For news industry, troubles only accelerate

The Tribune Company's bankruptcy may signal a trend toward a new kind of newspaper journalism.

The Tribune Co.'s move into bankruptcy this week is the most prominent signal – but just one of many – that a tumultuous revolution in the news industry is accelerating.

It's a predicament similar to that of the US auto industry.

A long reliable business model is under threat. For newspapers, it's because consumers are migrating increasingly to the free content zone called the Internet, while traditional revenue from ads and other sources is sagging. Then come some unexpectedly sharp economic forces that have also hit car manufacturers: a recession, a credit crunch, and rising costs for raw materials.

One difference, ironically, is that the media troubles are getting a lot less media attention than Detroit's bailout bid. But they are every bit as real.

•The New York Times Co., following a road traveled by the carmakers, now sports a "below investment grade" credit rating from Standard & Poor's.

•The Newark Star Ledger is cutting its staff nearly in half – headlining an industrywide wave of downsizing.

•From broadcast to book publishing, other media companies are retrenching in tandem with newspapers.

Few expect newspapers, any more than cars, to suddenly disappear. But an already difficult industry transition now looks harder. More bankruptcies seem likely, and some papers will simply shut their doors.

"This perfect storm of events has sucked in every player in the industry with astonishing speed," says Paul Gillin, a Boston-area media analyst and consultant. Yet he predicts that out of the chaos "will emerge a new kind of media, a new kind of journalism."

That doesn't mean there's an easy path forward.

The next year could see more staff cuts and consolidation, including mergers in cities with two daily newspapers. Readers may have fewer stand-alone sections to flip through. In Denver, the Rocky Mountain News may close altogether if a buyer isn't found in a few weeks.

The mix of a lean economy and changing business models isn't limited to newspapers. The stock of broadcaster CBS has lost about three-quarters of its value this year just like Gannett, a more print-centered conglomerate.

Even Yahoo, a leading destination for online news, is on the ropes.

For newspapers, advertising revenues have been falling since 2006, and the most recent quarter saw a record percentage decline of 18 percent, according to industry figures cited by the Associated Press. Even online ad revenue has declined a bit in the past two quarters.

Debt and a credit crisis deepen the challenge.

"The same things are happening to all newspapers, but it's magnified at the companies that were shortsighted enough to take on debt in recent years," says John Carroll, a former editor of the Los Angeles Times. "Tribune Company would be exhibit A."

Sam Zell, builder of a real estate empire, saddled the company with $13 billion in debt when he bought it a year ago. At the time, he expressed optimism about a turnaround for a firm whose flagships are the Los Angeles Times and Chicago Tribune.

Bankruptcy buys the company some time to restructure and perhaps sell assets.

The New York Times, while not as debt-burdened as Tribune, also feels the impact of tighter credit markets. With one credit line set to expire next spring, it plans to borrow against its valuable Manhattan headquarters building.

Media companies see the Internet as an opportunity, not just a threat.

It has opened the door to new formats and a more interactive role for news consumers, and to more rapid updating of breaking news. But online, the business partnership of advertisements and news content hangs in doubt.

"It's not really clear ... what the new equilibrium will be," in terms of revenue to support the labor-intensive process of news gathering, says Lee Rainie, who heads the Pew Internet and American Life Project.

For now, Mr. Carroll says the bottom line is that many papers can no longer take on ambitious projects. "We have fewer reporters on the streets."