It is not profitability but debt that is destroying media companies

Some interesting comments about the media industry from Jonathan Knee, an investment banker who advised on the San Diego deal and who has covered the media industry for over 15 years.

In an interview with the WSJ he says

Unfortunately people confuse dysfunctional capital structures with dysfunctional business models. The reason why most newspaper companies have gone bankrupt or appear perilously close to it is that they have too much debt, not that they have stopped being profitable. For the reasons I have already described, they are certainly less profitable than they used to be, but compared to most media businesses like movies and books, most newspapers still have higher profit margins. Unfortunately, many of these companies maxed out on available debt during a bubble in the debt market just before the debt bubble popped and their own profit margins precipitously declined. That does not mean that these companies cannot continue to generate significant cash flow once restructured into a sustainable capital structure