At $0.75, a copy of The New Haven Register now costs more than the common share price of its parent corporation, the Journal Register Company, which dropped to $0.22 on Monday.
The Journal Register is in trouble because of a number of factors, including in part a flagging economy and a newspaper industry become increasingly centered in the Internet, that are adversely affecting papers across the country. But the severe financial woes — the Associated Press reported Monday that the company is considering a sale, and the New York Stock Exchange has threatened to delist it if its stock price continues to hover below $1 — are also the result of the company’s expansion financed by massive debt.
But the potential consequences of the parent company’s troubles extend far beyond Wall Street. If the parent company cannot make up the $620 million in debt with which it ended 2007, the coverage of the Elm City’s only daily newspaper, which current Register employees say is already stretched far too thin, will suffer.
Profits and debt
The Journal Register’s immediate debt difficulties can be traced to the $415 million purchase of several Michigan newspapers in 2004. The purchase was financed by JPMorgan, which also refinanced the Journal Register’s long-term debt at the same time.
At the time, JPMorgan’s then-chairman and chief executive, Robert Jelenic, said the acquisitions of the award-winning newspapers “[fit] precisely within our strategy of acquiring community and suburban newspapers in attractive markets that enable us to implement and capitalize on our successful clustering strategy.”
But with Detroit’s automobile industry falling on increasingly hard times, advertising revenues from car companies declined, said Lauren Rich Fine, a retired top newspaper-industry analyst for Merrill Lynch. Ad revenues were already under pressure, she said, from the real-estate crisis, which decreased the papers’ ability to sell housing ads.
The resulting financial demands from the Journal Register have prompted cuts that have left some within the industry shaking their heads with disbelief. On March 11, the Register dismissed its Capitol bureau chief, Greg Hladky, a highly respected reporter who had covered state government for over 25 years.
“I think the Journal Register Company is sort of emblematic of what is happening to a lot of newspapers, in particular at the lower end,” Hladky said. “I think overwhelming concern is keeping up their profit margins, and they will cut whatever they think they can to achieve that.”
As a money-making operation, the company appears to have little commitment to journalism — even less so than other profit-driven newspapers, said Hladky.
“We used to tell the Courant [staff] that we were the canary in the mine shaft,” Hladky said of his time covering the capitol, during which he also reported for the Hartford Courant. “Unfortunately, that is now true.”
The Journal Register Company did not return two calls on Monday for comment.
If the Journal Register were to default on its debt to its creditors, Fine said, the investment banks that would take it over would likely sell its assets — possibly including the New Haven Register — in bits and pieces to whomever would buy it.
The cuts, past and possibly future, make life at the Register increasingly difficult, several current employees said. At present, Register staff are in the dark, being left to discuss the well-publicized financial troubles of their parent company among themselves but lacking any official comment from higher management about possible layoffs other than the press releases the Journal Register puts out.
“There aren’t a lot of people left,” a “worried” Register staffer said. “Everybody is pretty depressed about the whole journalism career.”
Still, while some staff are worried, others are relieved that what many have foreseen for some time is finally coming to a head. One employee said that “everybody wants new leadership” — that is, a change from a Journal Register Company that has left “nothing to cut.”
Even now, the employee added, some stories that should end up in the paper do not.
Paul Bass ’82, editor of the online-only New Haven Independent, said the reporters at the Register are like “survivors” on a ship, always faced with doing more and more work, even as the Journal Register keeps cutting.
“Greedy companies,” Bass said, “have a starvation approach” by which they come into cities and milk the newspaper properties for the greatest possible profit margins without reinvesting.
Bass said the New Haven Register’s current troubles are reminiscent of the situation in the early 1990s, when after massive layoffs resulting from growth funded by “junk bonds,” an investment bank was forced to take over the paper.
A similar introduction of new leadership may be required to help the paper survive today.
“I hope someone with some bucks gets it, someone who cares about the role of newspapers in a free society — and who then [is willing to] invest money to make it into something,” Bass said.
But that hope may be a vain one.
“There are still strategic buyers,” Fine said, “but they are getting harder and harder to find.”
The Journal Register is not the only newspaper business in financial straights. The Tribune Company, for example, which owns the New Haven Advocate and the Courant, appears to also be piling up significant debt, although Fine said its revenue sources were likely more secure than the Journal Register’s.
Fine also pointed to the Philadelphia inquirer, which was sold in 2006, but whose new owner, Fine said, was interested in seeking strategic ways to reinvigorate the business, other than “just laying off 5,000 people.” She said it was an example of more creative response to financial difficulties by paper management.
But infusing a struggling newspaper is not an easy task.
“The best investigative journalism,” Hladky said, “is expensive.”
The continuing explosion of the Internet as a medium for news, meanwhile, has created an industry-wide strain on print newspapers. Since the Web has replaced print as the cheapest and most convenient place to place classified advertising — which makes up just under a third of Journal Register’s revenue stream — the paper is having a hard time collecting enough money. Sites like craigslist.org and yahoo.com offer easily searchable and widely read classified space.
Still, other newspaper corporations have responded to the changing nature of journalism more adeptly, several experts on the newspaper business said.
Mark Oppenheimer ’96 GRD ’03, coordinator of the Yale Journalism Initiative and former editor of the Advocate, said the problems at the Register — the flagship of the Journal Register Company — are emblematic of the company’s inability to adapt.
“The Register didn’t create these problems, but they haven’t handled them as well as they could have,” he said. For one, Oppenheimer said, “they have a really bad Web site and have not managed the transition to the Internet very well.”
The Advocate, too, he noted, had been slow to make the online transition effectively, but its Web site is now “pretty good.” Furthermore, he said, the New Haven Register has failed to reach out to a sophisticated and well-educated local audience, cutting coverage as cost-saving measures instead of seeking out new opportunities.
“It has had a rapidly declining circulation for a number of years,” he said.
And circulation may not get any easier.
The New Haven Board of Aldermen meeting on Monday included an item that could institute a three-year flat fee of $25 to distribute newspapers in the city, plus a $12-per-rack fee.