As newspaper spending falls, some companies face end


reading newspapersIn the fourth quarter, newspaper revenue dropped 10%, including revenue from online enterprises.

According to The Wall Street Journal, "Ad spending at newspapers and their Web sites totaled $12.6 billion in the December quarter, compared with $14 billion in the final three months of 2006." Online spending was only 7% of the total.

Two companies may be facing forced sales of some of their properties or even outright liquidations. The company in the most trouble is Journal Register (NYSE:JRC). The firm's share price is at $.55 and has been slightly lower. Two years ago, it traded above $12. Falling revenue this year could cause the company to miss payments on its debt. In the fourth quarter of last year, the company has about $9 million in operating income before a non-cash write-off. Its debt service was also $9 million. Revenue is likely to be down more again this year.

The other company in real trouble is the nation's third-largest newspaper operator, McClatchy (NYSE:MNI). The operator bought rival Knight-Ridder and took on huge debt in the process. McClatchy trades just above $10, down from $50 less than two years ago. The company's revenue fell almost 12% in February. McClatchy recently wrote off almost $1.5 billion due to the falling value of its assets. Both Moody's and Fitch have either cut the firm's ratings or put it on credit review.

Just a year ago, it would have been unusual to find investors who thought a large newspaper company would go Chapter 11. This year, it will almost certainly happen.

Douglas A. McIntyre is an editor at 247wallst.com.

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