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Fold or float

How to save the Portland Press Herald
By JEFF INGLIS  |  April 2, 2009


It doesn't matter who the new owner of the Portland Press Herald is, or whether there even is one. The state's largest-circulation daily newspaper simply cannot survive in its current form. This situation is not helped by the fact that PPH execs both here and in the state of Washington seem incapable of imagining themselves out of this mess.

"A few tips: Giving the Press Herald a fighting chance" by Jeff Inglis.

"Sitting pretty: The guy with the cash can play a wating game if he wants" by Jeff Inglis.

A glance at the most recent figures pairing circulation declines with those in advertising revenue show that while papers like the PPH have a problem keeping and attracting readers, the bigger problem is keeping and attracting advertisers. The problem has worsened significantly over the past several months, with the economy's downward spiral.

The Press Herald has lost 16 percent of its subscribers in the past eight years, according to reports from the Audit Bureau of Circulations, the independent organization that monitors media-readership statistics.

That decrease is on par with the other two big dailies in Maine: the Bangor Daily News lost 15 percent of its subscribers in the same period, and the Lewiston Sun Journal lost 19 percent of its subscribers in the eight-year period from 1996 to 2004, when the paper stopped ABC audits.

And it's better than stats for the Boston Globe and the Hartford Courant, which have respectively lost 24 percent and 20 percent of their readers between 2000 and 2008. (The other major daily in the region, the Providence Journal, saw its circulation drop 15 percent over that period.)

It's not good that one-seventh of Press Herald readers stopped reading in the past eight years, but it's much worse that the paper's advertising revenue dropped by half, according to statements from the company. (The other papers are quieter on their revenue situations, but massive reductions in newspaper-ad spending are extensively documented nationwide, with many papers seeing double-digit ad drops in just one year.)

That is, in fact, the problem that threatens the paper today, and will continue to hang over the heads of any new owners. Ads and circulation are, of course, intertwined: reduced revenue means cost-cutting, which means making the paper worse for readers. Common cost-cutting measures, used at papers nationwide, as well as at the Press Herald, include shrinking the size of physical pages, printing fewer pages, and lowering the percent of space in the paper that is used to print news. In turn, this requires a smaller staff to report, assemble, edit, and lay out a paper.

That saves money, but readers drop away — particularly if, as the Press Herald did, the paper raises its cover price at the same time it cuts content.

This circling-the-drain problem gives us a good starting point for troubleshooting the Press Herald's future.

Cutting costs
The Blethen family borrowed roughly $230 million in 1999 to buy the paper, and has struggled to meet its quarterly debt-service payments ever since. Over the past decade, they've certainly lowered the amount they owe — to perhaps as low as $100 million — that's still a crushing burden for the paper to bear. Certainly, staff costs are a significant contributor, too, but a paper needs people to run. Debt service is an unnecessary killer.

The family and their top execs continue to claim that the Press Herald is still profitable. And they're probably half right. Despite the massive revenue drop, it's a good bet that the paper is covering its expenses — except for debt-service payments and transfers of money to the parent company (either through inter-company charges or outright profit-taking to prop up the Seattle Times Company).

If there's a new owner, we need to hope that he or she or they pay cash and view the purchase as a long-term investment, so they won't need to make very big profits (or any at all) right away. The price will certainly be lower than $230 million, and perhaps as low as $11 million, according to documents released by PPH suitor Richard Connor in last month's failed attempt to convince the Maine State Retirement System to invest in the papers. But it matters less what the price is than the point that the buyer shouldn't take on significant debt to make the deal.

And whether the Blethens remain in control or there is a new owner, a key way to pay off debt is to do what the Blethens have already done in Seattle, and Connor has proposed doing here: sell real estate. In Portland, the Blethens own not only the historic flagship building at 390 Congress Street, ideally situated between City Hall and the federal and state courthouses, but also a building across Congress Street and the parking surrounding it. While the building at 389 Congress was formerly home to the printing presses and is therefore likely contaminated with all matter of toxic printing chemicals, its prime location may help preserve its salability.

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Related: Sitting pretty, PPH almost sold. Now what?, Press Herald for sale?, More more >
  Topics: News Features , Advertising, Audit Bureau of Circulations, Clay Shirky,  More more >
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