Monday, July 18, 2011

More news you may not be reading in your local daily (guest essay)

6th in a series on troubles at The Post-Star

by Mark Wilson

Lee Enterprises, Inc., the Post-Star’s Davenport, Iowa-based corporate parent, reported last week that they have received warning that their listing on the New York Stock Exchange is endangered. Lee’s stock price has averaged below one dollar for the past 30-days, a trigger mechanism for being placed on an exchange watch list.

The NYSE keeps rigid compliance standards for its listed companies. Lee not only needs to find a way to attract investors to lift it out of the penny-stock zone, but charges the company plans to take against earnings in an effort to boost the stock price, may throw the company out of whack on another exchange compliance standard. According to Thompson Reuters ONE, if both the company’s shareholder equity and market capitalization fall below $50 million the second standard is breached.

At the same time, Jonathan Keehner, Shannon D. Harrington and Jeffrey McCracken at are reporting that Lee directors are working desperately to refinance the roughly $1 billion in loans that come due in nine months. Lee is sweetening the deal to potential suitors offering higher-than-market rates of interest as well as equity stakes in the company. As reported in previous installments, Lee’s overwhelming debt burden—which increases proportionately as the company’s market capitalization shrinks—and it’s imminent maturity, are largely responsible for investors’ flight away from the stock. Continued sluggish advertising revenues and loss of readership from the publisher’s 49 owned and 4 partially owned newspaper properties have also contributed to the stock’s poor performance.

Since failing in an attempt to refinance its debt with a junk bond issue in April, Lee has started to show its hand in the next frontier of cost savings: In Davenport a corporate executive is taking on the publishing duties of one newspaper (source)

Lee headquarters personnel are also assuming remote publishing responsibility for groups of LEE properties (source).

Out in Montana, Lee has combined the management of two newspapers, The Montana Standard (from Butte) and the Helena Independent Record (seventy miles away), eliminating the Helena IR's editor position.

Lee is also suing three employees—members of the St. Louis Newspaper Guild—over retirement packages.

If the company’s misfortunes continue, Lee’s troubles will have ramifications for its employees in Glens Falls. Apart from the ongoing threat of another round of staffing cutbacks, the depressed stock price adversely impacts all Lee employees whose pension and compensation packages include stock or are tied to stock performance.

Despite efforts to retain as many news reporters as possible, corporate cutbacks invariably take a toll on the quality of journalism. In terms of raw numbers alone: claimed the paper had nearly 200 employees at the start of 2004. That number was down to 147 full and part time personnel in March 2009 before the last major round of layoffs reduced the number to 136.

Managing editor Ken Tingley continues to dress up a grim situation as best he can. A recent blog post “When the cup board is bare” (proofreaders have been lost) explains the careful manipulation of scarce news content around the Fourth of July in a manner that conjures up a tapped-out dowager rearranging furniture to cover frayed sections of the oriental rug. The remarkable efforts of Don Lehman, Tom Dimopoulos and Jon Alexander last week covering incidents in White Creek and Salem notwithstanding, fewer resources equals less coverage.

Unless miracles start to happen for Lee -- in Davenport and on Wall Street --sooner or later the management of the Post-Star will need to figure out how to level with their readers on the exact straits faced by their parent organization (Post-Star is still in denial about its audited circulation figures). If they continue to refuse to shine a light on a matter of interest to many of their readers, when the news eventually hits home those readers may start to wonder what else their newspaper is not reporting.

[Here is a test of the adequacy of the Post-Star’s coverage of itself: Which do you think is the more important Post-Star-related news story: The threatened delisting of P-S parent Lee Enterprise stock from the NYSE, or the third-place finish of P-S editor Ken Tingley in a newspaper columnist award competition? Now guess which of these stories the Post-Star lists on its business web page.]

In other news of relevance to news consumers in the greater capital region, Journal Register Company, the Yardley, PA-based corporate parent of The Saratogian, The Record of Troy, and The Daily Freeman of Kingston announced last week that it had been purchased by international hedge fund Alden Global Capital, a major investor following the company’s 2009 bankruptcy. The recent history of Journal Register Co. may be instructive for those worrying about the future of Lee Enterprises, Inc.

The Wikipedia entry for the company states that the company was delisted from the New York Stock Exchange in April of 2008 (following the dropping of the stock’s 30-day average share price below $1.05 earlier in the year). The company filed for bankruptcy on February 21, 2009, emerging in August of that year as a privately-held company.


Brian said...

" fewer resources equals less coverage."

That's not necessarily true, depending on how the resources are used.

For example, what sort of resources does the PS waste on wire stories about things like the Caylee Anthony tabloid story or dogs jumping off a bridge in Scotland or a snake infested house in Idaho... all of which were FRONT PAGE stories as determined by their glorious "professional editors"?

Every dollar that was wasted on wire crap like this is a dollar that taken away from paying local reporters to do local journalism.

Less money means they have to be more judicious in what they do. Sending it to the AP or Reuters to regurgitate stuff you can get for free only rather than spending it on local journalism you can't get anywhere else seems like a death spiral to me.

MARQUIL said...

Perhaps the term "death spiral" may be too extreme. Glens Falls is a vital community, and a well-run source of daily (written) journalism should be able to thrive here.

For the PS to maintain that role two things will need to happen: Lee Enterprise must sell off the Post-Star (increasingly likely as part of a consolidation/reorganization following bankruptcy); and new owners will need to undertake a reorganization in the managerial positions at the newspaper—particularly editor and publisher, where a culture of self-promotion and corporate kowtowing has distracted the organization from its primary mission of local journalism.

Brian said...

'Perhaps the term "death spiral" may be too extreme.'

Perhaps. But I'm not sure how else you'd describe the combination of a higher price for increasingly less content and a gutted staff.

Will Doolittle said...

If only we can get more readers who hate the paper so much they follow its every editorial and business decision, to the point of doing long, researched articles about our circulation and corporate parent, then we'll be in the money!

Brian said...

Will I know some of my friends disagree but some of us DONT want traditional journalism to disappear or be rendered irrelevant by circumstances due to the business part of journalism's inability to adapt. Easier said than done, I know, but it needs to happen.

MARQUIL said...

I am much less a hater than I am a worrier. Everything I have looked into over the past four months leads me fret over the leadership of the Post-Star and Lee Enterprise.

In today's business environment, it is impossible to evaluate the prospects of an owned newspaper without considering the viability of its owner (a process made easier in the case of publicly-traded companies like Lee, thanks to SEC filing requirements).

Lee's expansionist mindset last decade was simply boneheaded. The argument that no one could've predicted the decline and devaluation of traditional newspapers one decade into the internet age remains unpersuasive. Lee's efforts to catch up to the technology while bogged down by so much debt (particularly after the stock and real estate markets crashed) have been lackluster.

On the local level, I fear the Post-Star's positions both as an honest broker of information and as a arbiter of ethical and fiduciary integrity are undermined by its refusal to report honestly and openly about its own circumstances. The biblical passage about pointing out the speck of sawdust in your neighbor's eye while ignoring the plank in your own eye fits.

On both levels, I fear that the management teams in place are not up to the job of steering the corporation or the paper through particularly demanding times. I have little doubt that the fortunes of the Post Star would improve if divested by Lee and if a younger, more intuitive editor were put in charge of the digital transition.

Yourself, for example.

Anonymous said...

uh oh... looks like the watch dogs get a little defensive whenever anyone watchs them

Will Doolittle said...

Unfortunately, I'm not young anymore, but I'm trying to make up for it by tweeting a lot. As for the "no one could have foreseen it" argument, sure, it's bunk. But it's worth noting that a lot of folks, such as the NYTimes honchos, were making big investments (the Times paid some ungodly sum for the Boston Globe) right up to the precipice of circulation and revenue decline. The ones who made out were the families, like the Howard family, which owned The Post-Star and other small papers across the country, who sold just before the bottom fell out. Put Murdoch also in the category of supposedly canny businessmen who overpaid for newspapers, taken to the cleaners by the Bancrofts and Ottaways.

MARQUIL said...

Okay, so I pulled a punch. I used "younger" as a euphemism for "less hypocritical."

(By the way, have I disclosed lately that I used to be a contributor to the Post-Star?)

MARQUIL said...

Also, Im not so sure that Murdoch's purchase of the WSJ wasn't more a vanity buy than an investment. His empire seems much more weighted toward broadcasting. (Exception: MySpace. What was with that?!)

Brian said...

I really don't understand what the purpose of videos on happens to be. It could be useful if there were, say, full length interviews of local officials with the editorial board. Instead, we get "how to clean the microwave" (and I didn't think it could get any more sad than "how to make spaghetti").