Media experts have been predicting for a year or more that consolidation was on the way for the nation’s five or six leading newspaper companies, including McClatchy, which owns The Kansas City Star.
The first big move appears close to being announced, according to Ken Doctor, media analyst with the NiemanLab, a subset of the Nieman Foundation for Journalism at Harvard University.
Ken Doctor of NiemanLab
Doctor wrote last week he expects an announcement by the end of summer heralding a merger between Gannett, the nation’s largest newspaper chain, and GateHouse, the second-largest chain. (GateHouse owns more papers than Gannett, but Gannett is larger in terms of market capitalization, cash flow and revenue.)
The big surprise in this deal, if it happens, is that GateHouse, which has a much lower profile than Gannett, would be the buyer.
Just six years ago, GateHouse found itself with such a large debt that it filed Chapter 11 bankruptcy. Since emerging from bankruptcy, it has been on an acquisition tear. It got a big boost two years ago after SoftBank, the Japanese company that has a large stake in Sprint, acquired the company that manages GateHouse. GateHouse now owns more than 150 daily papers and more than 300 weeklies.
Gannett ended up on the weak side of the proposition partly because it was the object of a hostile takeover attempt last year by another chain, Alden Global Capital. Even though Gannett was able to beat back the bid, “Alden had pushed Gannett into play,” as Doctor put it.
…Although a Gannett-GateHouse merger would not directly affect Kansas City or The Star, it would significantly alter the newspaper-industry playing field.
McClatchy, as is well known, has been struggling under a big debt — now about $745 million — since it acquired the Knight Ridder chain in 2006. Nevertheless, it remains a major player: If Gannett and GateHouse merged, McClatchy would be the second-largest chain in terms of print circulation (although dwarfed by G-G).
McClatchy suffered a setback last year when it made an unsuccessful bid to buy Tribune Publishing, which owns, among other papers, the Chicago Tribune, the Baltimore Sun, the Orlando Sentinel and the Hartford Courant.
Currently, McClatchy and Tribune remain unmoored, and a Gannett-GateHouse merger probably would leave them and a few other chains looking to team up.
All the chains are struggling financially, and the idea behind any mergers is for the participants to buy time until they might succeed at making a profitable transition from print to digital.
Doctor described it this way…
“Gannett and GateHouse, like all their industry brethren, look at ever-bleaker numbers every quarter; the biggest motivation here is really survival, which in business terms means the ability to maintain some degree of profitability somewhere into the early 2020s.”
So far, McClatchy has been lagging on the print-to-digital transformation, but in the first quarter of 2019 it had its biggest-ever percentage jump in digital subscriptions, with nearly 60 percent more digital-only subscribers than in the first quarter of 2018.
That is one sign of hope for McClatchy. Another is the turnaround GateHouse made after emerging from bankruptcy in 2016. Could it also catch a big wind through a bankruptcy?
In any event, it’s very hard to see McClatchy surviving without either teaming up with another chain or going into bankruptcy and reorganizing. And with its huge debt, it seems unlikely McClatchy would end up as the big dog in any merger.
In the meantime, the clock is ticking, and the monetary losses keep mounting.
JimmyCsays: At the juncture of journalism and daily life in KC 
This is the longest death watch ever…
That’s funny…The problem is there doesn’t appear to be a very good solution for any of the chain-owned newspapers. You’ve got at least six struggling chains — Gannett, GateHouse, Alden, McClatchy, Tribune and Lee (St. Louis Post-Dispatch) — all looking for partners and not wanting to be left standing when the musical-chairs game ends.
All the chains have been laying off employees as they thin their layers, shedding high salaries and hiring young reporters. The emphasis is on young reporters who will work cheap — and they abound — but overall quality suffers. That’s the future.
I’m not convinced overall quality necessarily suffers when younger employees are hired. A lot of experience doesn’t necessarily equate to quality journalism.
For example, consider this morning’s column from Dave Helling (“If Sebelius won’t run for Senate, Kansas Democrats can’t win”). Helling wrote “the one-time Health and Human Services secretary would instantly make the race winnable.”
Doesn’t the veteran reporter/columnist Helling remember that the one-time Health and Human Services secretary was essentially fired by Obama for screwing up the rollout of Obamacare? Perhaps Sebelius is electable, but I would hope even a young journalist would at least briefly reference (in the words of the NY Times) “a stormy five-year tenure marred by the disastrous rollout of President Obama’s signature legislative achievement, the Affordable Care Act.” Helling never even mentioned the fiasco.
It is a shame that the owners of newspapers have not taken the time to understand how “news” is delivered to consumers. “News” is an instantaneous commodity and most newspaper publishing companies have not figured that out. Young consumers want it now. and the smartphone delivers. A publishing company wants stuff to publish; young news consumers want the “news” now, thus Facebook has become one of the largest “news” delivery operations in the world. Without oversight, as has been the case, anyone at any time can publish “news,” opening the door for “fake news,” and it is believed. The “news” revolution will weed out those unable to adapt, and those that can will succeed. That is how capitalism works.
Mark P. — I, too, was puzzled regarding the Sebelius column. Like you, I noted the troubled ACA rollout was not mentioned, but, more than that, my prevailing thought was: Let the lady enjoy her retirement.
Kathleen turned 71 in May; she served her state and country conscientiously and as best she could for many years; and now she probably just wants to enjoy her free time and spend time with family and friends. (I know she’s a fan of live music because I once saw her and her husband Gary at Knuckleheads…It was when Matt Blunt was governor of Missouri, and the band leader introduced her as “the good governor.”)
It seemed like Helling was implying she owed it to Kansas to run, that she’d be some kind of turncoat if she didn’t. That’s baloney. I’m 73, and I’d also be a “hard no” if I was in her shoes.
Bernie Sanders is 77. Joe Biden is 76. Apparently, candidates are getting older these days.
Biden is crazy to give up his retirement…But Bernie, he’s just not normal; he doesn’t care about anything except getting Medicare for All and getting rid of Big Pharma and Big Insurance. He’ll go to his grave railing.
Even more embarrassing is that The Star completely ignored the fantastic work the Lawrence Journal World did exposing Sebelius’ attempt to transfer KU Med’s profit centers to her benefactors in KCMO. In their enlightening series of columns and articles they demonstrated how Sebelius tried to hold illegal meetings and other acts which actually led to the World to using the c word – corrupt. That fiasco also led to the demise of her corrupt ally at the med school the Atkinson woman. The Star, of course, was virtually silent.
In addition, Sebelius would also be subject to criticism regarding the judicial appointments that made Blago in Illinois look like a saint.
As for McClatchy, they have stayed alive selling off all of their physical property. They now have nothing left to sell and knowledgeable friends estimate about 18 months before they declare bankruptcy.