The new slimmed-down Journal Register company, being pieced together in a bankruptcy proceeding, is likely to eliminate at least some daily print editions at several of its 20 dailies.
“I would consider and am considering a reduction in print frequency in some markets — (which ones) to be determined,” CEO John Paton wrote me in an e-mail interview earlier this week. “I think it makes sense to think about the frequency of print as print revenues decline and digital revenues increase.”
In his blog, Paton has already praised Advance Publications’ decision to shift the New Orleans Times-Picayune to a three-day-a-week print publication at the end of this month (with the qualifiers that the announcement was poorly handled and the website needs improvement quickly to support the change). For Journal Register, Paton said the change need not be dropping four weekday editions — eliminating one or two would still have benefits in moving readership to digital platforms.
While he was not specific about when the changes were coming or the criteria to be considered in picking where, it is not hard to connect the dots. Paton will be looking for titles where digital first initiatives are yielding strong advertising growth and website improvements, at the same time targeting papers that lack the resources to produce seven good print papers a week.
At the Times-Picayune and nearby Alabama papers, Advance has laid off about half the legacy newsroom as it reduces print days, but with promises to hire back about half of those positions for expanded digital operations.
It is not clear whether Paton would pick up that part of the playbook. To date, Journal Register has kept news staff levels at its papers about the same while redirecting more of their effort from the daily print product to digital versions.
The financial context
Journal Register is profitable on an operating basis, Paton told me. But taking into account interest, taxes and special charges, “it is not profitable on a net earnings basis. Difficult to estimate when it will be, but some of the legacy overhang costs being dealt with in the bankruptcy process will make that easier to achieve.”
Paton was not willing to venture an estimate of how much legacy cost — like pension and lease obligations — will be shed in the bankruptcy proceeding and said “there are no resolutions as of yet with creditors.”
My colleague Andrew Beaujon asked me on the morning of the bankruptcy announcement how it was possible for Alden Global Capital to be the seller and another Alden entity the likely owner after bankruptcy is completed and the company put up for auction.
That is a complicated point of bankruptcy law (and a contested one in a recent Supreme Court decision and several in lower courts), but a senior debt holder like Alden can apply that debt to a repurchase in a so-called “credit bid.” Paton added in his e-mail, as the initial release also said, that despite that advantage, Alden could be outbid by someone else in the auction.
Paton declined to discuss what miscalculations in a bankruptcy plan three years ago, under different management, left the company with too much debt to carry again so soon. He also said it would be wrong to assume the same issues are creating an equal financial problem at MediaNews Group, the much larger chain controlled by Alden and managed by Paton’s Digital First company for just over a year.
The initial Journal Register bankruptcy news earlier this month provoked a host of analyses including several pieces slamming Paton as an evangelist for rapid print-to-digital transformation that has failed to deliver results.
Last week, digging through the bankruptcy filing and getting additional information from Paton, CJR put together the best financial picture yet of the changes at the private company, which had so far released only selective information.
CJR confirmed that Journal Register started with particularly weak websites, making it relatively easy, initially, to record high percentage gains. In 2011, digital ad revenue had grown to $30.1 million compared to $167.1 million in print advertising and $86 million in print circulation revenue.
That brings Journal Register’s digital ad base (15 percent of all ads) somewhat ahead of the industry average for 2011 (13.5 percent) but still trailing companies at the top end digitally like McClatchy and The Washington Post. Paton told CJR that digital advertising is growing at a 33 percent annualized rate so far this year — while the industry as a whole is showing disappointing gains of only about 2 percent for the first six months.
So put Journal Register down as rounding the corner on a switchover to a digital revenue base but not profitable yet, in part because the digital initiatives have required many high-level hires and other expenses. More detail will follow as the bankruptcy process unwinds in coming months.
Clarification: Paton did not say the papers could go to three days a week, that was our interpretation.
