Editorial: A new era in newspaper ownershipThe only good news about the announcement that a group of banks led by Bank of America will become the owners of the second largest newspaper group in the nation is that it unburdens the company from most of its almost billion-dollar debt.
As owner of Mercury News and Daily News seeks bankruptcy reorganization, banks assume uncomfortable role as media owners
But community leaders and local newspaper readers have every reason to be worried about last week's announcement that MediaNews, the privately held company that owns almost every daily newspaper in the Bay Area and more than 150 papers nationally, will fall into the hands of bankers — who are struggling with their own financial difficulties.
Locally on the Peninsula, MediaNews publishes the San Jose Mercury News, the Palo Alto Daily News and the San Mateo County Times. Officially, the papers echo the MediaNews announcement that there will be no changes, further layoffs or other impacts of the "pre-packaged" bankruptcy filing, expected within days.
In a prepared Q&A for its employees, the company said the "financial restructuring is a non-event for readers and advertisers."
Yet MediaNews CEO Dean Singleton told the Wall Street Journal that the banks assuming an 80 percent interest in the company will insist on further consolidations and improved profitability. He thus signaled that continued cost-cutting is likely, but declined to be more specific about consolidations other than to tell people to "look at the map."
Even though Singleton and his management team will retain operational control, for now, the idea that major newspapers would someday be owned by major banks would have seemed impossible just a few years ago. As newspaper ownership has become more and more concentrated in fewer companies, the most common concern was over the loss of local control and the elimination of competitive and independent voices.
Those concerns now seem trivial when compared to ownership by banks or other conglomerates.
While it is likely that the banks taking over MediaNews will seek to sell their interest to others as soon as they can, the low current values of publicly traded media companies suggest that will be difficult. Federal law gives banks up to five years to divest themselves of companies acquired through bankruptcy or due to collateral provisions in loan agreements.
Unfortunately, the Mercury News did its readers a disservice by its buried and incomplete coverage of its own restructuring. In doing so, it ironically demonstrated the hazards of media organizations being owned by large corporate parents.
These are treacherous times for many industries, but media companies have been hit hard by the recession and the growing use of the Internet.
As a locally-owned media company that is also working hard to weather these conditions, we empathize with our colleagues at the Merc and Daily News and hope the impending restructuring will indeed strengthen their operations. We doubt it will be as smooth and painless as the MediaNews announcement suggests.
The community benefits from having many voices and competing journalists seeking answers from policymakers.