Why the Rocky Closed & What its End Says About the Business’s Future

Spacer SpacerIt’s my job to be a dispassionate analyst of the media industry, but the sudden death of the Rocky Mountain News is hitting me hard. Not unexpected, but it all came down sooner, more abruptly than expected  — with some ominous implications for other ailing metros.
 
John Temple is far from the only class act among current American editors, but he is one of them. John is solidly grounded in the best journalism values, open and optimistic and much more willing than most to give new things a try — such as the Rocky‘s YourHub.com hyperlocal sites.
 
Ditto current management of Scripps. Senior Vice President Mark Contreras is a star among newspaper operating executives. Rich Boehne has been emancipated from being second banana in a cable network company now that Scripps has been split into two parts. He and his team are more than willing to break with tradition at both their broadcast and newspaper properties.
 
Scripps didn’t starve its papers or milk them for profit on the way down as Journal Register, for example, clearly did.
 
As a result, the Rocky was not just an OK paper. It was often a superior one, especially in photography, winning four Pulitzer Prizes over the last decade.
 
So why is it the first metro paper to die in the current frosty climate?
 
For a start, its fortunes were entangled in a Joint Operating Agreement. JOAs have not worked well and most have been dissolved over the last 15 years. They don’t work at all in 2008-2009. There is not enough of an advertising pie to support two publications in one city.
 
As Boehne pointed out in his announcement to the staff, the Rocky‘s tabloid format and ceding the lucrative Sunday edition to the Denver Post made it the weaker partner — though the daily circulation of the two papers was comparable.   
 
Some wonder why the paper didn’t convert to online-only rather than shut down. The course of action speaks for itself. There is not enough online advertising — especially now in the middle of a recession — to support a full-service, Web-only newspaper.
 
Couldn’t Scripps have waited a little longer, tried a little harder, some reporters asked. Here is the ominous part. As recently as six months ago, even three months ago, the company might have.  But revenues and earnings are falling off the table even faster in early 2009 than they were in late 2008.  Carrying losses of $1 million or more a month no longer makes sense for a company of Scripps’ size.
 
It is survival-of-the-fittest time. Weaker papers in chains will be weeded out to give the rest a fighting chance to get through the recession and recover in better times. Money-losing papers are on a very short leash to cut expenses very quickly — especially union contracts — or face closure or bankruptcy. 
 
That’s the story at privately held Hearst, where the rich parent company was willing for years to cover considerable losses at the San Francisco Chronicle from profits elsewhere. In part, I have always thought, that was because founding father William Randolph Hearst’s name was effectively on the door. No longer. Hearst this week gave the Chronicle its shape-up notice and is making deep cuts at healthier newspapers such as the San Antonio Express-News and the Houston Chronicle.
 
The closing of the Rocky Mountain News — and the likelihood that Hearst’s Seattle Post-Intelligencer will follow — proves for sure that big-city JOAs don’t work (with the possible exception of the reduced daily print delivery scheme about to be tried by the two Detroit papers).
 
As of today, however, every major city in America still has a daily paper. And as we have written earlier, many companies are in deep financial trouble with papers that are still profitable — just not profitable enough to pay the interest and comply with covenants of debt they took on a few years back.
 
But this is what it looks like to go from bad to worse. We are in for more bankruptcies and more closures before long.



I will answer questions about the closure of the Rocky Mountain News on Friday at 11 a.m. EDT. You can send questions in advance to News Editor Steve Myers.

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