Now the slump in the US is getting serious: the biggest newsprint maker and the second largest retail mall operator both went bankrupt overnight and quarterly results from the country’s biggest newspaper publisher showed a worse than forecast fall in ad revenues, especially classifieds.
Overnight North America’s biggest newsprint company, AbitibiBowater, finally threw in the towel and filed for bankruptcy protection in the US with debts of over $A3 billion. It has been hit by 60 consecutive monthly falls in newsprint consumption, with usage in February of this year down 29% on a year ago. That was clearly unsustainable as profits vanished and cash flow drained away. No one wanted to buy the company or restructure existing loans.
And America’s second biggest shopping centre operator, General Growth Properties, tossed in the towel and filed for an arranged bankruptcy owing $US27 billion in debt (a claimed $US30 billion in assets, or around $A40 billion). It has 200 or so malls across the US; 158 are in bankruptcy with their parent.
It is the biggest ever real estate bankruptcy in US history and follows the collapse of a string of tenants, such as Circuit City (the second largest electricals retailer) Linen N’ Things, a homewares chain and retailer, Steve and Barry’s.
The problems that toppled both companies are the same ones battering the media: newspapers, TV, radio and magazines are bleeding ad dollars to the internet in all cases, and losing revenue as major advertisers collapse, cut back or head for the net exclusively.
Plunging newsprint sales is the most visible outcome of the slump in newspapers that was reinforced overnight with poor results from Gannett, America’s biggest publisher which reported a 34% drop in publishing ad revenue, with a 28% fall in US publishing ad revenue, which includes the country’s top selling newspaper USA Today.
And it’s not just the US. In Britain, Gannett owns the second largest regional paper group called Newsquest and ad revenues there plunged 38% in the March quarter, driven by a 45% fall in classifieds.
With other media companies reporting shortly, analysts are now cutting their estimates for the likes of Media General Inc, McClatchy Co and The New York Times Co, which produces its long awaited quarterly report next week. The Times Co is expected to update the market on its all important debt repayments and restructuring costs with estimates it is spending $US150 million on redundancies.
Gannett earned $US77.7 million, down from $US191.8 million in the same quarter of 2008. Overall revenues fell 18% to $US1.38 billion.
Classified ad revenues was a black hole: down 46.5% in the quarter, including a 62% fall in job classified revenue, 39% in auto and 50% in real estate. These figures indicate that the severe falls in revenues, especially classified ads, seen in the December quarter of 2008, have intensified as the recession continues to roll across the economy.
Some of those falls represent a substantial acceleration on the falls seen in the December quarter. Total ad sales at USA Today, the company’s flagship, tumbled by a third quarter on quarter.
And it wasn’t just newspapers — Gannett’s local TV station business saw a 15% fall in ad revenues to $US143.5 million from $US170.2 million last year because of lower car and retailer advertising.
But there are more changes in other major papers. Reuters reported that New York Times plans to eliminate several weekly sections and cut freelance spending to save millions of dollars in annual costs.
The company is cutting pay for nonunionised employees at the Times and other papers and is seeking similar concessions from unionised employees. It also has threatened to close the money-losing Boston Globe should it not find ways to cut millions of dollars in costs. It has also sold a regional paper.
In a copy of the memo obtained by Reuters, Executive editor, Bill Keller said that he does not know how the Globe’s situation will be resolved, but said financial forecasts for the parent company have not changed in the past month.
The Times said it was doing away with several weekly sections “in a bid to save millions of dollars” in ink, paper and freelance reporter costs, absorbing them into other parts of the newspaper.
The Times is making substantial cuts and changes to its make up. It is cuttings sections covering New York City and nearby locations, including New York’s Long Island and Westchester County, along with New Jersey and Connecticut. These will be consolidated into a weekly section on Sundays.
The Times will eliminate its Escapes (a travel/lifestyles section) and absorb its content into the Weekend section, and stop running a separately labelled New York report in the first part of the Sunday paper. It also will stop running a regular fashion layout in the Times Magazine, and move its guide to the contents of each day’s paper to one page from three.
And the Washington Post told overnight employees in a memo about changes it will make to the newsroom of its namesake paper that will consolidate some editing and reporting tasks.
It was a sweeping editorial revamp with plans to merge its currently separate print and online operations into a single newsroom/ it will be called a “Universal News Desk” that will edit stories for both the print and online editions of the newspaper.
The paper said the changes are designed to “create new reporting groups, streamline editing desks and anticipate the impending integration of our print and digital news operations”.