Undeterred by the market conditions for metro newspaper sales, the E.W. Scripps Co. is putting the Rocky Mountain News and its 50 percent stake in the Denver Newspaper Agency on the block.
According to a story in the Rocky Mountain News, which first reported the sale, Scripps said the financial conditions in Denver had deteriorated to point where the company could not cover its editorial costs. For the first nine months this year, Scripps lost $11 million in Denver, said the story.
Mark Contreras, senior vice president of newspapers at Scripps, told E&P that newsroom expenses are $16 million and that the company was receiving $5 million in distributions from the agency (after a one-time gain).
“There is a whole series of hypothetical we can walk through,” Contreras said if no buyer comes forward by mid-January. “Part of the reason we are doing this is to layout on the table all the permutations and options.”
Closing the paper is one possible outcome though Contreras said the company “is not focusing on that right now. We do believe that someone will emerge.”
The decision to seek a buyer for the Rocky “would have been unthinkable until very recently,” Rich Boehne, president and CEO of Scripps, told the paper. “But the operating conditions have become increasingly difficult in Denver, as is the case in all major metropolitan newspaper markets. Our 50 percent of the cash flow generated by the Denver Newspaper Agency is no longer enough to support the Rocky, leaving us with no choice but to seek an exit.”
The Rocky Mountain news is under a joint operating agreement with the Denver Post, owned by MediaNews Group. The Denver Newspaper Agency handles the JOA, including all business matters, for both papers. Scripps and MediaNews Group share the profits of the agency. Contreras said that MediaNews Group has the first right of refusal over its 50 percent stake in the agency. The JOA expires in 2050.
Adding to the challenges, the agency is shouldering $130 million in debt from a recently completed production facility.
The company said it will entertain offers through mid-January and will seek other options if there are no acceptable offers. Scripps retained Robert Broadwater of Broadwater & Associates to aid with the transaction.
Scripps decided to put the paper on the block after a board meeting on Tuesday, confirmed Contreras who added there was a series of discussions leading up to the final decision. MediaNews Group was notified about the decision earlier today, he said.
“This has been a difficult and gut-wrenching decision to go through,” Contreras said.
Scripps was also involved in JOAs in Cincinnati, Birmingham, Ala., and Albuquerque, N.M. Contreras said that there are no plans to sell other Scripps papers.
“Some will be tempted to immediately write the obituary of the Rocky, but we’re hoping this step will open the way for a creative solution to the financial challenges faced by Denver’s great newspapers,” Boehne said in the news release. “The loyal readers and advertisers of Denver deserve the best and we’ll work hard to find a solution that benefits this great city.”
The Rocky Mountain News is one of several metros up on the auction block. The Copley Press is selling The San Diego Union-Tribune and other properties; Cox is also trying to unload several newspapers including the Austin American-Statesman. Landmark Communications pulled the Virginia-Pilot in Norfolk off the market on Wednesday due problems with buyers lining up financing.