24/7 Wall St.

Sam Zell took The Tribune Company private and probably regrets that every hour of every day. With the downturn in the industry, his huge debt load is like a boat anchor.

Zell has announced huge cuts in the amount of newsprint his papers like the LA Times and Chicago Tribune will use. He will chop the number of editorial pages to 50% of each property’s total. That means the home town newspaper is going to look very thin.

Zell has more debt than most news chains, but public companies like McClatchy (MNI) and Gatehouse (GTS) are not far behind him. They borrowed money to buy more newspapers. Their high long-term debt and falling revenue have taken their stocks down 50%, 60%, and in some cases 80% this year.

Zell’s move will spread from The Tribune to other newspaper operations. Revenue in the industry in now falling close to 10% a year. Even financially strong companies like The New York Times (NYT) and Gannett (GCI) can’t hold out without making similar large reductions. Online versions of their products might have saved them, but, at most of these companies, they are not even 10% of total revenue.

Internet news outlets are winning and it is just a matter of time before they will replace newspapers altogether.

Douglas A. McIntyre