It’s not just Wall Street, Detroit, and Silicon Valley that have been hobbled by the economy. Today the beleaguered newspaper business took another crushing hit, with Sam Zell’s Tribune Company filing for Chapter 11 bankruptcy protection. Word is that the New York Times, whose stock was devalued to junk status last month, may follow in suit. They have a $400 million debt payment due in five months, and it’s unclear how they intend to pay it. Regardless of whether the Times sticks it out, the blow dealt by the Tribune’s flop to the media industry is massive. The company owns eight major newspapers, which includes the LA Times, the Chicago Tribune, and the Baltimore Sun, as well as various television stations.
For most people, (particularly us former members of the press corps), the Tribune’s announcement today wasn’t a shock. As ad sales have continued to decline and debt has continued to grow, newsrooms across the U.S. have become plagued with layoffs, buyouts, pay cuts, and other general nastiness associated with a declining industry. And it appears that the Tribune’s problem may be one that’s quashed more than a few businesses before it: insufficient cash flow. According to the Wall Street Journal, the Tribune has managed to keep up with its $12 billion debt payments by shedding assets, like the sale of the iconic Long Island newspaper Newsday earlier this year. However, that well has started to dry up (seriously – who wants to buy a newspaper right now?), and its cash flow appears to be insufficient to cover the $1 billion in interest they owe this year.
The real question, of course, is who else will follow in suit. As anyone who’s set foot in a newsroom in the past few years knows, the Tribune isn’t alone in its troubles.