Bad News in Philadelphia
ALG Editor's Note: As ALG News previously reported, the newspaper industry is come into some tough times as of late, and as noted by the following featured editorial in the Wall Street Journal, some of them are lined up for bailouts:
The worst bailout idea so far: newspapers.
Taxpayer cash is going to rescue so many people these days that it is hard to sort the truly awful ideas from the merely terrible. Then we heard the doozy out of Pennsylvania, where Governor Ed Rendell has discussed a state bailout of the company that owns a pair of Philadelphia newspapers, the Inquirer and the Daily News.
Philadelphia Media Holdings is in default on its loans, having missed debt payments going back to June. With no buyers knocking on the door, the Philadelphia Bulletin has reported, owner Brian Tierney went hat-in-hand to the Governor's office to talk about giving the paper some public help. Mr. Tierney won't comment on the record, while Mr. Rendell's spokesman tells us the conversations weren't specific but that state help is a possibility.
Times are tough, but as they say in Philadelphia, this is nuts in eight different ways.
Starting as a business proposition: When McClatchy bought Knight Ridder in 2006, the Inquirer and the Philadelphia Daily News were spun off and sold for $515 million to investors led by Mr. Tierney, who made his money in advertising and public relations. The buyers put up around 20% in equity and took on some $400 million in debt, enough leverage to raise eyebrows even before the credit crunch. Mr. Tierney is now no different than thousands of other Americans who borrowed too heavily during the credit mania.
Mr. Rendell's spokesman, Chuck Ardo, plays down the possibility of the state government holding an equity share in the newspaper, but says direct state investment "is possible." Even if the bailout is designed simply to help the newspaper meet its default payments until the economy recovers, that is still a highly speculative taxpayer bet. Everyone knows the big-city newspaper business model is under pressure, to put it mildly. The Tribune Company and the Minneapolis Star Tribune have both filed for bankruptcy, while the publisher of Connecticut papers including the New Haven Register suspended its debt payments in December.
Philadelphia is a great city, but we're not sure why taxpayers in Pittsburgh should finance readers on the other side of the state. Mr. Ardo told us the state has an interest in saving the paper to protect jobs as well as a free press. Newspapers are "the lifeblood of democracy," he says.
But newspapers aren't the lifeblood of anything if they are merely an adjunct of the state. Independent journalism is valuable, but only if it is truly independent. A newspaper that is bankrolled by the state, even if it's only a loan, is going to have a strong interest in not criticizing the state. Perhaps this is one of Mr. Rendell's goals, since like all politicians he prefers a favorable press.
The business of journalism is changing, and many newspapers will vanish in the coming months and years. But that doesn't mean that journalism itself is vanishing. TV, radio and national newspapers have an audience in Philadelphia. Smaller papers like the Bulletin are also working hard to reach a larger audience in the city. Internet news operations have popped up in Minneapolis, San Diego and other places, often started by former reporters for the big-city dailies. The fastest way to kill a newspaper is to make it dependent on the politicians it is supposed to cover.