White House to Newspapers: No Bailouts, Guys

(MoneyWatch)  It's time to kick 'em when they're down.

At his annual shareholder's meeting in Omaha over the weekend, the world's second-richest man (and most-renowned investor), Warren Buffett, answered one question by allowing that he wouldn't buy most American newspaper companies "at any price."

Then, at a White House briefing yesterday, President Obama's point guard, Robert Gibbs, was asked whether the administration would consider a bailout for the newspaper industry. According to Politics Daily, this was his response:

"I think that might be a tricky area to get into given the differing roles. Obviously, the President believes there has to be a strong free press. I think there's a certain concern and a certain sadness when you see cities losing their newspapers or regions of the country losing their newspapers. So it's certainly of concern. I don't know what, in all honesty, government can do about it."

So, that would be a "no," then.

All of this was occurring in the context of yesterday's headliner that The New York Times was -- or maybe wasn't -- threatening to shut down the Boston Globe by summer. (This caused my Bnet media industry colleague Cathy Taylor and me all manner of stress as we tried to evaluate the mixed signals emanating from that leased high-rise on 8th Avenue.)

Although much coverage contineus to be focused on whether The Times is simply bluffing by issuing threats in order to wring concessions from the Boston Newspaper Guild, the union representing journalists, my opinion is that The Times has no real choiice but to shut down the paper. In fact, I'm not sure what the executives in New York are trying to accomplish here by delaying matters.

They've already let it be known that they would sell the Globe at a deep discount, should anyone show up wanting to buy it. (We also know Mr. Buffett will not be among those willing to pony up the cash.) Now, they are forcing cuts upon cuts on the Globe's workers, without any visible plan for saving the business.

If you read the SEC filings from The Times, none of the steps yet taken will come even close to restoring the Globe to profitability, so what's the point? Even if the Globe doesn't lose the entire $85 million projected in the company's recent 8-K Report, The Times doesn't appear to have the cash or liquid assets or access to debt to carry the weaker paper much longer.

In addition, the Times is already so debt-laden, and its stock has been downgraded so far into junk territory, where is it going to find the money to continue operating businesses that are all losing so much money? (There's still that share of the Boston Red Sox to sell to somebody, I suppose, but this isn't exactly the greatest market for selling stakes in sports teams, either.)

At the end of the day, then, we should expect the closure of the Globe to be confirmed, sooner or later. Once that is done, the question becomes: How will The Times itself survive?