary to $850,000, according to court papers filed Monday. The raise was meant to reward Tierney for improving the newspapers' operations and for performing the jobs of both publisher and CEO, Devine said. Tierney has been handling both jobs since August 2006 when the former publisher resigned from his job, which paid a salary of $565,000.
Tierney and the publishers of other newspapers operating under bankruptcy protection must now persuade their lenders that they can hold on until the economy bounces back — an argument that may be difficult to make because the Internet figures to continue to siphon money away from the industry even in better times.
Tierney did not respond to a phone message left Monday. The Tribune Co. declined comment, while the Star Tribune did not immediately return a phone call. Journal Register officials said in a statement they already have a deal with most of its lenders in which the company would cancel its stock and become a private company controlled by its lenders; a phone call late Monday went unanswered.
Although the newspapers have been boosting their Internet operations, growth in online ad revenue isn't anywhere near what's needed to offset the reductions in print. In the third quarter of last year, print advertising in U.S. newspapers totaled $8.2 billion while the online operations fetched $750 million.
"They have to hope some of their revenue comes back before their businesses just break through ice," said analyst Edward Atorino of Benchmark Co. "Some of these companies are looking at the end of the world here."
The bleak outlook for newspapers actually could help keep them alive because lenders may be reluctant to press for a liquidation, knowing the publications are unlikely to fetch much money in a forced sale, said analyst Fitch Ratings analyst Mike Simonton.
He said creditors instead "may choose to remove the management team and put in a new team that's more focused on restructuring costs or more talented at it."