Downhill slope

An important shoe has dropped in the ongoing saga of the Daily Freeman and the other Journal Register Company newspapers purchased in their entirety in June by a hedge fund, Alden Global Capital. What might this change in management mean for the Freeman? What does it portend for the readership area in which this venerable daily newspaper operates?

Under a new arrangement announced earlier this month, Journal Register’s operations will be partially combined with those of a much larger Alden-controlled newspaper publisher, the MediaNews Group, the nation’s second largest newspaper group by circulation. John Paton, the Journal Register ceo, will be the chief executive of the merged entity, to be called Digital First Media.

Alden specializes in investing in distressed industries. A year-old update to Alden clients, which recently found its way onto the Internet, explains the importance of “industry themes” to the Alden portfolio “because individual companies in the same industry usually face similar economic drivers.” When investor and analyst opinion goes sour on an industry because of poor financial performance, the Alden commentary continues, “this bias can create significant buying opportunities, and it is one that we look for in industries that are on our distressed radar.”

Alden has sunk many hundred millions of dollars of its assets into the newspaper publishing industry. As well as owning Journal Register outright, Alden is the largest shareholder of MediaNews. It has significant positions in Gannett (publisher of, among many other papers, the Poughkeepsie Journal), Belo, Freedom Newspapers, McClatchy and other major newspaper companies. It has also holdings in various radio and television properties.

Journal Register Company, consisting of several clusters of newspapers in Connecticut, mid-New York State, the suburbs and exurbs of Philadelphia, the Cleveland area and central Michigan, is a small spoke in the Alden wheel. It largest single daily paper is the New Haven Register.

In terms of revenue, the Daily Freeman is the largest paper in the jrc New York cluster, which also includes dailies in Troy, Saratoga and Oneonta. The clustering theory posits that some advertisers will be attracted to a combination buy of all four publication areas. What do these four dailies have in common from an advertiser’s perspective? Not much. The advertising strategy seems not to have proven particularly successful.

MediaNews Group is a media giant. According to its website, it has 55 daily newspapers in eleven states, including 29 dailies in California communities. Its Denver daily in Colorado, Lowell daily in Massachusetts, Detroit daily for Michigan, St. Paul paper in Minnesota, El Paso daily in Texas, Salt Lake City daily for Utah, Bennington and Brattleboro papers in Vermont and Charlestown daily in West Virginia are among its best-known larger newspapers.

Adding control of MediaNews Group to Alden’s journalistic stable represents an increase in the hedge fund’s bets. Its costs of purchase have been low by historical standards; the daily-newspaper business, its monopoly status a relic of the past, is severely distressed.

Whether Alden has underpaid or overpaid remains to be seen. As a prominent critic earlier this year told a group of career journalists and managers, “We have entered a new era where what we know and what we traditionally do has finally found its value in the marketplace, and that value is about zero.” The damage from the last six years along with over-leveraged capital structures has left the U.S. newspaper industry in ruins, he said.

“In our blustering for self-justification we have created a myth of our value,” continued the prominent newspaper executive. “Without ever establishing its economic value, we have argued our value as journalists and journalism itself is self-evident and unassailable.”