The New York Times is right: The Newspaper Bubble, Too, Has Burst.
The bankruptcy filing of the Tribune Company on Monday is just the latest, largest evidence that the American newspaper industry is suffering the hangover from an immense buying spree in 2006 and 2007 at what turned out to be the worst possible time for the buyers…
…the companies in the weakest condition are there largely because they borrowed a lot of money to buy papers, often at inflated prices…
Tribune’s was the biggest of those deals, $8.2 billion to take private the company whose assets include The Los Angeles Times, The Chicago Tribune and 23 television stations, a transaction that almost tripled the company’s debt…
Most newspapers still have earnings before interest, taxes, depreciation and amortization that are equal to 10 to 20 percent of their revenue. That is down from 20 to 30 percent in the middle of this decade, but tolerable — if not for the burden of making debt payments.
So the problem here is greed, greed, greed.
Investment banks were making millions with all these mergers and acquisitions.
The consolidation of the U.S. newspaper industry was in many ways the consequence of tax laws that made family transitions very difficult, so old and new generations decided to sell and cash-in.
The Tribune Company is the best example.
Gannett has been more prudent, and didn’t buy too much during the last few years, so its debt is low.
INNOVATION works around the world with many kinds of media companies, but our main clients are private, independent and family-owned ones.
So, they are not clients, they are friends.
You interact all the time with the owners.
And business is more easy and pleasant.
They know you, and you know them.
They don’t need to spend days or weeks making decisions.
They decide in hours.
They don’t play with money from investors.
It’s their own money.
They don’t need to look good to shareholders, stock analysts or market regulators.
So, I am always very happy when the phone rings and the call is from a family-owned media company.
You know them not by their properties, but by their family names.
(Pictured: The Washington Star’s building in Washington D.C.)