Sunday, January 29, 2012

A Surprise Leader in the Print-Media Bankruptcy Sweepstakes

Which would you rather own: paper mills, large printing plants, a leading e-tablet platform, or the U.S. postal system?

Here’s another way to look at it: Which of those assets does not have to contend with overcapacity in a shrinking market.

In both cases, I thought the answer overwhelmingly favored tablets, which is why the results so far of the current Dead Tree Edition poll (in the right column, just below the first ad) surprise me so much. The 30% of voters who think Barnes & Noble (owner of the Nook tablet platform) will go bankrupt this year is well ahead of the number voting for Quad/Graphics (23%; printing presses), the U.S. Postal Service (22%), and Verso (paper mills, 20%).

Update: Final poll results are at A Major Print-Media Bankruptcy Is Likely in 2012, Voters Say.

Financial markets seem to have pegged Verso as the most likely to succumb among the three private companies. Its market value has dropped precipitously in the past year, to 84% below its peak and less than 1/30th of annual revenue. B&N and Quad both have market values of about 1/10th their annual sales.

The comments about the article introducing the poll, both on this site and in various LinkedIn groups, are some of the best I’ve ever seen. I extended the voting deadline by a week to 3 p.m. Hawaii time (8 p.m. Eastern) this Tuesday because I find the comments and the voting so interesting. As they say in Chicago, vote early and vote often.

Here are some of the best comments:

  • The Postal Service will never truly reach bankruptcy in the sense we know it now, but restructuring is inevitable. Unfortunately no one in the 2012 Congress will have the ability to make the necessary moves. Apollo will keep Verso afloat this year, if only to have a play in the post-NewPage world -- some combination of these two groups will be the eventual endpoint. B&N is only a matter of time -- the Nook sell off will signal the end if or when it occurs. And Quad will hold on -- for all their pompousness and overreaching, their plan is sound and they will continue to shrink and optimize over the next few years.
  • Who told you that Congress is REQUIRED to establish a post office? Read the constitution. It says, “The Congress shall have Power To establish Post Offices and post Roads.” [Good point. Constitutionally, providing mail delivery is optional. Politically, mail delivery is not optional.]
  • Let’s get real, the tablets are going to kill the printing and publishing industries sooner than later! Paper companies and printers, we are living on borrowed time! I have been telling my kids for the last 10 years “DO NOT GET INTO THE PRINTING INDUSTRY IN ANY FORM!" It is sad but true!
  • Verso ... has no near term maturities and an undrawn revolver.
  • As for USPS going bankrupt, Congress will be forced to bankroll it no matter what because there will always be a need for a public delivery service to areas that the other services do not provide and never will; not to mention the thousands of mailbox services which depend on the USPS for survival.
  • Verso will not go bankrupt. I believe they are fast and furiously getting out of the coated market and turning to more specialty grades and food grades that will be around for many years to come.
  • As a quasi-Government agency, I seriously doubt that the Congress or Executive branch will let the Post Office go bankrupt. I do think that though that they will let it get to the edge before doing anything about it. Probably be mid-year, and then it will be another crisis for each party to point fingers at the other for not doing something about it.
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