Scripps puts Rocky Mountain News for sale

The Rocky Mountain News, Denver???s oldest daily newspaper, is for sale, and its owners would consider shutting it down if no buyer is found by mid-January.

Cincinnati-based E.W. Scripps Co. announced Thursday that it???s searching for a buyer for the newspaper, which was founded in 1859, because of what it called ???difficult??? operating conditions.

Scripps officials say they expect to lose $15 million this year on the newspaper.

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The company set a mid-January deadline for purchase offers.

Ken Doctor, a newspaper industry analyst with Burlingame, Calif.-based Outsell Inc., said it???s ???highly unlikely??? that Scripps could find a buyer for the News in just a few weeks.

???In this market of cratering newspapers and a credit freeze, you don???t find a buyer in less than 60 days,??? he said.

Asked in an interview whether Scripps would shut down the News if no buyer is found, Mark Contreras, senior VP of Scripps??? newspaper division, said: ???You never want to say never. I guess [if] we would get to the point where there???s nobody [offering to buy the paper] and no other option, a shutdown of the Rocky is a possibility, but we???re really not anticipating today that that???s a probability.???

He said it would not be feasible to convert the News into a website-only operation without the existing staff to provide content.

Contreras said there are no plans to make further staff cuts or other ???financial surgery??? at the News to make it more attractive to a buyer.

In a statement, Scripps (NYSE: SSP) said it is offering to sell the News as well as its 50 percent interest in the Denver Newspaper Agency (DNA), an organization established under a partnership with Denver-based MediaNews Group Inc., owner of The Denver Post, to publish both papers.

Word that the newspaper is for sale comes after steep circulation and advertising declines, which led to months of speculation about the tabloid???s future.

It???s not clear who would be willing to buy the News given its steep losses. Contreras said Scripps is identifying potential buyers and that some have expressed interest in the past, but he declined to provide names.

No specific asking price has been set, he said.

Doctor noted that numerous other papers are also on the market in several states. A would-be owner, he said, would have to be willing to either subsidize further losses by the News or make severe cutbacks.

Kirk MacDonald, who until 2006 was CEO of the DNA and now is an independent media consultant, said the announcement that the News is for sale was not a surprise given the general state of the economy and specifically the dismal market for newspaper advertising.

He said he was optimistic some form of the Rocky could survive, however.

Under terms of Scripps??? deal with MediaNews to publish the News and Post, MediaNews has right of first refusal to buy the News.

William Dean Singleton, MediaNews vice chairman and CEO and a principal owner of the company, declined to comment on whether he would make an offer for the paper or how a News shutdown would affect the Post.

While privately held MediaNews does not report the Post???s financial results, it???s believed the newspaper is suffering losses similar to those of the News ??? or perhaps even greater, given the Post???s larger newsroom staff. So a News shutdown presumably would bolster the Post???s finances.

Doctor said he doubted that MediaNews would acquire the Rocky Mountain News. Given that Scripps and MediaNews are already partners in Denver, ???that would have happened already??? if such a deal could be reached, he said.

A spokesman for investor Philip Anschutz, who has been mentioned in the past as a possible buyer of one of the Denver papers, also declined to comment. Anschutz owns newspapers in Baltimore, San Francisco and Washington, D.C., and web-only news sites in other cities.

The Rocky Mountain News sells 225,000 copies weekdays and 490,000 on Saturdays, when it is delivered to both News and Post subscribers. Those numbers have declined sharply in recent years.

Finances are to blame for the decision to try to sell the newspaper.

???Our 50 percent share 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,??? Rich Boehne, president and CEO of Scripps, said in the statement issued by his company.

???The decision to seek a buyer for the Rocky would have been unthinkable until very recently,??? Boehne said. ???But the operating conditions have become increasingly difficult in Denver, as is the case in all major metropolitan newspaper markets.???

News Editor and Publisher John Temple declined to comment on the announcement, referring questions to Scripps??? corporate office.

???This is a day I never wanted to see come,??? Temple told his employees Thursday, according to the News??? website. ???Clearly, you???re not responsible for what happened.???

Boehne was in Denver Thursday and spoke to the News staff.

???We just decided that the best course of action was to offer the paper for sale and see if there was somebody else with the capital or the money or that has a different view of the market than we do who might have the opportunity to create the next great future of the Rocky Mountain News,??? Boehne said, according to a video of his address to the paper???s staff posted on its website.

Two News employees who asked not to be named said the paper???s staffers were told Thursday that the paper might be shut down if no buyer is found.

One said that employees were told that ???Scripps has put us on the market. They are also talking about closing us. If that happens, it would happen fast, probably in January.???

???The company intends to entertain [purchase] offers through mid-January 2009,??? Scripps said in its statement. ???If no acceptable offers emerge in the course of that period, the company will examine its other options for the future of the Rocky Mountain News and its interest in the Denver Newspaper Agency.???

Scripps acquired the News in 1926. After decades of bitter competition with the Post left the News on the brink of failure, the two newspapers in 2001 entered into what is known as a ???joint operating agreement??? (JOA), an exemption from federal antitrust laws aimed at preserving multiple newspapers in a city.

The deal allows the partners to save millions on business expenses, print on one set of presses, deliver papers on the same trucks, and avoid costly competition for advertising and subscriptions.

But they still operate separate newsrooms with separate teams of reporters, photographers and editors, so their news-gathering costs are largely duplicated.

Scripps and MediaNews split profits from the JOA minus their newsroom expenses.

But while the JOA kept the News alive, it evidently has not been enough to keep it healthy, judging from Thursday???s announcement, especially with the mass-circulation newspaper business in free fall nationwide.

While the Justice Department would have jurisdiction over changes in the JOA, it does not appear that Scripps would face much opposition if it chooses to shutter the News, based on past JOA dissolutions.

Scripps said its share of ???operating income,??? also known as ???equity earnings,??? from the partnership ??? basically, profit before deducting newsroom costs ??? declined more than 50 percent to $5 million in the first nine months of 2008, not counting a one-time gain of $4.4 million from the sale of property.

Rocky Mountain News editorial expenses in the same period approached $16 million, Scripps said.

Scripps also said the DNA had about $130 million in long-term debt stemming from the consolidation of News and Post printing operations in one facility.

The company said it is working with New York-based Broadwater & Associates on the sale. No asking price was announced.

Gov. Bill Ritter spoke Thursday with Boehne about the sale offer, said Ritter???s spokesman, Evan Dreyer.

???He told Boehne he hopes Colorado???s oldest newspaper and oldest continually operating business can survive the worst economic crisis this country has seen in decades,??? Dreyer said.

Ritter noted that the News staff has won several Pultizer Prizes in recent years and praised Temple as a community leader.

???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 his statement. ???The loyal readers and advertisers of Denver deserve the very best and we???ll work hard to find a solution that benefits this great city.???

Scripps officials said they will continue to operate the paper as always for the time being.

The company said the announcement doesn???t affect its separate partnership with privately held MediaNews Group, known as Prairie Mountain Publishing, which publishes several other Colorado newspapers, including the Camera of Boulder.

When the JOA began in 2001, Scripps agreed to pay MediaNews $60 million as part of the agreement that led to the joint-publishing deal. It was not clear Thursday how that payment would be accounted for in case of a News sale or shutdown.

Years ago, JOAs were more prevalent than they are now, with about 25 operating nationwide. They were seen as a veritable license to print money, allowing the two papers to jointly set ad and subscription rates at a time when newspapers were by far the dominant vehicle for classified and local retail ads.

But that was before classified advertising started fleeing to the Internet, and retailers increasingly resorted to direct mail.

Today, fewer than 10 JOAs remain in effect. In at least 10 former JOAs, one or the other paper was shut down; in two cases, the formerly separate papers merged into one.

???When you have two papers, I think the technology and economic realities of 2008 have just overcome JOAs,??? analyst Doctor said. That???s the meaning for me of [the Denver situation], that JOAs are a relic of a different era.???

Scripps has been involved in the shutdown of at least three JOA-protected newspapers.

Last December, Scripps shut down the 126-year-old Cincinnati Post in its headquarters city, leaving the Enquirer as the one remaining newspaper.

Scripps also closed its Albuquerque Tribune in February, leaving New Mexico???s largest city with one daily. Scripps continues to own 40 percent of the partnership that published the Tribune and the Albuquerque Journal.

And in 2005, it shut down the Birmingham (Ala.) Post-Herald.

E.W. Scripps runs newspapers in 15 cities and also operates 10 TV stations as well as United Media, a service that distributes comic strips such as Dilbert and Peanutsto newspapers.

In July, it spun off its lucrative cable-TV networks and Internet shopping services as a separate company, Scripps Networks Interactive (NYSE: SNI).

Scripps, like many media companies, has been suffering lately from a severe loss of advertising revenue. The company owns newspapers and TV stations in several U.S. markets.

In its third-quarter results, reported Nov. 7, Scripps reported a loss of $16.8 million, or a loss of 31 cents per share. In Q3 2007, the Cincinnati-based company reported a profit of $88 million, or $1.63 per share, including $71 million in income from discontinued operations.

It sustained a loss from continuing operations of $21 million, or a loss of 39 cents a share, versus income of $16.6 million, or 31 cents a share, a year ago.

In a conference call with analysts Nov. 7, when asked about the future of the Denver paper, Boehne did not reveal any plans to offer it for sale.

???Denver is going through some of the same pains that many large markets are going through,??? he said then. ???The good news is, Denver is a good market for the long term. The local management team there that runs the JOA has been very, very good on the cost-cutting side. We have a very good ad sales staff in place today. And we just have to see how it works through.

???But over the long term,??? Boehne added then, ???we???ll look at that market like we???d look at any market and be wiling to make any sort of rational decision that???s required.???

Scripps said in November it planned to reduce staff by about 400 workers at its newspapers nationwide and suspend its dividend as it reported a third-quarter loss.

The staff cutbacks did not affect the News, where staff has already been reduced through voluntary separation buyout offers and attrition.

(Paula Moore and Rene?? McGaw contributed to this article.)