A scenic ride along the Connecticut River valley from my abode near Brattleboro, Vt., on the New Hampshire side of the valley, is the city of Claremont — a typical New England mill town with a population of 13,000, a regional hospital, a state college branch, a relatively sound local economy (unemployment rate of 6.0 percent), and until last Friday, a local daily newspaper with a circulation of about 7,800, the Eagle Times.

But on Thursday, Eagle Times owner and publisher Harvey Hill threw in the towel, after subsidizing losses in his operations to the tune of “seven figures”.  He gathered his employees and announced that Eagle Publications was filing for Chapter 7 bankruptcy (some were told by e-mail), that Friday’s edition of the paper would be its last, and that the company’s three weekly publications would not publish any more issues. Chapter 7 means the company is heading for liquidation, not reorganization.  (Note: links to the newspaper’s web site may not last much longer.)

Locally, the big concern is what will move into the void. At least one entrepreneur has a plan (after the jump). But more broadly, the big question is what the Claremont situation portends for small “community” newspapers — both weeklies and dailies — across the country.  The conventional wisdom has been that it’s primarily the big metropolitan newspapers that are in trouble; that papers in smaller markets remain profitable, if less so than in the past.

An Inland Press Association study cited by Alan Mutter, the Newsosaur, in several recent posts suggests that papers under 15,000 in circulation have seen revenue grow slightly from 2004 to 2008, while suffering a 64.8% drop in profits. But the study is based on data from only 120 newspapers of all sizes, and may not have a representative sample of papers in any particular size group.

In an earlier data point, the National Newspaper Association, which represents many community newspapers, especially weeklies, announced back in September that “the outlook is strong” for small-market newspapers. But the NNA’s studies focused primarily on readership, which appeared to remain strong for weeklies and dailies in the smallest markets, not on revenue or profitability. And the last study in its series was conducted mid-2008.

Based on my own publishing experience, it would not be unusual for a small daily in a market like Claremont, in good times, and with the benefit of economies of scale that come with group ownership, to generate an operating profit of $300,000 or more. (It would be more in some similar markets, but Claremont lacks a large contingent of big-box retailers that contribute lucrative preprint revenue.) The weeklies owned by Eagle Publications might push this to $500,000 or more. But, operating independently, without the consolidated financial services, circulation management, copy editing, ad sales, website management, purchasing advantages and general management common in group-owned newspapers, Claremont’s cash flow was probably closer to $250,000 in a good economy. Losing a few major advertisers like car dealers, general cutbacks from other advertisers, and erosion of classified advertising would be enough to erase that margin and put the operation in the red. (These figures don’t include debt service; most of the reported $1 million or more the Hill family spent to keep the paper afloat probably covered debt payments rather than operating losses.)

The Eagle Times had other problems: it reached less than half the households in its core Claremont market (2,609 net sales, versus 6,022 households, or 43.3 percent, according to the most recent 2007 ABC report; 47.2 percent on Sunday). The rest of its 8,287 weekday circulation went to areas straddling both Vermont and New Hampshire.  But the paper’s reach was only 25.5 percent in its home county, and it split the market in its next-biggest towns with competing dailies — in the Bellows Falls, Vt. area, it sold 504 copies versus the Brattleboro Reformer‘s 691; and in Springfield, Vt., it sold 1,108 copies versus the Rutland (Vt.) Herald‘s 779. It lacked majority household penetration in any town. And all of these numbers have probably come down in the meantime — the most recent (March 2009) Eagle Times publisher’s statement filed with ABC reported circulation of 7,793, a drop of 6 percent from the 2005-2007 audited average.

Some of the criticisms levied at the paper by commenters at the Union Leader as well as on the Eagle Times site is levied at the paper’s attempt, under Hill’s ownership, to cover areas of Vermont to the detriment of its local Claremont coverage; this could well explain the thin circulation pattern. Then again, without pushing its coverage borders, the paper might have had even fewer subscribers and advertisers. To some extent, the daily may be been undercut for readership attention by its own network of weeklies. And those weeklies spanned an ambitiously-large geographic area, expense to cover but thinly populated with consumers and retailers.

In the salad days that ended not so long ago, newspapers sold for 10 to 12 times cash flow. But today, if Hill was trying to sell, an adventurous buyer might risk a multiple of 5 or 6 — but if cash flow had essentially dried up, 5 or 6 times zero is zero. And most of the usual buyers — the nation’s larger newspaper groups — have been on the sidelines with no access to capital. So the liquidation value of the Claremont operations may be limited to the resale value of the building and the hardware in it, especially since the titles themselves have been allowed to lapse.

Many small towns with daily newspapers in America are just like Claremont — in fact, they may have fewer people employed, fewer advertisers, and newspaper owners enjoying less cash flow and possessing less willingness than Harvey Hill to try carrying the operation for a while through rough times. Many of these papers are owned by larger companies that may have bigger debt loads, relative to size, than Hill did. Some of them, like Journal Register Co., are already in bankruptcy, and others are in workout with their bankers or, if public companies, are in penny-stock territory. Quite possibly, there will be many more Claremont-sized towns where dailies and weeklies, now hanging on by a thread, will close up shop.

So what happens now in Claremont, N.H.? The daily readership will probably divide itself among several neighboring papers: the Brattleboro Reformer and Rutland Herald in Vermont, and the Valley News, based 29 miles upstream in Lebanon, N.H.

There’s a business opportunity in Claremont for a weekly newspaper coupled with a good bloggy local web site. One quick-minded entrepreneur, Nancy Zullo Brown, is rounding up ex-employees and others interested in at least launching an online venture. She is a veteran of online publishing, with a family of sites focused local information for military personnel called YourMilitary.com. Brown’s site will be called YourClaremontPress.com; she aims to have it in operation by Wednesday, and it may branch into a printed version as well. Brown is a native of Claremont, now based in Virginia.  She’s considering moving back to Claremont to run the business, but meanwhile has family there, and a number of former Eagle Times staffers who have contacted here. Once before, as a teenager, she saved the Eagle Times (then called the Daily Eagle) by reporting a fire in the building early one morning when she was on her way to her job at Dunkin Donuts.

Disclosure: I served as publisher of the Brattleboro Reformer from 2006 to 2008.

Photos by pattyvern, used under Creative Commons License.