Denver Post & MediaNews Group: Fallout from partner Journal Register Company bankruptcy?

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Almost exactly a year ago, the Journal Register Company's John Paton was named CEO of MediaNews Group, owner of the Denver Post, with a new entity called Digital First Media taking over management of both firms. But the first birthday of this deal hasn't been a happy one. Yesterday brought word that the JRC has filed for Chapter 11 bankruptcy. What's that mean for MediaNews Group and the Post? Impossible to say at this point -- but an insider offers some intriguing speculation.

Paton is a prolific blogger, so it was only natural that he would personally describe his vision for Digital First Media. In a September 7, 2011 post entitled "Digital First: The Next Step," he awkwardly misidentified MediaNews Group as "Media News Group," but this goof was overshadowed by bold declarations about the next stage of journalism. He maintained that JRC had "blown up a lot of...received wisdom" about what newspapers can and can't do in the 21st century marketplace, and touted the rise in online revenue. "Digital dimes can replace Print dollars," he asserted. "And if our dailies continue on the trend they are on right now, by the end of the year they will have brought in more digital revenue than the costs of running their newsrooms. Digital revenues can pay for newspaper newsrooms."

Here's a video interview with Paton that catches him at his most optimistic:

Paton's tone is considerably less effusive in a letter to employees explaining JRC's bankruptcy; it's on view below in its entirety. He notes that digital revenue for the firm grew 235 percent from 2009 through 2011, and the audience more than doubled. In contrast, though, its print-advertising revenue declined 19 percent -- "and print advertising represents more than half of the company's revenues," Paton writes, adding that "both print circulation and circulation revenue have also declined over the same time period." These factors, combined with $225 million in debt from a 2009 "restructuring" and obligations dating back to 2005 or so, when times for the newspaper industry were better (if not exactly plush), convinced JRC's board that filing for Chapter 11 was the best course of action.

In the months that followed Paton's elevation to MediaNews Group boss, his early reviews were fairly positive. This past January, when Jerry Grilley retired as Post president and CEO, our source was optimistic about the future, telling us that Paton and his new management team had made great strides toward creating and instituting a bold digital plan.

By summertime, however, our source reported grumbling over what was perceived as top-heaviness at Digital First Media, with new senior executive hires during a time of layoffs at MediaNews Group papers around the country. The fear: MediaNews Group was being used as a cash cow to build up DFM. Our source also noted tension between MediaNews Group types and folks imported by Paton, many of them with Journal Register Company roots.

Meanwhile, rumors of major changes were in the works, with speculation that Alden Global Capital LLC, which acquired the Journal Register Company last year, was looking to sell its interest in either the JRC or MediaNews Group. And sure enough, Paton, in his letter to employees, notes that the Journal Register Company has signed what's known as a "stalking horse bid" with the idea of effectuating what's described as "a prompt sale" -- one that could be completed within ninety days or so.

MediaNews Group isn't mentioned in the bankruptcy-related FAQ for Journal Register Company employees -- a document that focuses on reassuring workers that the firm will emerge from Chapter 11 and continue moving forward into the digital future. But our source cites concern among MediaNews Group staffers that the damage won't be isolated to the JRC. At this point, there's no direct evidence of that, but it won't stop folks in Denver and beyond from worrying.

Here's the Paton letter to employees, followed by the aforementioned FAQ.

John Paton Letter About Journal Register Company Bankruptcy Filing
Journal Register Company Bankruptcy Employee FAQ

More from our Media archive: "Jerry Grilly to retire as president and CEO of the Denver Post."

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