A tale of one company

by: Eric B.

Sun Apr 13, 2008 at 14:43:24 PM EDT

When we first checked in with the stock prices for the Journal Register company last summer, a share was about the price of a pint of decent beer.  When we last checked in, the pricer per-share for JRC was that of a pitcher of Busch Light on poverty night.  This week?  Less than half that of a cup of gas station coffee.  Last week, it was delisted from the New York Stock Exchange, and announched that it'd hired a consultant to help sell the company.

JRC owns a number of newspaper clusters throughout the northeast, usually centered in suburban areas.  In Michigan, in addition to a handful of weeklies sprinkled across the Lower Peninsula, it owns the Oakland Press, the Macomb Daily, the Royal Oak Tribune, and the Mt. Pleasant Morning Sun.

For anyone following the industry, this really isn't very shocking.  Stock prices have been following profits down over the last few years, and have been following the general trend in circulation since, oh, sometime in the 80s.

Devaluing stock prices don't necessarily mean the company is in danger of going backrupt, but that investers see no good reason to sink a lot of money into it.  This is one of the reasons why the stock market isn't a great indicator of economic health -- it's based on perception as much as anything.  On the other hand, if there was a concrete reason why investors were steering clear of a company's devalued stock, then it means serious trouble.

In the case of JRC, that happens to be the case.  It's not necessarily indicative of the profit performance of the individual papers, mind you, but of the company's overall ability to generate revenue and carry debt at the same time.  In this case, the corporation -- when it purchased its Michigan cluster from the private equity firm 21st Century Newspapers -- took on a huge amount of debt, and has never been able to make things work.  It's been the product of a lousy state economy coupled with a general decline of newspaper stocks (the only company showing appreciable growth continues to be the Washington Post Group, which diversified its products itself a long time ago), and also crappy corporate management (not just of numbers, but the company is also famous for mistreating employees).

If they file, and I think this is going to happen, the question is what happens to their properties.

If you look at the dailies owned by JRC in Michigan, the thing that immediately leaps to mind is, "One of these things is not like the others."  That thing, of course, is my local daily, the Morning Sun.  Back about a zillion years ago (before I turned 30), it was owned by Brill Media, a private media group that was invested not just in print but also radio.  Overextended in radio, matter of fact, and the company went bankrupt because of radio-related problems. Along with the other weeklies and shoppers of the chain, it was acquired during the bankruptcy by a private equity firm -- 21st Century Newspapers -- which already owned the Detroit-area dailies listed above.  After an attempt (rather, a rumored attempt) by Gannett and/or Hearst to piece off the Sun and its associated properties from 21st Century, JRC bought of it.  This was a few years ago, when JRC stock prices were about $20 a share.

That means there's a natural faultline in JRC's Michigan properties, splitting the company roughly north-south over by Lapeer (the company used to own one or two or three weeklies over there ... it could very well have sold them by now).  I suppose whether that happens is anyone's guess, but it could be that Hearst or Gannett -- if they were really interested the first time around -- or even a private party (Alan Brill, who owned Brill Media, was rumored to still covet the Sun at one point) could wind up buying JRC's northern Michigan properties in a standalone deal.

What I don't expect to happen is for any of the papers to close their doors.  I mean, rumor had it a couple of years ago that the Oakland Press was leaking revenue and circulation worse that a bullet-riddled collander, and if you were to ask me what kinds of newspaper is apt to go under first, I'd point at suburban dailies (money trends, plus my gut, tells me that local, community papers and massive, huge media outfits, are the most likely to survive a coming bloodletting in the industry), but I think that unless they consolidate papers -- maybe fold the Royal Oak Tribune into the Oakland Press -- that they won't shut down any potential revenue streams ... just yet.  The individual papers have their own local brand, and brands are -- in many cases -- themselves worth money (during my first bankruptcy, when I was slinging coats for London Fog, my manager -- himself a veteran of several bankruptcies as member of management -- estimated the London Fog name to be worth maybe $250,000 ... a reflection on projected sales revenue simply by calling something a London Fog).

The question, in terms of politics and a democracy's critical ability to inform its citizens, is a huge question mark. Set aside, for a second, what the media landscape will look like in six years or even two.  If JRC is broken up or even sold, it's likely that the company will find places to cut costs ... someplace.  That could mean further cuts to newsrooms (each time positions are cut, managers tend to say, "Well, that's about as deep as we can go" ... right up until the next position is eliminated), which in turn means fewer stories and also stories that require less of an investment in time (i.e. cuts to investigative reporting). 

What I can say without reservation is that since JRC is not falling victim to pressures unique to itself, and if someone tells you that they have a firm idea of what will happen that you're probably talking to an idiot.