Newspaper Bubble by Mia
Due to the economic recession, U.S second largest news company Tribune filed for bankruptcy on Dec.10. In contrast to the past two years, U.S news enterprises merged small newspapers competitively with huge funds, now they start to downsize, sell buildings and even on the verge of bankruptcy. Apparently, newspapers are no different from house market suffering market bubble, and both of them need a fresh start.
First of all, with shrinking profit margin, most newspapers still run a lucrative business. To look news sector as a whole, the advertising revenue dropped fifteen percent this year alone.
Even though many newspapers still stay in the black, there are no more buyouts underneath huge debts going on compared with those mergers in the past two years. For Tribune, it was sold to the real estate tycoon Sam Zell in record high 8.2 billion dollars borrowing from the bank. Now there are Chicago Tribune, L.A Times and 23 TV stations under Tribune’s name. The debts Tribune owed are three times its assets.
The merger of newspapers in the U.S reached its climax in the last two years. Before Sam Zell bought Tribune Company early last year, Knight Ridder was sold to the eighth largest newspaper McClatchy in 4.5 billion dollars. In addition, the headlines among newspapers last year included the buyout of San Jose Mercury News and International Herald Tribune by international news giant News Corporation and the mergers of Philadelphia Inquirer and Philadelphia Daily.
But even those consortiums never start the merger of newspapers, newspaper still have a tough war to fight, said a senior analyst at Moody Investor Service, a credit evaluation institute. Most newspaper carried low debts 10 to 15 years ago; however, the financial leverage has become higher and much riskier in recent years, he said.
In fact, after deducting interest, tax and loss of currency rate, most newspaper still run a profitable business. Though there is only 10 to 20 percent profit margin in total revenue, lower than 20 to 30 percent profit margin in the past few years, most companies still can keep themselves afloat. However, companies with a huge amount of debt would tell a different story.

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