Tuesday, August 19, 2008

Fire Sale

It's official. The Daytona Beach News Journal is for sale. Parent company News-Journal Corp. has stated it expects to have the paper sold by the end of November -- of this year. Either News-Journal executives have an inside track on a potential deal or somebody is smoking some funny stuff in by the beach.

It could be a case of the latter, given that the paper is in trouble because it had the arrogance to buy the naming rights to a performing arts center for about $13 million without letting its partner Cox Enterprises know. Cox sued. The News-Journal opted to buy out Cox and a federal court set the price at $129 million for Cox's 47 percent ownership share. An appeals court upheld the ruling, and here we are. The paper is for sale to pay off Cox.

Given these end times for newspapers, it's not clear what amount the News-Journal can fetch. The field of newspapers with for sale signs hanging from their banners is getting crowded. Among those on the auction block are the Newark Star-Ledger, Chicago Sun-Times and San Diego Union. The number of companies who probably wish they could put their newspapers up for sale: infinite.

A newspaper for sale today is going to get a rock-bottom price. And that's if they are lucky. If they're unlucky, they will languish for a while on the market until somebody gets the hint: Ain't no interested buyers.

Investors are scared of newspapers, following the continuing debacle at Tribune and McClatchy, to name just two well-known newspaper chains that are taking a soaking. They are drowning in billions of dollars in debt and not generating enough cash flow to pay it off. Financial analysts aren't even covering the newspaper industry anymore, a sure sign newspapers are dead and buried. And trading volume on many newspaper stocks is anemic by Wall Street standards.

As for share price, it's ugly out there. Gannett is trading at $18.65 per share, down nearly 50 percent in the year to date. E.W. Scripps Co. is selling at $7.07 a share, down 30 percent for the year. McClatchy closed at $3.99 per share Tuesday. That's right, $3.99. Murdoch's News. Corp., which bought the Wall Street Journal, has not seen a bump from the sale. Its stock price is $13.90, down nearly 50 percent from the same period a year ago. Even the venerable Gray Lady, the New York Times, with a stock price of $13.57 per share, is down nearly 21 percent thus far this year.

The Daytona Beach News-Journal has a couple of things going for it. First, it pretty much has the market to itself now that the Orlando Sentinel has decided to cut and run from Volusia County. Still, it's also feeling the economic pinch and announced it would close three bureaus and cut 99 staffers from its payroll. It's also a medium-size newspaper with 100,000 daily circulation. Smaller papers generally are outperforming the big guys right now. And the family owned paper, now nearly 80 years old, is an institution in Volusia County. It has a good brand.

Even so, a sale by the end of November -- just three months from now? Somebody needs to put down the pipe and breathe some fresh air.

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