Jessica Kerman

I feel bad for banks and lenders right now (and that does not happen too often).

With the looming bankruptcy of some car manufacturers and other major manufacturing industries, another industry might do well to look at the bankruptcy option.

Martin Langevald, of Nieman Journalism Lab, posted a very interesting blog entry about whether news organizations should declare bankruptcy.

An article in The Deal Magazine by Richard Morgan entitled “The default option” explores in detail the impact that upcoming debt maturities will have on Gannett, the nation’s largest publisher of daily newspapers.

Gannett, says Morgan, faces a slew of bond maturities in mid-2011, and very little prospect of being able to raise sufficient cash to cover that obligation.  He quotes an anonymous expert on “distressed debt”: “They painted themselves into a corner. They have to raise more than $400 million between now and the middle of 2011 in a market where, frankly, many of their bondholders would rather they default.” Gannett’s debt rating has been lowered to junk-bond status and it is in danger of violating at least one debt covenant later this year. (Those inclined to speculation can find in the story a “win-win” strategy to profit from Gannett’s predicament with the help of credit default swaps.)

Other newspaper firms with high debt loads have similar predicaments exacerbated by several years of revenue declines that culminated in a mind-boggling 29 percent revenue drop for the industry as a whole in the first quarter of 2009.

The number-two publisher (by circulation), Tribune, is already in bankruptcy. McClatchy (number 4) is technically in default for seeking relief from bondholders by means of an exchange offer relating to $1.15 billion in bonds that met little acceptance. MediaNews Group (number 6) arranged a forbearance agreement with lenders back in April, indicating a technical default as well. MediaNews is privately held and has not reported subsequent arrangements, but it has a total of about $1 billion in debt.

The New York Times Company (number 7), has been taking a variety of drastic steps to avoid defaults, including a pricy loan from Mexico’s Carlos Slim and attempts to sell non-core assets, particularly those in New England (the company’s minority stake in the Red Sox baseball team, the Boston Globe, and the Worcester Telegram & Gazette). Lee Enterprises (number eight) obtained waivers back in January to postpone a debt default situation relating to $306 million of its $1.1 billion debt.

It’s not likely all these operations can avoid eventual bankruptcy. Farther down the list, other publishers have already made the trip to the courthouse: the Journal-Register Company (number 18), Minneapolis Star-Tribune (the number 4 independent, non-group newspaper), Chicago’s Sun-Times group (number 17), and the Philadelphia Inquirer (the number 3 independent).

Often, corporations staring the repo man in the face opt for strategic bankruptcies that allow time for operations to be rationally resized, or sold off, and potentially for a new, viable organization to emerge.  The current restructuring of the auto industry certainly falls into this category. Resistance to this notion comes, of course, from current owners who are generally left with next to nothing — but for most of the aforementioned newspaper publishers, their stock prices are already in the penny range, or close to it, and the market value of owner equity is zero, or close to it (as indicated by the suggested negative price to be paid by whoever is willing to take the Boston Globe off the hands of the New York Times, which originally paid about $1.3 billlion for it.)

If we experience a rash of bankruptcies among these larger publishing groups, the likely outcome is that the underlying newspaper assets will be sold individually, often to local groups wishing to regain control of their local news enterprise. If those groups are willing to follow through with the necessary investments needed to turn their local papers into digital-first news enterprises, that could be a good outcome for the public at large. In fact, it might be an essential path, because the current owners have no resources or flexibility left to complete the needed transformation.

I’m not sure how I feel about this idea. I love the idea of putting local news back in local hands. This creates local jobs and hopefully will get the news organization back in touch with its consumers (if there are any left). However, I’m not sure how I feel about the direction bankruptcy takes and the effects it has on society as a whole. These companies employ thousands of people. Bankruptcies allow thousands of layoffs with no negotiations. If any unions had negotiated pensions or retirement benefits…those would be gone. The banks and lenders would be out the millions (or billions) of dollars they put into these companies to keep them alive.

But, if local people see all these companies die, would they really be willing to purchase the local entity anyway? It wouldn’t look like a smart investment for sure…

Today I watched an interesting TED talk from Clay Shirky titled “How social media can make history“. Shirky, author of Here Comes Everybody, talks about how the decentralization of media by social networking sites and cheaper technology has changed the way people communicate with each other, with corporations and with governments. The immediate availability of communication democratizes the media, he says.

In media history, Shirky says, there are four major periods in the past 500 years: the printing press; the telegraph and two-way communication; recorded media such as photographs, sound and video; and broadcast radio and television. “The media that is good at creating conversations is no good at creating groups, and the media that is good at creating groups is no good at creating conversations.”

The Internet changed all of the completely, he says. Now, the same medium is used to create conversations and garner groups. The Internet is less about a site for information as it is more about coordination. People not only consume what professionals give them, but they respond and produce their own materials to supplement it. “It’s as if when you bought a book, you got the printing press for free.”

He uses a couple of examples to exemplify this idea. The first was a large earthquake that hit China. Unlike previous natural disasters in the country, this time the people in China were reporting the disaster in real time. As the quake was happening, people were updating Twitter and other social media sites. BBC, according to Shirky, found out about the earthquake from Twitter. The Chinese then used the same media sites to send out their messenges about bribery and corruption in the government that led to the deaths of thousands of children who were in unstable buildings during the disaster.

The next example he used was an obvious pick— the Barack Obama campaign. When Barack Obama changed his mind about the Foreign Intelligence Surveillance Act, a group of people used his social networking site to disagree with Obama’s decision. However, Obama and his campaign never shut down the group, never censored them. They just let them continue to give input. This is what Shirky calls the “mature” way to use the Internet and to deal with the democratization of information communication.

However, efforts to ensure voters were not suppressed during the election also became quite popular, and the U.S. was not the first to advocate such an idea. Shirky turned to Nigeria to show almost the same idea for its free election a year earlier.

We’ve been talking about the decentralization and democratization of information for years, but only now— when people in third world countries can access the same sites as the elite in America— can it be considered a revolution.

“What matters here isn’t technical capital, it’s social capital,” he says. “It isn’t when the shiny new tools show up that their uses start permeating society. It’s when everyone has the tools.”

As Thomas Friedman says, “There is no revolution is nobody gets hurt.” There is definitely a revolution happening, and it is uprooting everything we know as news.

I see this not only as a step in history, but a change in history. The newspaper article was once consider the “first draft of history,” but now, I see Tweets and Facebook profiles and blogs as taking root in this role of documenting what is happening now. For example, take a look at the Iranian election. When Mahmoud Ahmadinejad “won” the free election in Iran, the supporters of Mir-Hossein Mousavi took to the streets to express concerns about fraud and irregularity in the election process. Despite Iranian efforts to censor citizens and journalists in the country (including foreign journalists), news of protests and violence still hit the World Wide Web rapidly every day. News organizations, which previously controlled the conversation, had to rely on its consumers for the news.

Not only did the Iranians gain international attention, they also garnered international support. Americans, especially a large group of people on Twitter, showed their support for Mousavi supporters by changing their icons to green. Some advocated changing the settings on their computers to Tehran to protect bloggers and reporters in Iran who were leaking information.

Today, we’re seeing the same thing from Honduras, where there are still media blackouts, but people still are learning more and more about the ousting of President Manuel Zalaya. I was disappointed by the Wall Street Journal’s article about the “coup” because it never really explained why President Obama would support a man in bed with Hugo Chavez other than the people elected Zalaya into office. Anyway, social media sites are showing mixed reactions to the ousting. Leaders have all condemed the “coup” and some citizens in Honduras have posted on Twitter supporting Zalaya, but others are correcting the foreign media, saying that he was taking illegal actions to try to stay in power like so many of the other Central American leaders have done.

A revolution is happening, and we better be ready to capture it, one Tweet at a time.

Related links:

Shirky’s book

I admit that my friends have written some strange comments to me on Facebook and Twitter. Many of these comments would seem unprofessional to the uninformed eye. However, I believed, at least to this point, that people who research me on social media sites would know the difference between my actions and my friends’ actions on these sites.

However, the Associated Press has changed this viewpoint for me this week. According to Editor and Publisher, the News Media Guild has complained about new policies the AP added to the employee handbook last week regarding social networking sites.

Leaders of the News Media Guild, which represents 1,520 AP employees in the U.S., complained that one policy requiring Facebook users who are AP employees to delete material posted — by others — that violates AP standards is over-reaching.

“It is making some people cringe,” said Kevin Keane, News Media Guild administrator. “It is not appropriate for a company that heralds free speech.”

Keane also objected to another portion of the new rules that states: “Posting material about the AP’s internal operations is prohibited on employees’ personal pages.”

“You can’t tell people not to talk about anything internal to AP,” Keane said. “It is too broad. People have the right.”

The News Media Guild makes a good point— a company that prides itself in upholding the First Amendment should be mindful of how it upholds those same values within its company. However, I can understand why the Associated Press is worried. Right now, the biggest difference between the professional journalist and the citizen journalist is the professional’s commitment to present fair and balanced information in a clear manner for the public. If the idea of fairness and obejectivity is compromised, the basics of journalism also stand compromised.

Choosing to be a journalist is choosing a certain lifestyle. You can vote, but you can’t participate in the campaign. You can believe in a policy, but you can’t stand in support of it. The same is true of politicians, teachers, administrators and movie stars. When you choose certain professions, you are willingly making the choice to live the life that goes along with that occupation.

While I agree with Keane that some of the wording is too broad and vague, I completely understand why the AP is worried. We are in a transitional period for news and news writers, and it is important to analyze each step the industry takes closely before we completely lose the idea of objectivity.

Related Links:

Should your company have a social media policy?

WSJ social media policy