April 10, 2008 6:02 PM
MediaNews goes quiet
Each successive financial report from Denver-based MediaNews Group has illustrated the troubles of the newspaper industry as a whole and MediaNews in particular.
Its second-quarter 10-Q, filed in February, showed a companywide revenue decline of 7.3 percent. Net income was up, but only because of noncash accounting gains because of changes in the company's newspaper partnerships in California and Connecticut. Ratings agencies, concerned that the highly leveraged company is pushing the limits of its bank loans, keep downgrading the company's debt.
Last week, MediaNews, the owner of The Denver Post, came to an agreement with its lenders - but it had nothing to do with its debt-to-earnings numbers.
According to an 8-K report filed Wednesday, it agreed to provide its financial information directly to its bondholders, and the bondholders agreed to let MediaNews stop making filings with the Securities and Exchange Commission.
"We will no longer be posting our financial results to the MediaNews Group web site, effective immediately," Chief Financial Officer Ronald Mayo told me via e-mail.
That means an end to quarterly and annual earnings reports, disclosures of legal matters, compensation of CEO William Dean Singleton, and the ownership stakes of Singleton, Chairman Richard Scudder, and key employees.
MediaNews is not a public company, with all the reporting obligations that come with it. It's almost entirely owned by the Scudders and the Singletons. All of its public filings were made because the company had publicly registered debt.
MediaNews' going-quiet plan also shuts off another view of the operations at the Denver Newspaper Agency, the partnership between MediaNews and Rocky Mountain News owner E.W. Scripps.
Scripps has simply reported its slice of Denver earnings, before undisclosed newsroom expenses. MediaNews, by contrast, has had greater disclosure obligations thanks to the agency's size in relation to MediaNews.
Through MediaNews, we've learned of the dramatic top-line revenue declines in Denver - 11 percent in the quarter ended Dec. 31, and for the year as a whole.
Last week, MediaNews filed an amended annual report that included the full financial statement of Denver Newspaper Agency LLP, giving a rare peek inside the Denver papers' operations. (Click here to read it.)
It included these figures: while the reported net income of the agency was a combined $93.1 million in the three years from 2005 to 2007, its operating cash flow was $294.7 million. MediaNews and Scripps, as partners in the agency, took $201.6 million in distributions in the three years from Denver.
It is necessary to point out that none of those figures include newsroom expenses, which by a very rough estimate could have totaled around $150 million in those three years. So two companies netting $50 million in cash over three years on $1.2 billion in revenue? Forget about all those stories about the industry's still-fat profit margins. It's not happening in Denver.
Unfortunately, MediaNews' move to end disclosure means we won't know how bad it might get.
April 11, 2008
2:18 PM
ed writes:
As one of those holding SSP, I can only suggest this report confirms my belief that the company has lost all control of expenses. Even a small reduction in the $150 million in newsroom expenses would bring SSP spending levels in line with Singleton's other operations, without affecting quality as far as I can determine. Larded staffs and newsroom extravagance need to be brought in line with reduced revenues.
April 11, 2008
4:49 PM
Bird writes:
You obviously know nothing about the company you've invested in, Ed.
Singleton and "larded staffs" are words that should never be in the same sentence. They are the ultimate oxymoron, since he has cut staff at every paper unfortunate to come under his clutches.
The product that remains is a joke and is frankly unreadable. Your concept of "quality" bears no reality to the concept of quality in journalism.
You obviously have no idea on the concept of newsroom expenses -- or how the industry in which you hold bonds works.
Let me educate you. If you cut out the content producers to the point where they can't effectively cover what needs to be covered, there's no reason to take or consume the product. If there's no reason to take or consume the product, advertisers flee.
If advertisers flee, your revenues decline. In Singleton's case, given his history of gutting everything he touches to the point of near unreadability, you have what you have now.
Class dismissed.
April 11, 2008
5:27 PM
ed writes:
SSP, Bird, is a stock not a bond. SSP is Scripps Howard, the owner of the Rocky, and you can look it up on the New York Stock Exchange. I put my money where my mouth is, and I do closely follow the investments I make, which is why I read this story. We disagree about Singleton. Yes, he is much maligned, but he's been the savior of the newspapers he runs. I think he should be commended for his efforts, which have kept many reporters and back-room press operators getting paychecks when other investors refused to have anything to do with the newspapers for which they work. I frankly think many of his newspapers are basket cases which have no hope of survival, but at least he is keeping them operating. You may disagree or wish otherwise, but newspapers that are not financially viable simply cannot survive. Your prayers, wishes or desires will not keep them alive. There is no appeal from market forces. In this period of declining ad revenues and swooning circulation, the only companies that can suvive are ones that get control of expenses, and the point of my post is that the Rocky needs to look at what Singleton is doing, and copy some of it, because what they are doing now isn't working. SSP is down 20 percent this year, which is better than others that are off 50 percent or more. SSP and other newspaper companies don't have to listen to my advice, but if they want to use my money or the money of other investors, then they have either to adopt stringencies or to go back to being privately run and use debt or bonds for their operations -- incidentally, just like Singleton's operations are run.
April 11, 2008
10:23 PM
Brad writes:
Exhibit A on what the inside of a Singleton owned newspaper looks like.
http://www.flickr.com/photos/hellvetica/sets/72157604470612285/
Can't say that I agree that the Mercury News was a basket case with no hope of survival. It might have had profit troubles, I don't know, but at least it had a product to sell. I've worked at one of Singleton's other papers and it wasn't pretty. Now I'm at a family owned paper. We're feeling the crunch too, but unlike Media News we're close to debt free which is a big help.
I agree that the industry is in a bad place and costs need to be controlled. However, it seems that taking on hundreds of millions of dollars in debt to buy papers at a time when the industry was already slumping was not a great idea. It certainly added to the screw-job we got at my old paper.
In a bigger picture, it cracks me up that newspaper owners and publishers are always saying: "We have to compete with new media! We have to do more to stay relevant!" only to slash talent and resources and make their product as irrelevant as possible.
April 14, 2008
9:52 AM
John Bowman writes:
As a former editor who left MediaNews in disgust after repeated Draconian staff cuts, I take issue with the statement that Dean Singleton is "the savior" of papers that he owns. Dean Singleton saves papers the way Dracula "saves" his victims: They're still walking, but only in the dark. They are the undead.