That point was underscored as recently as Wednesday when Berkshire Hathaway Inc. Vice Chairman Charlie Munger bluntly told attendees at the annual meeting of the Daily Journal Corp. that “technological change is destroying the daily newspapers in America,” adding that “they’re all dying.”
In January, Berkshire got out of the business when it announced it was selling all its 31 daily papers to Lee Enterprises Inc. for $140 million.
McClatchy has been in steady decline over the past decade. In 2006, it bought the Knight Ridder chain for $4.5 billion. The deal was ill-timed: By that year, print advertising dollars had started to fall, according to Pew Research Center. The global recession eroded ad revenue even further.
The company, which employs 2,800 people, serves 30 communities in 14 states, and last year had an average paid daily circulation of 1.1 million. But the trend has been relentlessly down, with daily circulation collapsing by 58.6% between 2006 and 2018, according to court papers.
Bankruptcies are nothing new for the newspaper business -- about 20 since the Great Recession, Doctor said. Other newspapers to file for Chapter 11 protection include Tribune Co., the Journal Register Co., Freedom Communications, and the owners of the Minneapolis Star Tribune, Philadelphia Inquirer and Philadelphia Daily News.
Cut Debt
McClatchy listed liabilities of $1.6 billion and assets of only $946.5 million, according to its Chapter 11 filing. The Sacramento, California-based company said in court filings that its turnaround plan would cut that debt by 55%.
The company obtained a $50 million bankruptcy loan from lender Encina Business Credit, allowing it to continue operating its newsrooms as it restructures, McClatchy said in its statement.
Doctor, the newspaper analyst, predicts McClatchy will eventually combine with another newspaper chain.
“It creates another chess piece on the board,” he said. “The question is what can Chatham do to make its investment a better one and that will involve combining with another company.”
--With assistance from Katherine Burton.
This article was provided by Bloomberg News.