The Wall Street Journal - 21.03.2020 - 22.03.2020

THE WALL STREET JOURNAL. ** Saturday/Sunday, March 21 - 22, 2020 |B

BUSINESS & FINANCE NEWS

Single-copy sales of newspapers have been hard hit during the coronavirus pandemic because so few people are out and about.

TED S. WARREN/ASSOCIATED PRESS

Daily News. “The most vulner-

able may not survive.”

Some free alternative week-

lies in Washington, Oregon

and Northern California, which

depend entirely on advertising

and are heavily reliant on

events listings, have already

suspended operations and laid

off staff. Voice Media Group,

which publishes six alternative

weeklies in places including

Miami and Phoenix, cut pay to

staff by at least 25% and

warned that layoffs were

likely. The Cleveland Scene

laid off five staffers and cut

pay by 25% to the rest.

On Monday, the Tampa Bay

Times, which is owned by the

nonprofit Poynter Institute,

laid off 11 staffers just weeks

after instituting an across-the-

board pay cut. Paul Tash, the

Times’ chairman and chief ex-

ecutive, said the paper had al-

ready seen its event-related

advertising disappear and has

had inquiries from big retail-

ers about canceling future ad-

vertising.

“It’s hard to know what is

going to happen next,” he said.

“I just hope this passes as

quickly as possible.”

Gordon Borrell, an advertis-

ing market analyst, estimates

that local advertising will drop

by 25% this year, as restau-

rants, bars and other local

businesses close temporarily

andpullbackspending.

Newsrooms across the na-

tion have swarmed the corona-

virus story, redirecting re-

sources from coverage areas

that seem less pressing now.

Sports reporters at the Tampa

Bay Times were immediately

tapped once sports leagues’

seasons were put on hold. “Ev-

eryone is a coronavirus re-

porter now,” said Mr. Tash.

The Boston Globe’s web

traffic shot up 140% in the

seven-day stretch through

March 16. Its total number of

digital subscribers has risen to

more than 170,000 from

111,000 about a year ago. How-

ever, it has been heavily dis-

counting subscriptions with

introductory offers as low as

six months for $1.

The Globe has been ham-

mered on newsstand, or “sin-

gle copy,” sales, which repre-

sent 13% of its circulation

revenue, or about $20 million

a year, according to Globe

President Vinay Mehra.

According to a 2015 survey

by news industry trade group

News Media Alliance, single-

copy sales across the sector

represented 11% to 12% of

weekday circulation, on aver-

age, and 18% to 20% of Sunday

circulation.

Union contracts could re-

quire continued payment of

printing and delivery workers.

Mr. Mehra spoke with union

officials on Tuesday to see if

they would consider opening

negotiations on the matter,

and he said they asked for a

20% pay raise.

As for advertising, catego-

ries such as travel, events and

arts “have all gone to zero,”

Mr. Mehra said. Even without

the impact of the virus, the

Globe, as with much of the in-

dustry, had been losing 10% to

20% of its advertising revenue

annually. Mr. Mehra said the

advertising drop would over-

whelm the gains from the new

digital subscriptions.

Readers are flocking to

news sites during the corona-

virus pandemic. The media has

a basic commodity—informa-

tion—that people are craving

as they try to keep themselves

and their loved ones safe.

And yet, financially, the cri-

sis is delivering a punishing

blow to already struggling lo-

cal publishers, from big-city

metro papers to small-town

outlets.

Web traffic is up about 30%

among the top news sites and

has doubled for some publish-

ers, according to data from

Comscore Inc. Many news

sites have recorded solid gains

in digital subscriptions, even

as many have made coronavi-

rus coverage available to non-

subscribers.

But the immediate boost in

readership won’t offset the vi-

rus’s brutal impact on the pil-

lars holding up the business,

publishing executives say. Lo-

cal advertising spending could

tumble this year by at least a

quarter, amounting to a de-

cline of more than $30 billion,

according to one estimate.

Newsstand sales are tank-

ing, because fewer people are

out on the streets. Some union

contracts require publishers to

pay printers and truck drivers

even if the shops they were

once delivering papers to are

closed. Consumers could even-

tually trim subscriptions as

the economic fallout settles.

“So many papers were al-

ready teetering on the brink,”

said Walter Hussman Jr., pub-

lisher of the Arkansas Demo-

crat-Gazette. “If we really see

a collapse of ad revenue, this

could be the straw that breaks

the camel’s back for a lot of

places.”

Newspaper companies have

struggled for years to diver-

sify and rely less on advertis-

ing and print revenue. Select

U.S. national papers have had

success building robust digital

businesses, while local outlets

have generally failed to make

the transition.

Now, the new coronavirus

crisis could become a cruel

test of whether newsrooms

can survive on digital revenue.

“It may turn out that the

impact of the virus on local

newspapers is analogous to its

effects on people,” said Jim

Friedlich, the executive direc-

tor of the Lenfest Institute for

Journalism, which owns the

Philadelphia Inquirer and

BYLUKASI.ALPERT

ANDKEACHHAGEY

Readers, but Not Ads, Flock to Local Papers

California Gov. Gavin
Newsom dropped his opposi-
tion toPG&ECorp.’s plan to
emerge from bankruptcy pro-
tection after striking a deal re-
quiring certain concessions.
As part of the deal, PG&E
has agreed to put itself up for
sale if it can’t exit bankruptcy
by June 30, a state-imposed
deadline for its emergence if it
wants to qualify for a state
wildfire fund.
PG&E also agreed to use
shareholder funding to reduce
its debt load and submit to
more stringent regulatory
oversight that could lead to a
state takeover of the company
if it fails to make safety im-
provements.
“Because of these new
tools, the state will have the
legal authority to continue de-
manding total transformation
even after the company
emerges from bankruptcy,” Mr.
Newsom said.
The move clears one of the
last major remaining hurdles
for PG&E to exit Chapter 11.
The company sought bank-
ruptcy protection last year
due to billions in potential lia-
bilities from wildfires sparked
by its equipment. The com-
pany disclosed the details of
the agreement in a bankruptcy
court filing.
The plan is now subject to
approval by the California
Public Utilities Commission, as
well as a vote by the com-
pany’s creditors, which include
wildfire victims as well as
shareholders and bondholders.
“We now look to the Cali-
fornia Public Utilities Commis-
sion to approve the Plan
through its established regula-
tory process, so that we can
exit Chapter 11, pay wildfire
victims fairly and as soon as
possible, and participate in the
State’s Wildfire Fund,” PG&E
Chief Executive Bill Johnson
said.
Mr. Newsom, a Democrat,
had for months opposed
PG&E’s reorganization plan,
which proposes raising billions
of dollars in debt and equity
to pay damages tied to a se-
ries of deadly wildfires
throughout its service terri-
tory. He raised concerns that
the plan would leave the com-
pany too leveraged to make
safety investments in the elec-
tric grid and failed to ensure
operational change within its
leadership.
As part of the deal, PG&E
has agreed to submit to an
“operational observer” se-
lected by the state to monitor
its safety compliance. The
company earlier this year
agreed to replace many of its
current directors and expand
safety positions and perfor-
mance metrics after it
emerged from bankruptcy pro-
tection.
It will now be subject to
stricter regulatory oversight
from the California Public Util-
ities Commission to ensure its
compliance with state regula-
tions. Marybel Batjer, the
agency’s president, last month
proposed a series of escalating
sanctions for continual viola-
tions, culminating with a pro-
cess to revoke the utility’s li-
cense to operate if necessary.
The company is seeking
regulatory approval to issue
$7.5 billion in low-interest
bonds to replace pricier short-
term loans included in its re-
organization plan. As part of
the deal with the governor,
shareholders would have to
foot the repayment of those
bonds.
PG&E also agreed not to re-
instate dividend payments for
about three years.

BYKATHERINEBLUNT

PG&E’s

Chapter 11

Plan Gets

Go-Ahead

cording to the London-based

World Travel and Tourism

Council. The lobby group said

it is in talks with 75 govern-

ments about potential aid for

the sector, as travelers cancel

trips amid the global spread of

the new coronavirus.

The Trump administration

is offering up to $50 billion in

credit to airlines. Loans come

with strings attached, though,

including requirements for

continued service on some

routes and limits on executive

compensation until loans are

repaid, The Wall Street Jour-

nal reported this week. Air-

lines had asked for direct

grants to provide the cash

many carriers need right away.

American carriers have cut

back capacity, raised capital

and sought out drastic cost

cutting, like unpaid leave.

European carriers in many

ways have been harder hit, with

a U.S. travel ban in place for

noncitizens coming from Europe

curbing trans-Atlantic flights

and a series of separate border

closings on the continent slam-

ming transcontinental travel.

Deutsche Lufthansa AG,

Europe’s biggest network car-

rier, has cut 95% of its flights,

halting operations completely

at several of its group airlines.

European discountersRyanair

Holdings PLC and easyJet

PLC have indicated plans to

ground almost all flights.

Lufthansa has said it is in

talks with the German govern-

ment and others about liquidity

options. Early Friday, Ger-

many’s finance minister said

the government could step in

to buy shares of large corpora-

tions like Lufthansa to help

them through the downturn. It-

aly’s government has said it is

ready to nationalize flag carrier

AlitaliaSpA as part of a broad

set of emergency measures.

In some cases, initial

rounds of cost cutting haven’t

been enough to stave off more

furloughs and painful cuts to

pay. British Airways ownerIn-

ternational Consolidated Air-

lines GroupSA is reducing pi-

lot pay 50%, in addition to two

weeks of mandatory unpaid

leave, according to a person

familiar with the plan.

Virgin Atlantic, the trans-

Atlantic carrier partly owned

byDelta Air LinesInc., is ask-

ing staff to take eight weeks of

unpaid leave during the next

two months. It has also of-

fered employees voluntary

severance packages.

Scandinavian carrierSAS

AB has been offered a com-

bined three billion Swedish

kroner ($290 million) in credit

guarantees by Sweden and

Denmark.

Governments world-wide
are starting to roll out a
patchwork of rescue packages
for their ailing airlines, but in
some cases aren’t moving fast
enough to buffer industry
workers from the fallout of a
rapid drop in bookings.
About a million travel and
tourism-related jobs are being
lost daily at airlines, hotels,
cruise-ship operators and at
companies up and down the
industry’s supply chains, ac-

BYBENJAMINKATZ

Airlines Ask for Cash, Fast, as Governments Unveil Rescue Plans

AirbnbInc. is considering

raising capital from new inves-

tors, as the home-sharing gi-

ant wrestles with escalating

losses due to the devastating

impact of the coronavirus pan-

demic on its global business,

according to people close to

the company.

The pandemic has also

thrown into disarray Airbnb’s

plans to go public this year,

and the board and investors

are divided over the best path

forward, according to people

familiar with the matter.

The San Francisco-based

startup, which lets people list

their properties for rent on its

marketplace, has racked up

hundreds of millions of dollars

in losses this year, one of the

people said. A spokesman for

Airbnb said the company has

“$4 billion in liquidity” and is

“focused with our board on

ways we can help our commu-

nity weather this crisis.”

It is unlikely that the com-

pany will be able to attract in-

vestors at its 2017 valuation of

$31 billion, when it last raised

money, the people familiar

with the matter said. The

management is mulling how

low it is willing to go to seek

an injection of capital.

The Wall Street Journal re-

ported last month that Airbnb

internally was valuing itself at

less than $31 billion.

Airbnb, one of the nation’s

biggest private companies, had

planned to make its widely an-

ticipated debut on the public

markets this year via a direct

listing, which wouldn’t involve

raising any additional money.

The company is now con-

sidering instead raising cash

using an initial public offering,

and has held several meetings

with its board this month to

discuss its approach, the peo-

ple familiar said. Morgan

Stanley and Goldman Sachs

Inc. have been appointed as

dual-lead underwriters. But an

IPO could go ahead only when

the virus crisis has eased,

stock markets stabilize, and

the company’s finances re-

cover to a stable footing, the

people familiar said.

An Airbnb spokesman said

it “should come as no surprise

that in these extraordinary

times, like virtually every

company in the world, we are

regularly consulting with our

board to discuss our work.”

Airbnb—caught in the

crosshairs of the all-out crisis

the virus has created in the

global travel industry—now

faces evaporating revenues, as

well as a backlash from the

hosts who are the backbone of

its business.

All its major markets are

getting hammered. Bookings

last week were down year-on-

year around 95% in Asia, 75%

in Europe—the company’s big-

gest market—and 50% in the

U.S., according to one of the

people close to the business. A

report last week by Airbnb-an-

alytics firm AirDNA also

showed bookings tanking in

big cities world-wide. This

week’s numbers are much

worse, the person said.

A spokesman for the com-

pany said the figures weren’t

accurate but declined to pro-

vide other numbers.

Airbnb’s board had already

raised concerns about the

company sliding into the red,

even before the pandemic up-

ended its business, the Journal

previously reported. Execu-

tives were grilled at a board

meeting late last year on why

overheads such as its head of-

fice and employee expenses

had been allowed to balloon,

outpacing even the then-rapid

growth in revenue.

Some board members are

unhappy that Airbnb didn’t go

public last year, when a soar-

ing stock market put premium

prices on even unprofitable

startups, the people close to

the company said. Employees

are concerned the listing could

now be delayed beyond the

end of the year, meaning many

valuable stock options will ex-

pire, becoming worthless.

One person close to Airbnb

said management and the

board are working in sync but

that outside investors are agi-

tated about the company’s

troubles and its response to

them.

Brian Chesky, Airbnb’s chief

executive, is under intense

pressure from employees to go

public, after more than 10

years as a private company. He

recently sought to reassure

staff that a delay won’t hap-

pen. In a staff meeting held

earlier this month and on a

separate phone call with em-

ployees last week, he said the

company plans to stay the

course of going public this

year, the people close to the

business said.

Some investors are skepti-

cal this will be possible, or

question what price the stock

might achieve.

The price at which Airbnb

shares are trading has fallen

sharply, according to people

who specialize in the market

for private company shares.

Before the pandemic hit,

shares were trading privately

at more than $140, valuing the

company around $45 billion to

$47 billion, according to Jared

Carmel, managing partner at

Manhattan Venture Partners, a

secondary-market specialist.

Now, he said, “we’re seeing

shares tick back to close to

$105.”

Airbnb Reels, Listing Is in Limbo

ByPreetika Rana,

Jean Eaglesham

andKirsten Grind

CravingInfo

Thecoronavirusiscreatinganappetiteforinformation.News

sitesareexperiencingjumpsintraffic.

BostonGlobeFacebook

interactions

*Change from Jan. 6–12 to March 9–15 Sources: NewsWhip (interactions); Comscore (visits)

1.

0

0.

0.

0.

1.

million

Dec. ’19 Jan. ’20 Feb. March

Increaseinvisits*

theatlantic.com

170%

gosanangelo.com

168

readingeagle.com

146

dallasnews.com

111

bostonglobe.com

108

sfchronicle.com

83

wired.com

80

nbcnews.com

78

startribune.com

76

southbendtribune.com

71

Airbnb CEO

Brian Chesky

is under

employee

pressure for

the company

to go public.