Arizona Daily Sun's parent company struggles

Flagstaff, AZ – Lee Enterprises, publisher of the Arizona Daily Sun, is having trouble paying its debt. Last week (Jan. 8) Lee's largest paper, the Saint Louis Post-Dispatch, laid off 39 employees - the latest in a series of lay offs. That's left many wondering how the Daily Sun and other Lee papers will survive. Arizona Public Radio's Laurel Morales reports.

Lee Enterprises bought the Arizona Daily Sun and other Pulitzer-owned newspapers in 2005. They didn't only buy the newspapers they also acquired their debt. Lee has a 140 million dollar payment due this spring. So far Lee has not been able to refinance that debt. These are challenging times to negotiate with lenders. A recent auditor's report questioned whether Lee had enough money to cover its debt and operating costs.

Ken Doctor is a news industry analyst at the research firm Outsell.

DOCTOR: Long story short same problem as other newspaper companies but a seemingly inability to figure out how to get past the debt mountain it's facing in the coming year.

Doctor says all newspapers are seeing a fall in advertising sales caused by the recession. He says Lee has a couple options: They can find lenders that will allow them to push off their debt for a while or they can declare bankruptcy. Either way, he says, they're going to have to reduce operating costs.

That could mean laying off employees, selling off some of its newspapers, and/or reducing the number of days some papers are circulated.

DOCTOR: Right now cash is so tight at a company like Lee that it has cut off its dividends. It is looking for cash anywhere it can get it. So the demands on individual publishers have never been greater.

Arizona Daily Sun publisher Don Rowley says on the local level the newspaper is making budget cut backs. He wouldn't disclose the amount or whether employees will be laid off. But he assures the Flagstaff community that despite rumors, the newspaper is here to stay.

ROWLEY: This newspaper survived the Great Depression; certainly it can survive the current economic downturn. This is one of the oldest most well established businesses in the community. And we're not going anywhere.

Rowley says the Sun isn't filling certain vacancies, it's cut the TV listings and it's looking at cutting other features. And in February the newspaper will shrink its width like the Arizona Republic and the Prescott Daily Courier did recently.

News industry analyst Ken Doctor says that's a cost saving trend across the nation.

DOCTOR: You have the web width shrinking, the depth of the paper shrinking, the number of pages shrinking, the number of staffers shrinking so all of those things are adding up to the amazing shrinking American newspaper. It's kind of ironic in 2008 we had the greatest upwelling of democracy we have seen in terms of public participation in the election. At the same time newspapers that have been such a key part of democratic expression in their communities over time have never been in worse shape.

But Don Rowley says the Daily Sun remains viable and he's optimistic about its future.

ROWLEY: The kinds of things you look for in a great newspaper market are relative isolation, which we have. We don't have a major metro market 50 miles outside of the city. You look for a well-educated population, which we clearly have. And you look for a population that's really involved in its community If a newspaper can't thrive in Flagstaff I don't think it can thrive anywhere.

For many Arizona newspapers it's not so much whether they can thrive as whether they can survive. The Winslow Mail recently folded and the East Valley Tribune cut back to four days a week.

So much depends on when the economy recovers.

For Arizona Public Radio I'm Laurel Morales in Flagstaff.