I’ve been passing around an odd little YouTube clip of a 2005 Christmas gift from Sam Zell. It shows an animated statue that features a recording of Sam extolling the virtures of an economy that’s throwing off cheap cash left and right, And then, there’s a song:
“We’re awash with cash to spend!”
It would just be that – an oddity – until you read a piece in the New York Times which notes that the newspaper industry over the past few years followed the same bubble of cheap money that drove the housing bubble.
And, like all bubbles, eventually it pops:
The bankruptcy filing of the Tribune Company on Monday is just the latest, largest evidence that the American newspaper industry is suffering the hangover from an immense buying spree in 2006 and 2007 at what turned out to be the worst possible time for the buyers, just as the business was about to enter a drastic decline.
Newspapers would be in trouble either way. The steady leak of advertising and readers from print to the Web has become a widening torrent in this recession year. Most newspapers remain profitable, but the margins are dropping fast, with the industry losing about 15 percent of its ad revenue this year.
But the companies in the weakest condition are there largely because they borrowed a lot of money to buy papers, often at inflated prices, and the biggest of those deals were struck in 2006 and early 2007.
The full story is here.