After declaring bankruptcy twice in three years, the publisher of Connecticut Magazine and three Connecticut daily newspapers will be sold this spring with hundreds of jobs at risk of being permanently eliminated.
The demise of Journal Register Co., a Yardley, Pa., firm that publishes 18 daily newspapers nationwide, represents a cautionary tale for media companies rushing to transition from print to digital platforms, experts say.
Journal Register Co., which is managed by Digital First Media and owned by Alden Global Capital L.L.C., a New York City investment firm, filed for Chapter 11 bankruptcy protection Sept. 5, 2012, and subsequently announced plans to auction its assets.
Another Alden Global subsidiary, 21st CMH Acquisition Co., submitted the sole bid and on Dec. 19 announced it had reached a deal to acquire the assets of Journal Register for about $122.5 million.
With the bid awaiting court approval, Journal Register gave notice to the state Department of Labor late last month that the company would cease operations around April 17 and that all 285 of its Connecticut employees would be laid off upon the finalization of the sale.
“We have asked the buyer to operate the business using substantially all of our current employees,” the notice, required under the federal Worker Adjustment and Retraining Notification (WARN) Act for all layoffs impacting 100 or more employees, stated. “We have expressed to the buyer that a competent and competitive employee population is critical to the company”™s ongoing success.”
Journal Register publishes the New Haven Register, with a daily circulation of more than 81,000, The Middletown Press, with a daily circulation of just over 6,000, and The Register Citizen, based in Torrington, with a daily circulation of about 9,000, according to the company”™s website.
Other Connecticut publications that will be impacted by the Journal Register sale include Connecticut Magazine, with a monthly circulation of almost 84,000, and the Fairfield Minuteman and Westport Minuteman, with a combined weekly circulation of nearly 32,000.
The company also publishes dailies in the Philadelphia, Detroit and Cleveland metropolitan areas, as well as in upstate New York and suburban Michigan.
Representatives of Digital First Media could not be reached for comment.
Betting on digital
John Paton was brought on as CEO of Digital First Media after Journal Register emerged from its previous bankruptcy in 2009.
With Paton at the helm, Journal Register invested heavily in its digital products, with digital expenses rising 151 percent from 2009 to September 2012.
Revenue growth followed. According to a Sept. 5, 2012, blog post by Paton, digital revenues grew 235 percent between 2009 and 2011, and Journal Register”™s online audience more than doubled. Through the first eight months of 2012, digital revenues were up 32.5 percent, Paton wrote.
However, he wrote, Journal Register continued to be burdened by high legacy costs and declining print revenues.
From 2009 to 2011, print advertising revenue ”” which represents more than half of Journal Register”™s revenues ”” declined 19 percent, Paton wrote, adding that circulation revenues had fallen as well.
Despite debt reduction measures, Journal Register was servicing more than $160 million of debt as of its second bankruptcy filing, according to Paton, after exiting its 2009 bankruptcy with $225 million in debt and a legacy cost structure that included leases, defined benefit pensions and other liabilities.
Rick Edmonds, media business analyst for the Poynter Institute and an acquaintance of Paton”™s, said the Digital First Media CEO may have overplayed his hand.
“Since Paton came aboard at the company he has been very aggressive and outspoken, saying, ”˜Our feature is digital, we”™re going to make this company digital-first. ”¦ We need to set about building new revenues in the digital era and expanding audiences and serving both advertisers and readers in new ways,”™” Edmonds said.
Edmonds said Paton is “right about what we”™ve got to do,” but added, “We”™ve got to pay pretty close attention to the traditional print product, probably for some number of years, because that”™s probably still where 85 percent of our advertising revenues come from.”
Poynter Institute, based in St. Petersburg, Fla., is a school dedicated to teaching journalists and media leaders.
Edmonds said he doesn”™t expect any of the Journal Register publications to fold, but said the new owner could conceivably reduce newsroom staff and cut the size or frequency of the various newspapers.
Changing business model
Readers are resigned to the fact that digital platforms will eventually overtake print media, said Alma Derricks of Deloitte Consulting L.L.P.
For publishers, she said the questions of when and how to make that transition are “less about the timing of consumers”™ interest and more about how long you can afford to keep the lights on.”
“On the news gathering side, you”™re talking about a constant stream of information, which is very different from putting the paper to bed every night,” said Derricks, a director in Deloitte”™s Technology, Media & Telecommunications Strategy practice. “When you”™re talking about ads, you”™re talking about platforms that have two very different rate bases.”
Derricks said specialized and community-based publications will likely have an edge going forward.
“Outlets that are providing very specialized, time-sensitive (information) ”” they have very different prospects going forward than a general news weekly or daily that”™s covering information that”™s been covered from multiple angles all day long,” she said, noting that a unit of Warren Buffet”™s Berkshire Hathaway has been active in buying small community newspapers around the U.S. over the past two years.
From a circulation standpoint, publications are grappling with questions of how to add revenues, said Stuart R. Jordan, founder and managing director of Norwalk-based Stuart R. Jordan Consulting L.L.C., which advises magazines, newsletters, websites and other subscription-based services.
“Newspapers are, as a group ”¦ having to undo their own problems,” Jordan said. “Initially when they went digital, they were willing to let anybody read their information on their websites for free.”
While newspapers and other publications have figured out they must charge readers to maintain revenues, “the problem is, consumers were initially conditioned and there”™s this general feeling now that everything on the Internet is free, and so getting people to value and be willing to pay for a subscription to a digital newspaper has been a real challenge,” Jordan said.
