50 cents: Buy a newspaper, or a share of Lee stock

Was it really just last Friday that the following comment appeared on our blog:

RhymesWithClergy wrote: By Christmas, I expect the cost of a copy of the Journal Times to be more than the cost of a share of Lee stock. -- 12/05/2008 2:10 PM

His comment came in response to Dustin's suggestion that everyone go out and subscribe to the Journal Times because -- despite its faults -- we need a local daily newspaper.

Well, RhymesWithClergy was right about the price, but wrong about the timing: It didn't take until Christmas. The price of a share of Lee Enterprises stock fell Monday to 47 cents on the New York Stock Exchange, before closing at 50 cents, the same price as the daily paper. You be the judge which is worth more.

The plight of the JT was made even clearer by a court filing in Delaware on Monday. The Tribune Company -- owner of the Chicago Tribune, the Los Angeles Times, ten other newspapers, two dozen television stations and the Chicago Cubs -- filed for Chapter 11 bankruptcy protection. That, hopefully, will give the company time to restructure its $13 billion in debt. Owner Sam Zell has tried to reassure readers, advertisers and employees, but employees who became partial owners or who are owed deferred compensation can kiss that money goodbye.

Tribune, with big city papers that could actually be losing money, is different from Lee, with mostly mid-market papers that probably are still individually profitable -- if freed from the $1.4 billion debt the corporation incurred when it bought the Pulitzer chain and its flagship, the St. Louis Post-Dispatch four years ago.

Lee does not release profitability figures for each paper, but the numbers for the nation's largest newspaper chain, Gannett, leaked out last week. The figures (somewhat dated: from the first nine months of 2007) showed most Gannett papers earning solidly double-digit profits. Highest was the Green Bay Press Gazette, chugging along at a 42.5% profit margin (at one time fairly standard for isolated newspapers but these days truly incredible). Only a handful of Gannett's operations were down in single digit profitability territory, and only one -- at the time -- was losing money: the Detroit News, which has problems of its own that Congress may at least partially fix if it bails out the hometown auto industry.

Despite its overall profitability figures, Gannett last week fired more than 2,000 employees systemwide, including more than 90 from its 10 Wisconsin papers. Even Green Bay made cuts and will be combining news sections to save newsprint.

What is Lee doing? Good question. We've seen some layoffs; seven at the Journal Times in July, coupled with newsprint savings here from the disappearance of features like stock listings and the weekly TV tabloid. (Reader complaints about the latter brought the daily listings back to Page 2, thus cutting into daily newshole.) Lee's Montana papers did layoffs all at once, but otherwise we've seen no corporatewide bloodletting like Gannett's last week. Lee also suspended its stock dividend, reduced payments into employee retirement accounts, and cut payments for retiree health benefits (earning itself pickets outside the Post-Dispatch Monday) -- all those cuts coupled with changes in Lee's credit terms that further mortgage the farm.

Will it be enough? Probably not enough to save the remaining stockholders. Lee's total market cap today was a mere $22.5 million -- less than some mediocre ballplayers are paid in one year -- and a far cry from its $2 billion market cap in 2004. Delisting from the New York Stock Exchange is a certainty if the stock price remains below $1.05 for the rest of the year, a further blow to those stockholders.

But that doesn't necessarily mean much has to change at the Journal Times... beyond death by one thousand cuts. One thing is certain: it's going to be a long, cold winter outside, but especially at 212 Fourth St.