Media Watch

Can GateHouse Media stop our local newspaper shrinkage?

Gatehouse Media owns over half of the weeklies on Cape Cod & the Islands including The Cape Codder, The Register, Harwich Oracle, Provincetown Banner, Sandwich Broadsider, Falmouth Bulletin, Bourne Courier and Nantucket Independent. This article by New England's best media critic, Dan Kennedy, was published in Commonwealth magazine as Gatehouse was delisted from the New York Stock Exchange. - The Editor

Can GateHouse Media stop the shrinkage
of community newspapers in the Bay State?

It's hard to be optimistic about the newspaper business these days, but Kirk Davis is trying. Davis is the president and publisher of GateHouse Media New England, which owns more than 100 newspapers in eastern Massachusetts — and which itself is part of GateHouse Media, a national chain of some 500 papers based near Rochester, New York.

Like all newspaper companies, GateHouse is struggling. But by some measures, it’s struggling more than most. Since the company went public in 2006, the price of its stock has fallen by more than 95 percent. At press time, the company was in danger of being delisted by the New York Stock Exchange. Some financial analysts have gone so far as to predict that GateHouse could be broken up at some point in the near future.

Davis, though, says GateHouse is outperforming other newspaper companies. And though its debt is sizable — $1.2 billion, or about 10 times earnings, according to publicly reported data—he and other company officials say GateHouse has no problems making its payments.

Dan's update in today's  column


The question: Can the company's chief executive in New England, Kirk Davis, eventually begin rebuilding his staff after two decades' worth of cuts under three and in some cases four different owners, including Fidelity and Boston Herald publisher Pat Purcell? Or is GateHouse, and the rest of the newspaper industry, doomed to keep shrinking?
   One problem is that the economic outlook is considerably worse than it was in early September, when I was wrapping up my reporting and writing the story. Last Friday, the Boston Herald ran a report that seven editorial employees had lost their jobs at MetroWest and the Milford Daily News. Well-informed buzz within the company suggests that's just the tip of the iceberg.
   In addition, the New York Stock Exchange this week, in a long-anticipated step, announced that it will delist GateHouse's stock, which is essentially worthless. And a major investor is getting out.
Still, the principal on GateHouse's enormous debt is not due until 2014, and its cash flow has been decent. Whether that will continue as we move into what may be a deep recession remains to be seen.

“We feel that community newspapers have a very viable future and, juxtaposed against the trend overall, are performing very well,” says Davis, arguing that small, community newspapers have a competitive advantage over major metros because their locally focused content is not available elsewhere. “I believe in it, and I believe it’s going to stay strong.”

For several years now, the newspaper business has been battered by the rise of the Internet and a failure to develop online business models that could offset the loss of circulation and advertising revenue. Large, regional papers such as the Boston Globe, the Miami Herald, and the Philadelphia Inquirer are under assault, as readers looking for national and international news have migrated to the websites of even larger news organizations ranging from the New York Times to the BBC. Local papers, with their community-based advertisers, were regarded as less vulnerable to such online phenomena as Monster.com and Craigslist, which have ravaged classified advertising. But with housing in a slump and the economy slowing, the local advantage has its limits. Consider these developments:

• At the Worcester Telegram & Gazette, 36 positions and all zoned editions have been eliminated, leaving the paper with just one edition. The T&G, like the Globe, is owned by the New York Times Company, whose New England operations lost 24.5 percent of their advertising revenue in July 2008 as compared with the previous July.
• At the Eagle-Tribune of North Andover and three affiliated dailies — the Daily News of Newburyport, the Salem News, and the Gloucester Daily Times — 52 jobs have been cut by their corporate owner, Birmingham, Alabama–based Community Newspaper Holdings.
• After previously announcing he would sell Ottaway Newspapers, a chain of community papers he acquired when he purchased Dow Jones and the Wall Street Journal, Rupert Murdoch pulled them off the market. Cutbacks have been relatively mild at Murdoch’s Massachusetts papers, which consist of the Cape Cod Times, the Standard-Times of New Bedford, and two weeklies. But industry observers concluded that executives at News Corp., Murdoch’s company, decided to hold on to Ottaway because they couldn’t get the price they were seeking.

“I feel like I’ve witnessed the end of the local newspaper. It’s become less and less of a factor in the local community. We’re not even trying to do the job that we used to take pretty seriously 20 years ago. That’s probably true everywhere."

Over the past year, GateHouse New England has eliminated positions as well, through layoffs and attrition — the equivalent of about 50 full-time journalists (out of about 535) since July 2007, says Davis, who calls the current period “the worst in my 25 years in the business.”

It’s a situation that has GateHouse staffers tense and worried.

“There’s a lot of paranoia,” says one GateHouse employee who asked that he be identified only as a manager with knowledge of multiple departments. (Numerous staff members were contacted for this article, and none agreed to be quoted by name.)

“People are very anxious,” he adds. “I wouldn’t say there’s any kind of a mood of Chicken Little, people running around and pulling their hair. But people look at the stock price every day”... read the rest of this well researched article in the current Commonwealth magazine here.

Dan Kennedy is an assistant professor at Northeastern University’s School of Journalism. His blog, Media Nation, and he can be reached at da.kennedy@neu.edu.