Local newspaper giants face cold winter
Some of the largest local newspaper chains have seen their stocks tumble over the past few weeks, making further consolidation and job losses in the local newspaper space seem inevitable.
Why it matters: The crisis surrounding the collapse of local news is not just being felt by family-owned local newspaper chains, of which there are many, but also major conglomerates and publicly traded newspaper companies.
Driving the news: McClatchy, now the second-largest newspaper chain in the country, saw its stock collapse Friday, dropping by over 60% after it told investors that it likely won't be able to pay the IRS $124 million in pension funding due in 2020, per Poynter.
- McClatchy also posted revenue declines during its third-quarter earnings released Friday, although it said that it increased its number of paid digital subscribers — a positive sign as advertising forecasts are expected to decline for local print media.
- According to Bloomberg Law citing analysts, the company could file for bankruptcy within the next year. One analyst, citing McClatchy's finances, says it's unlikely it will have the free cash flow needed to pay back the IRS.
Meanwhile, shareholders approved a merger between Gannett, the newspaper chain that's parent to USA Today and other local papers, and New Media Investment Group, the parent company to newspaper giant GateHouse, on Thursday after months of back and forth financial negotiations.
- The deal was announced in August for $1.4 billion, but shares have declined since then, devaluing the merger by nearly $300 million at close, per Poynter.
- Heavy cost synergies, which will inevitably include layoffs, are expected as a result of the merger, which will close Tuesday.