Creative Loafing, the national chain of alt-weeklies which purchased the Chicago Reader and the Washington City Paper in July 2007, is filing for bankruptcy. CP editor Erik Wemple announced the news on City Desk, the City Paper‘s news blog, this morning.
A corporate memo released this morning captured the rationale for the move: “The term ‘bankruptcy’ conjures up all kinds of images and demons but it is essentially a legal proceeding designed to give an over-leveraged company the time, process and a safe harbor for which to reorganize its finances. Chapter 11 was the natural place for the Company to go to accomplish an orderly reorganization of our finances.”
“This filing has little to do with the acquisition and everyone should feel very proud of what we’ve accomplished,” reads the company memo. “It hasn’t been easy but it has been successful. The assumptions we made have not turned out to be so successful. The print business has been under siege from all quarters with the exception of the one place that counts; audience.”
I’m not sure how the acquisition itself can be successful while the assumptions Creative Loafing made—presumably upon which the acquisition was based—were not. I also don’t really buy the “print is dying” argument as a rationale for Creative Loafing’s troubles. Even though print revenue has been declining, the City Paper and the Reader are still profitable newspapers, as they have been since the ’80′s. Considering that web advertising now only makes up roughly 5% of the City Paper‘s overall revenue, it seems to me like Eason may have jumped the gun by switching to a “web-first” model so soon.
On the bright side, at least the editorial cuts mentioned in the Voice‘s feature on the City Paper last week are going to be put off for a while.