What’s at stake in the latest Journal Register bankruptcy

Matt DeRienzo

This article also appears at the Nieman Journalism Lab.

In the spring of 2009, when I began researching what would become a book about online community journalism, I couldn’t have found a better foil than the New Haven Register.

Owned by the bankrupt Journal Register Co. (JRC), the daily was moribund and mediocre, its disconnect from the community symbolized by its location: a gigantic converted shirt factory, partly surrounded by barbed wire, on the outskirts of the city next to Interstate 95. The contrast with the New Haven Independent, a nonprofit, online-only startup that is the focus of my book, couldn’t have been more stark.

Three years later, when I turned in my manuscript, things had changed considerably. JRC was out of bankruptcy. Its chief executive, John Paton, was winning industry plaudits for his “Digital First” strategy of accelerating the transformation from print to online. The New Haven Register had a new, young, progressive editor, Matt DeRienzo. And JRC had outsourced printing to the Hartford Courant as DeRienzo had begun preparing to move his staff to a yet-to-be-determined location in the downtown. New Haven, a poor, largely minority city of about 130,000 people, was suddenly home to two of the country’s most closely watched experiments in reinventing local journalism. (My book on all of this, “The Wired City,” will be published by the University of Massachusetts in 2013.)

So I was shocked on Wednesday when Jim Romenesko reported that JRC was once again entering bankruptcy. As Paton explained it on his blog, the idea is to get the company out from under the legacy costs that it took on when the newspaper business was a lot larger and more profitable than it is today: debt; long-term leases on buildings it no longer needs; and pension obligations. The strategy is to take advantage of Chapter 11 in order to reduce JRC’s cost structure and re-emerge from bankruptcy in a matter of months.

The pension piece has been the subject of considerable consternation on Twitter and elsewhere, as it raised the specter of out-of-state investors (JRC is headquartered in suburban Philadelphia) taking away from loyal employees what is rightfully theirs. DeRienzo countered by pointing out that pensions are guaranteed by the federal government. “No one’s retirement is at risk,” he wrote.

There’s no question that guaranteed pensions are largely a thing of the past in the private sector, with defined benefits having given way some years ago to the era of the 401(k). And JRC is not the only newspaper company with pension problems. In 2009, the New York Times Co. nearly reached a deal to sell the Boston Globe that would reportedly have brought in less cash ($35 million) than the Globe’s future pension obligations ($59 million), which prospective buyers were asked to assume.

In other words, if you were going to start any private enterprise from scratch, you would almost certainly not include pensions as one of the benefits that you would offer your employees. And I have little trouble believing that JRC’s pension system is weighing the company down.

On the other hand, it seems to me that JRC may soon face a “Where’s the beef?” moment. Paton’s tireless advocacy of Digital First has gotten a lot of attention and praise — deservedly so. At some point, though, Paton has to deliver real improvements both to the journalism of JRC’s news organizations and to the bottom line.

I think Paton and DeRienzo have the right values and the right motives. I’m rooting for them. Fundamentally, though, we are talking about trying to effect change from the top down. Corporate chain ownership has been a disaster for community journalism. I’d rather my paper be owned by a good chain than a bad one. But neither is an adequate substitute for local ownership — and yes, I realize that’s no panacea, either.

As the Nieman Journalism Lab’s Joshua Benton points out, this may be Paton’s last, best chance to remake JRC exactly along the lines that he envisions — truly a new start without the dead weight of his predecessors’ poor decisions dragging him down. I’m eager to see what he’ll do with that opportunity.

9 thoughts on “What’s at stake in the latest Journal Register bankruptcy

  1. Mike Benedict

    A couple of thoughts. 1. It’s a bit harsh to call pensions, investments in infrastructure, etc., that may have been standard with previous generations of publishers but are now fiscal albatrosses “poor decisions.” In some cases they made perfect sense and were necessary in order to attract the higher caliber of talent and produce the best product. That almost no one foresaw how drastically the order would change does not mean they all made poor decisions.
    2. Getting out from under any pension responsibility would make a company more attractive to suitors. Dumping that responsibility on the taxpayers is a Bain-like move.

    1. Dan Kennedy Post author

      @Mike: Yes to No. 1, absolutely. Only looks like a poor decision in retrospect. I should have made that clear. As to No. 2, well, Bain has done some very smart things over the years. Is society better off if taxpayers assume some of Journal Register’s pension obligations, or if instead JRC goes under (in which case we would assume all of the pension obligations)?

    2. L.K. Collins

      Any comment about dumping the pensions of salaried GM workers completely via the packaged bankruptcy?

      There seems to be no standard at all.

  2. Jack Kramer

    Mr. Kennedy: Jack Kramer, here, the old, broken down ex-editor of the Register that Matt DeRienzo replaced. Forgetting about me, there’s a lot of fine journalism and journalists that have worked at the Register – including recent history – that you insult with your “moribund and mediocre” and ”disconnected with the community” comments.

    1. Dan Kennedy Post author

      Lot of fine journalists at the Register, several of whom I’ve met, Mr. Kramer. Walk into the newsroom of any paper in the country and you’ll find good journalists, regardless of whether the paper is good, bad or somewhere in between.

  3. Rick Peterson

    I believe the PBGC benefit maxes out at $45,000 annually. Not bad but the machinations necessary to actually get paid are major. The real elephant in the room, DK is that your students should plan on being unemployed beyond the age of 55 at a time when life expectancies are growing and social security, what there is of it, will be at almost 70. Do the math. Due to short-term thinking, publications are laying off people for no reason other than their age at the same time that these people have no way to support themselves. Ravaged 401K’s that replaced defined benefit pensions, hammered home equity, zero job prospects. Think Polaroid redux. If this were to be done on the basis of race, gender or sexual orientation, there would be screams heard across the land. Ah, but age? Everyone starts whistling past the graveyard. “It won’t happen to me” and besides, there are too many of these people. If you’re not financially secure at 55, you must be a loser, right? Highly-qualified yet unemployed baby boomers, people who played by the rules, are a ticking demographic time bomb that isn’t going away. I am witnessing this right now at a major publication. It’s like “Soylent Green”. No old people. The social costs of this are just starting to manifest themselves.

    1. James Craven

      I cannot disagree with Mr. Peterson. As a 58-year-old journalist who was laid off last November, I left a newsroom of mostly 20-somethings. The job hunt follows along the same lines. Although I have decades of experience and enough awards to fill a wall, the placement of my resume with newspapers in 22 states and five countries has not enticed even a nibble. An unemployment counselor told me to leave off when I went to school, and to delete any awards past five years. I have even had a publisher tell me that why would they hire a veteran, when college grads are a dime-a-dozen. It seems that experience counts for little in today’s industry.

  4. Dan Kennedy Post author

    Wanted to note that I originally wrote that DeRienzo himself outsourced printing to the Hartford Courant when I should have said JRC. Now revised.

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