The Newspaper Bubble, Too, Has Burst

The bankruptcy filing of the Tribune Company on Monday is just the latest, largest evidence that the American newspaper industry is suffering the hangover from an immense buying spree in 2006 and 2007 at what turned out to be the worst possible time for the buyers, just as the business was about to enter a drastic decline. Newspapers would be in trouble either way. The steady leak of advertising and readers from print to the Web has become a widening torrent in this recession year. Most newspapers remain profitable, but the margins are dropping fast, with the industry losing about 15 percent of its ad revenue this year. But the companies in the weakest condition are there largely because they borrowed a lot of money to buy papers, often at inflated prices, and the biggest of those deals were struck in 2006 and early 2007. Tribune's was the biggest of those deals, $8.2 billion to take private the company whose assets include The Los Angeles Times, The Chicago Tribune and 23 television stations, a transaction that almost tripled the company's debt. Most newspapers still have earnings before interest, taxes, depreciation and amortization that are equal to 10 to 20 percent of their revenue. That is down from 20 to 30 percent in the middle of this decade, but tolerable — if not for the burden of making debt payments. Some newspaper companies would like to merge with others in the same region, but have been barred from doing so by media ownership regulations.