Is Dean Singleton's Media News Group in financial distress? The media chain that owns 56 daily newspapers is privately held, but some of the latest news strongly suggests that the company is short on cash.

The Rocky Mountain News reported that its crosstown rival Denver Post, the flagship of Singleton papers, had to borrow $13 million from the agency that operates the Joint Operating Agreement (JOA) to meet payroll. Both Denver papers are losing money rapidly, at about $4 million per paper per quarter.

Media News refuted the Rocky's reports in a memo circulated in the Post's newsroom. But the gist of the memo really was to say that the Rocky may not be around for much longer since it was put on the market by its parent E.W. Scripps Co. back in December. If no buyer is found by mid-March, the paper will be shuttered. In that event, the Post will take over the agency, therefore any issue between the agency and Media News will be rendered irrelevant.

Whatever the case may be in Denver, Media News is not doing well. The company is heavily leveraged, having borrowed at least $350 million to purchase the San Jose Mercury News and Contra Costa Times in 2006. Its creditors include the Bill and Melinda Gates Foundation and the Hearst Corporation, the parent of the San Francisco Chronicle.

Media News' Bay Area entities, which also include the Oakland Tribune, just announced that all employees are required to take an unpaid one-week furlough in the first quarter of 2009 - a practice first introduced by Gannett in early January. Its Los Angeles area papers, which include the Daily News, Long Beach Press-Telegram and Pasadena Star-News, are also adopting the same measures.

And the furloughs may be only the beginning. According to David Rounds of the Bay Area News Group, there may be more to come:

I realize that we are all working hard to overcome this difficult time. I know this action will create a strain on our personal budgets, and unfortunately, I cannot guarantee that a furlough will prevent any further layoffs. However, from what I am hearing across our company ... "a brief period without pay is better than many more layoffs."

Posted by Samuel Chi at 11:11 AM | Permalink

There was a time when the San Francisco Bay Area was the second-best newspaper market in America, behind only New York City. Major metro and suburban dailies, owned by different entities, were all competing in the same high-energy newsmaking environment.

A decade later, the Bay Area is on the verge of becoming a one-newspaper region.

The Hearst Corporation (full disclosure: my former employer) owns the biggest paper - the San Francisco Chronicle - but its ever-dwindling circulation is dwarfed by the Dean Singleton-owned MediaNews Group papers surrounding it: San Jose Mercury News to the south, Contra Costa Times and Oakland Tribune to the east and Marin Independent Journal to the north (the only thing west is the Honolulu Advertiser). The only other paper in the region not owned by MediaNews is New York Times Co.'s Santa Rosa Press Democrat.

And it looks like Hearst is ready to throw in the towel - or at the very least, get into bed with Singleton.

Alan Mutter, a well-connected insider writing on his blog "Reflections of a Newsosaur," revealed that Hearst actually already has a significant stake in the MediaNews operations in Northern California, inasmuch that it helped secure the latter's purchases of Contra Costa Times and Mercury News. As a privately held company, Hearst's books aren't open to the public. But it's believed that it has pumped more than $1 billion into the money-losing Chronicle in this decade.

Against this backdrop, Mutter speculates on what might happen:

With the outlook for the newspaper business now worse than ever, a more radical solution than nipping and tucking the Chronicle to profitability would seem to be in order. And it probably is this:

Folding the Chronicle into the network of MediaNews Group papers that completely surround it - a network, significantly, that Hearst itself played a major role in building.

In that event, the Chronicle's now-independent news, ad sales, production, distribution and administrative staffs would be merged into a single entity managed by MediaNews. Deep staff cuts likely would result in every department, not the least of which would be the already decimated newsroom.

In other words, one newspaper operation in the entire Bay Area, with different banners depending on where they're distributed.

When Hearst bought the Chronicle and folded the Examiner into it in 1999, there were nearly 600 newsroom employees. With annual and now semi-annual buyouts since then, that number has dwindled down to 260. Reliable sources inside that newsroom indicate that the staff size might be close to just 200 by the end of the year.

That is if the aforementioned "merger" doesn't take place.

Back in the '90s, the Department of Justice, with assistance from then-mayors Frank Jordan and Willie Brown, did its part to keep San Francisco from becoming a one-newspaper town. But in today's economic climate, particularly one facing the woebegone newspaper industry, it's doubtful that the DoJ can - or even wishes to - do much of anything.

Posted by Samuel Chi at 02:36 PM | Permalink