• by Erik Sass  @eriksass1, December 5, 2008

The Rocky Mountain News, one of two dailies serving the Denver metro area, could be closed if it does not find a buyer by mid-January, according to owner E.W. Scripps--which announced it was putting the struggling paper up for sale on Thursday. The company cited financial difficulties, revealing that the newspaper lost $11 million so far this year. RMN is one-half of a joint operating agreement with the Denver Post, owned by the MediaNews Group.

"It's going to be very difficult to find a buyer in this market," predicted Ken Doctor, a newspaper analyst with Outsell, Inc., who noted that a loss-making newspaper probably would not attract much interest in the best of times. He said it's also one of two metro dailies operating in the same market, which is another strike against it. "Now, with the credit markets seized up, and the recession officially declared, it's hard to imagine any bank is going to agree to finance a newspaper deal."

On Wednesday, another newspaper--the Virginian-Pilot in Norfolk--was taken off the market after potential buyers could not arrange financing. Several other sizeable dailies, including The San Diego Union-Tribune and Austin American-Statesman, have been on the market without finding a buyer for months.

Financial analysts have warned that a number of newspaper publishers with substantial debt are at risk of default under the terms of their lending covenants--including Tribune Co. and MediaNews. Philadelphia Media Holdings, the publisher of The Philadelphia Inquirer, defaulted in June, followed by The Journal Register Co. in July. McClatchy narrowly avoided defaulting on its debt by renegotiating lending agreements in September.

Scripps tacitly acknowledged that closure was a likely outcome for the Rocky Mountain News. Mark Contreras, senior vice president of newspapers, maintained that the company "is not focusing on that right now," according to Editor & Publisher. "This has been a difficult and gut-wrenching decision to go through," he said, a seeming portend of the newspaper's demise, rather than divestment.

Threats of newspaper closures have become more common over the last year: the Star-Ledger, based in Newark, retreated from the precipice at the last second when union holdouts agreed to more layoffs, and the Journal Register Co. said it may close up to 13 newspapers in Connecticut if it doesn't find buyers by January 13.

On this note, a report from Fitch Ratings warned on Wednesday that "more newspapers and newspaper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010."

However, Doctor does not expect closings to become common events. "Most of these newspapers are simply becoming small enterprises," predicting "shrinking staff, shrinking of individual daily editions" and reductions in frequency. In 2009, he said he expects more newspapers to follow the example of the East Valley Tribune in Arizona, which recently cut back its publication schedule from seven days a week to four.

When will the shrinkage stop? Doctor said it's hard to tell, but the situation is getting worse: "All the conditions were already leading in the same direction. Real estate classifieds, auto and hiring were all off, retail and national--all the major categories of newspaper advertising. In the last six months, the turndown has acted as an accelerant. All the problems that newspapers were facing from being a mature industry are now being amplified. That's what recessions do: They disproportionately hurt an industry that was already wounded."