Wednesday, September 5, 2012

Digital First Media announces that Journal Register Company has filed for Chapter 11 bankruptcy

The CEO of Digital First Media, John Paton has just informed staff that Journal Register Company has filed for Chapter 11 bankruptcy and will be sold. The company has accepted what Paton calls "a signed stalking horse bid" for Journal Register Company from a hedge fund. (A stalking horse bid is usually defined as a bid for assets chosen from a list of bidders by the company.)

The buyer was identified by Paton as 21st CMH Acquisition Co., described as an affiliate of funds managed by Alden Global Capital LLC, a New York-based hedge fund which actually bought the company last year, so this looks like more musical chairs with a media company.

Paton, without any sense of irony, puts the blame at least partially on the company's digital efforts when explaining why the company has chose to file of Chapter 11 bankruptcy, stating that digital expenses were up 151 percent since 2009.

But for the most part, Paton said that print advertising revenue had declined 19 percent and that print ads still accounted for more than half of the company's total revenue.

Ultimately, however, Paton blamed the high debt load the company has been shouldering.

I have been a frequent critic of anything and anyone claiming to be "digital first" while actually not enthusiastically launching new digital products. The Journal Register Company seems to me to be no exception: it is a company obsessed with all things digital as long as it involves the newsroom, but is lagging behind most other media firms when it comes to all digital platforms including the web (the company's newspaper websites and tablet editions are nothing to write home about).

I find it especially galling when a company uses becoming "digital-focused" as an excuse for layoffs (as Advance Publications has done), while again not announcing any new digital initiatives. One would think that this would at least me a common courtesy for those losing their jobs, a sign that the company is being serious in what they say.

Here, at least, Paton has laid out his thinking clearly and honestly.

Update: here is a blog post from Steve Buttry, Director of Community Engagement & Social Media at Digital First Media. Buttry attempts to explain today's Chapter 11 filing and shore up the troops. I guess I would say I'm not buying it – it reads too much like one of those statements from Advance Publications.

This sentence early in the blog post was really the one that got to me: "JRC is making great strides in developing a healthy new business model for the digital marketplace."

I have no idea what that means, though I suspect he is talking about the moves being made in the newsrooms that, in the end, will have absolutely no effect on the company's declining revenues. To me it is window dressing. Something that is said as employees are laid off.

One look at the newspaper websites, or a search inside Apple's App Store, is all that is necessary to know that "digital initiatives" is being used in an all new and creative way.

It is truly a shame that the company name, "Digital First," was taken by an old media company saddled with tons of debt. It makes it seem, not unreasonably, that the term 'digital first' only is about firing four guys and telling the two remaining to start aggregating content. That might be a new way to manage the newsroom but I don't see what that has to do with digital.

I really hoped a digital pure play might have grabbed that name - one with developers, as well as editors and reporters. Further, I hoped that company was as sales and advertising oriented as Google and other successful digital companies, not led by advocates of "paid content" who have never sold an ad in their entire careers, and wouldn't know a P&L or a budget if one fell on their head.

Because, you see, there are at least two parts of a P&L – revenue and expenses – and those that seem only concerned with expenses appear to be driving the bus right now – and there looks to be no guardrails ahead.