Publisher McClatchy Co. Files For Bankruptcy, Disrupting 30 Newspapers
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One of the nation's leading newspaper companies is filing for bankruptcy. The McClatchy Company owns 30 papers across the country, from Olympia, Wash., to Miami, Fla. Its executives say it has too much debt to continue under its current structure.
NPR media correspondent David Folkenflik joins us now from New York. And, David, for people who are not familiar with McClatchy, they may be familiar with its papers. Can you tell us a little more background?
DAVID FOLKENFLIK, BYLINE: Sure. Well, let's think of some of those titles. You mentioned Miami - The Miami Herald. It owns The Kansas City Star, Fort Worth Star-Telegram, Sacramento Bee, even the first paper where I had a permanent job, the Durham Herald Sun down in North Carolina. It's got a strong family history. The McClatchy family has basically owned the company since it started. It started Sacramento in the wake of the gold rush. Proud of the journalism it did, it absorb Knight Ridder in the early 2000s with - itself with a great tradition of regional newspapering. And it's got a great presence. Think of the real watchdog journalism by the Kansas City Star and failures of transparency there in local government, or take the failures of the U.S. Justice Department as - in the Jeffrey Epstein scandal. That really exploded entirely thanks to the Miami Herald.
CORNISH: Given the kind of reporting you described, people thought McClatchy was doing well - right? - despite the fact that local newspapers had been struggling across the board for a long time. So what went wrong?
FOLKENFLIK: Well, I'd contrast the robust journalism that met the aspirations of the people throughout the McClatchy chain and its financial performance. Let's first not forget how tough this business is. You know, you compare print ads to what it once was, you know, in 2010, print ads had gone down to what they were in 1950. And they haven't gotten any better. Charlie Munger, who's Warren Buffet's longtime business partner at Berkshire Hathaway, says newspaper industry is dying. Subscribers are falling hard in the digital age, classified ads gobbled up by Craigslist and Monster, now more recently, of course, Facebook and Google.
And then think about McClatchy. Fifteen years ago, the stock was worth about $700 a share. Now it's trading at 75 cents at the time of bankruptcy filing. Its acquisition of Knight Ridder loaded it with billions of dollars more of crisis, and its pension thing is unsustainable. They say they have 28 pensioners for every employee. That's in part because they've cut back so much. But, you know, that's what they face - the question of debts, the question of their pension obligations.
CORNISH: It sounds like these financial problems have been brewing for years, so why haven't they been able to address them?
FOLKENFLIK: I think there's a pretty good argument to be made. Perhaps they should have declared bankruptcy after the global financial crisis, which hit only a year or two after they acquired Knight Ridder and had gotten all that debt. That debt made it really hard to adjust the real realities facing all newspaper publishers. They tried to strike a deal to sell themselves to Tribune as recently as last year. That fell through. They tried to get relief from Congress as part of a larger bill that helped other newspaper companies, didn't get included in that. Tried to strike a deal with regulators, get some relief from the question of fulfilling all their pension (ph) obligations. That didn't happen.
And it's worth remembering, too, executives and former executives have been given this additional added pension benefit. And that really gave the company's leaders a lot of incentive to try to protect pensions at all costs.
CORNISH: In the meantime, what's ahead for the company now, for its papers and also for its readers?
FOLKENFLIK: Well, it's going to continue to operate assuming the judges approve of this bankruptcy structure. It's likely to be owned by a hedge fund called Chatham Asset Management. The question is, you know, shed of this debt and relieved of a lot of pension obligations, would this hedge fund be relatively benign and say, hey, we see a path towards better profitability? Or more likely, is it going to be on the market, sold relatively soon to another newspaper company, perhaps like Tribune, perhaps the new - giant new Gannett newspaper company? Alden Global Capital is an investment fund that owns a ton of newspapers around the country. All of these companies have cut costs a ton, Alden the most brutally, and it seems to be the most acquiring mode.
So these guys are geared to extract these profits from what are continually declining properties. This is clearly a tough blow to a company with a proud tradition. But let's be clear; it's tougher for the journalists who work there and want to do good work and even tougher for the communities they serve.
CORNISH: That's NPR media correspondent David Folkenflik from our studios in New York. David, thank you.
FOLKENFLIK: You bet. Transcript provided by NPR, Copyright NPR.