The impending death of the newspaper industry is vastly overstated, according to John F. Sturm, President and CEO of the Newspaper Association of America. In a recent advertorial, he offers this evidence:
- More adults read a newspaper every day than watch the Super Bowl, and more than four times as many who watch American Idol.
- Sixty-one percent of 18-34 year olds read a newspaper every week.
- Most newspapers remain profitable, with operating margins in the low to mid teens.
(Update: Erik Sherman deconstructs and refutes Sturm's "evidence," )
At the same time, unfortunately, it wasn't the best week for newspaper companies. Consider two big ones, The New York Times and the McClatchy Company.
Standard & Poor's Ratings Services downgraded the Times' corporate credit rating to B from B+, thereby driving it lower into junk status. As Fitz and Jen put it, over at their E&P blog, "They're both junk bond ratings with B being a little worse and signifying, under S&P's definitions, that a debtor is current on its loans now, buuuuut 'adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.'"
They add: "Boy, Times Co. creditors better hope there are no adverse business, financial or economic conditions in the newspaper industry!"
For McClatchy, the news is much worse. In a series of filings mid-week, the giant newspaper chain filed documents with the Securities and Exchange Commission revealing that it is trying to exchange over a billion dollars in debt for new notes at a steep discount against the face value of the old debt. S&P, Moody's, and Fitch Ratings all effectively declared the offer essentially a default.
S&P downgraded McClatchy's corporate credit rating to CC from CCC+, and assigned a "negative outlook" to that rating. When the debt exchange is completed, that means MNI's corporate rating will be lowered again, now to SD (selective default).
If you are finding it hard reconciling Sturm's sunny outlook and what is happening to companies like the Times and MNI, you are not alone.
(Thanks to Thierry Lamouline for pointing me to Sturm's advertorial.)