A few days back I suggested that newspaper publishers should take personal responsibility for their own bad business decisions, arguing that as poor as industry fundamentals may be, it’s the mountain of highly leveraged debt, not operating losses, that threatens to crush many of our daily newspapers. And as an example, I pointed to two of Washington’s most prominent struggling dailies.
While the whole industry is struggling, the financial precariousness of some of our most threatened papers is at least partially due to the awful business decisions of their owners, in particular, the incredibly over-leveraged position they find themselves in as a result of ill-advised acquisitions and other bone-headed ventures.
For The Columbian, it was the construction of a new $40 million office tower that landed a shrunken newsroom back in its old digs, and publisher Scott Campbell in bankruptcy court. For The Times, it was Frank Blethen’s ill-fated foray into the Maine media market that has left him with a couple hundred million dollars of debt coming due, and no obvious means of raising more capital. Both papers are currently losing money on their daily operations, but neither would be struggling to survive this particular recession if the bankers weren’t pounding at their doors.
As usual, my trolls took issue with my analysis, arguing that I was bucking conventional wisdom simply to take another potshot at my friends at The Seattle Times. Uh-huh. So I’m guessing they’ll probably be disappointed to read the unsigned editorial in today’s Times, that picks up on my basic premise in arguing that the bankruptcy of the Columbian is “different” than that of debt-laden giants like The Philadelphia Inquirer and The Los Angeles Times:
Like every newspaper, the Columbian’s advertising revenue has been whacked by the recession. Unlike larger companies such as Philadelphia and Tribune, the Columbian’s push into Chapter 11 does not stem from a debt-laden purchase of newspapers.
The Campbell family, three-generation owners of the Columbian, took on debt to help revitalize downtown Vancouver by constructing a new building. The newspaper quickly moved back to its old building because of the recession. Now Bank of America is calling in its loan of about $17 million — a pittance compared to what other newspaper companies owe.
What makes the Columbian’s plight so sad is that Southwest Washington could lose its dominant news provider because Bank of America is apparently not willing to work with the company. This is a newspaper that in ordinary times would be doing well and will likely do well after the recession.
Forget for a moment the Times’ effort to spin the Campbell’s ill-fated real estate speculation as an act of civic engagement; what’s important here is that The Times acknowledges my core thesis… that it is debt, not operating losses, that threatens both the Columbian and its larger cousins. The Times also confirms that it was the construction of its new/old headquarters that ultimately pushed the Columbian into bankruptcy, not the Great Recession, or the fundamental weakness of the newspaper industry itself.
Of course, what we don’t see from the Times is a mention of their own poor business decisions, or an admission that they and their friends at the Columbian should take any personal responsibility for the current sorry state of their respective family businesses. On the contrary, the Times paints evil, Bank of America as the bogeyman for demanding that the Campbells actually make good on their debt, according to the terms contractually promised.
The Times solution to The Columbian’s mismanagement of their own finances? Appeal to gov’ment to force BoA to renegotiate the loan.
The U.S. Senate Commerce Committee is holding a hearing today about the future of journalism. This hearing and the Columbian’s plight should grab the attention of the governor, the state Legislature and our federal delegation.
The time is right for politicians, journalists and the public to start working toward preserving an independent press.
One can’t help but wonder if this is a preview of the arguments the Times will make on its own behalf should it seek bankruptcy protection later this year… that the government should use its bailout accrued leverage to force financial institutions to renegotiate terms with struggling newspapers, in the interest of preserving an independent press?
Irony aside, I’m not necessarily opposed to the government doing exactly that. It would be a shame to see Southwest Washington lose its only major daily, just as much as it would for Seattle to become our nation’s largest no-newspaper town.
But as a condition of any such government-brokered bailout, I’d want to see a genuine public admission from the likes of the Blethens and the Campbells of their own culpability in their respective paper’s near demise—not out of vindictiveness or a craving for public humiliation, or even the hope that acknowledging their own plight might moderate their editors’ demands for less government and more personal responsibility—but because self awareness is the first step to recovery. For the most effective thing we can do to prevent newspaper publishers from repeating their own mistakes of the past fifteen years is to force them to admit these mistakes to themselves… something the Times, if today’s bankers-as-villains editorial is any indication, simply isn’t ready to do.