Standard & Poors has cut its long-term rating of the Washington Post Company from BBB+ to BBB with a negative outlook. Why? Blame its Kaplan unit and declining ad revenue:
The downgrade reflects the risk that operating performance and discretionary cash flow will remain depressed as a result of more restrictive regulation of for-profit education businesses, as well as our expectation that continued declines in newspaper advertising revenues will outweigh the company’s cost-reduction measures. The company has experienced sharply negative year-over-year trends in student enrollment and profitability since 2010, as a result of U.S. Department of Education (DoE) regulations that significantly tighten marketing practices. Also, the company is revising its business practices and implementing measures to reduce student loan default rates, which have contributed to lower enrollment levels.
S&P took a particularly dim view of the newspaper:
The company’s newspaper operations largely consist of its flagship newspaper, The Washington Post, which is minimally profitable, despite cost reductions, due to the secular decline in print advertising revenues. We believe that the unit is unlikely to restore satisfactory profitability, as additional cost cuts may be insufficient to offset long-term pressures of readership declines and advertising moving online.
The WaPo won’t fold, nor will its print version soon vanish from doorsteps and bird cages.
But it is one more example of how stricter Obama administration regulations are slowly bleeding the life out of a company. In this case, one that otherwise finds itself in agreement with the President, and barring a miracle, will endorse his re-election in November.
