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Wednesday, March 21, 2007 11:21 pm

Red all over

The SJ-R’s new owner has been gobbling up small papers and piling on debt

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Sue Schmitt, publisher of the SJ-R
Untitled Document If everything goes as planned, Springfield’s hometown daily newspaper will soon have a new owner. Fairport, N.Y.-based GateHouse Media Inc. last week announced an agreement to buy the State Journal-Register and six other dailies and two weeklies in Illinois and Ohio for $380 million. The seller, Copley Press, of La Jolla, Calif., put its Midwestern properties on the market last year. Subject to approval by regulatory officials, which is expected, the deal will be completed by the end of April. What happens then — whether there will be changes in content or personnel — is unknown. GateHouse spokeswoman Francie Nagy says the company isn’t “looking to comment on anything right now,” and for the time being it’s business as usual at the SJ-R and its sister, the Lincoln Courier, says publisher Sue Schmitt. “Where we stand is — we pretty much know as much as you do right now,” Schmitt says. She adds that GateHouse representatives have yet to travel to the capital city. Doing so, she says, would be premature. In recent years, newspaper companies have been pounded by declining circulation, competition for ad dollars, and the fluctuating cost of newsprint. Although some newspaper chains have crumbled under the pressure, little-known GateHouse has quietly become one of the nation’s largest newspaper companies, at least measured by the number of titles it owns. Not counting the Copley papers, GateHouse has 74 dailies, 226 weeklies, and 113 shoppers (including the Springfield Shopper) in 18 states. GateHouse began business in 1997 as Liberty Group Publishing, the company formed to acquire some of the U.S. newspaper properties of Conrad Black’s Hollinger International Group. Current chief executive officer Mike Reed later changed the company’s name and moved the headquarters from Illinois to upstate New York in 2006. GateHouse’s business strategy of acquiring newspapers in smaller communities and heavily emphasizing local coverage seems to have been a winning plan for the company’s stockholders. Despite a history of losses, the profit picture appears to be improving. Operating losses in 2006, for example, were $14.9 million on revenues of $314.9 million, compared with a loss of $30.7 million on revenues of $200.1 million in 2004. At the same time, as the company expands, it’s piling on more and more debt — $690 million as of March 9, according to its 2006 annual report, filed last week with the Securities and Exchange Commission and available at www.sec.gov. The company, which paid $49.7 million in interest last year, warns in its filing that “our indebtedness could adversely affect our financial health.”
GateHouse, which is controlled by private equity firm Fortress Investment Group LLC, went public in October and trades under the symbol GHS on the New York Stock Exchange. The Copley papers will present new challenges for GateHouse. The SJ-R, with circulations of 61,330 on Sundays and 51,850 on weekdays, will soon become one of the largest GateHouse newspapers — and the first daily operating in a capital city. It’s unclear how GateHouse’s “hyperlocal” editorial philosophy will jibe with the SJ-R’s statewide scope and national coverage, including on its editorial page. Typically a change in ownership of large newspapers is followed by job cuts in the newsroom, but that may not be the case for leaner, smaller dailies. Bob Neil, president of the Quincy, Mass., Newspaper Guild, the union that represents workers at the Patriot Ledger, says that although some staff changes were made when GateHouse bought that paper last summer, the experience hasn’t been too bad — a few people’s contracts were bought out, but the company found jobs elsewhere for others.
“We understand that they need to make changes,” Neil says. “We know that things have to change, and we’ve been working with them to protect our members and as many jobs as we can.”
Staffers at the SJ-R aren’t wringing their hands yet, says Schmitt.  “We’re not going to speculate on what they’re going to have us do,” Schmitt says. “What I’ve been discouraging people from doing is looking at what they’ve done other places and extrapolating ‘This is what it is going to mean here,’ because we’re a quite different newspaper than they usually acquire.”
Whatever changes are in the offing at the SJ-R, readers won’t know until later this spring, says Bob Sullinger, president of Great Plains Group, a local advertising agency. “You don’t know until the new man takes over,” says Sullinger, a former TV reporter, “but historically, as with broadcast, when the new man comes in there’s a new way of doing things.”

Contact R.L. Nave at rnave@illinoistimes.com
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