Many Newspapers Want Coronavirus Stimulus. Four Out of Five Can’t Get It.

Seattle Times Co. received a nearly $10 million loan last week as part of the federal government’s rescue program for small businesses. The money is helping the publisher avoid layoffs and payroll cuts for its staff of 700, despite a plunge in advertising revenue during the coronavirus pandemic.

The Arkansas Democrat-Gazette is in essentially the same financial distress as the Times, with a similar size workforce among its parent’s publications. Yet it isn’t eligible for the aid and had to furlough or cut pay for 10% of its 900 employees this month.

The reason: its parent company, WEHCO Media Inc., has more than 1,000 employees — the Small Business Administration’s maximum size for newspapers to qualify for the forgivable loans.

Across America, most of the newspaper industry is in the same boat as the Democrat-Gazette, while the Times is one of the exceptions. Papers representing more than 80% of U.S. circulation are disqualified from the government’s Paycheck Protection Program because of the way their companies are structured, according to data from the Alliance for Audited Media.

The issue has prompted a bipartisan push in Congress to either amend PPP rules to make an exception for local news or get news organizations other forms of aid in the next stimulus bill.

“Without it, you are going to see a significant number of newspapers closing,” said Seattle Times Co. President Alan Fisco.

The steps many struggling papers took over the past 15 years to stay afloat — round after round of mergers and consolidation, selling to private-equity buyers, taking on mountains of debt — now prevent the industry from getting meaningful federal help.

While many local papers are now owned by big chains or other conglomerates, they still see themselves as local businesses, staffed by local journalists, reliant on local business for advertising, and driven by a mission that advocates say has grown more important amid the pandemic.

The thirst for local information during the pandemic has boosted web traffic and subscriptions at many news outlets. But the shuttering of the retail businesses that have long been their biggest advertisers has sent revenue into free fall.

Layoffs, furloughs, and pay cuts have affected roughly 33,000 news organization employees nationwide since the start of the crisis, according to a tracker compiled by the NewsGuild-CWA, the largest journalists’ union. The U.S. has lost 2,100 newspapers — or one in four — since 2004, leaving 1,800 communities without a news source, according to research from the University of North Carolina. Shriveling print ad revenue and difficulty competing for digital ad dollars with tech giants was pushing even more outlets to the brink before the coronavirus crisis exacerbated the situation.

Proposals for government aid range from directing federal ad dollars to local media to loosening rules for local papers that belong to larger conglomerates.

Lawmakers in both parties pushed unsuccessfully to include the latter provision in the most recent coronavirus aid package. In the Senate, Sens. Maria Cantwell (D., Wash.), John Kennedy (R., La.), Amy Klobuchar (D., Minn.) and John Boozman (R., Ark.) sent a letter to Senate leadership calling the viability of local news “essential to public health,” but the provision ultimately didn’t make it into the bill.

Loosening the rules got tougher after brand-name restaurant chains drew outcry after obtaining forgivable loans intended primarily for smaller businesses, according to people familiar with the negotiations. Some companies returned the money last week. The Treasury Department has updated its guidance for PPP loans, saying big public companies with access to capital were “unlikely” to qualify.

“I think the sympathy for local news remains,” said David Chavern, chief executive of the News-Media Alliance, which represents nearly 2,000 news outlets. “We are going to keep pushing the point into the next stimulus bill.”

Big newspaper companies could be eligible for assistance Congress provided for larger corporations in its emergency relief efforts. But unlike the PPP loans, which can be forgiven if used to keep employees on the payroll, those other loans would have to be repaid. “They are just a lot less attractive,” Mr. Chavern said, adding that many newspaper companies already have a lot of debt.

Some publishers are uncomfortable about getting help from the federal government.

“We are always open to considering ways to sustain journalism. However, we would never allow ourselves to be perceived as dependent on or influenced by government funding,” said an executive at Gannett Co., the country’s largest chain, with 261 daily papers.

Gannett, which wouldn’t qualify for a PPP loan and didn’t apply for one, anticipates a roughly 30% decline in second-quarter advertising revenue, according to people familiar with the matter. Already, it has announced furloughs, pay cuts and layoffs across its staff of more than 20,000, although Gannett says the layoffs are part of its continuing integration process and unrelated to the coronavirus pandemic.

Gannett is a good example of a large company for whom raising new debt — whether from the government or in private-capital markets — can be costly. To finance its recent merger with New Media Investment Group Inc., Gannett took on $1.8 billion in debt financing at an interest rate of 11.5%.

Some news outlets are ineligible for PPP loans because their parent company owns large businesses unrelated to the news. The Star Tribune in Minneapolis is ineligible because it is considered an “affiliate” of businesses controlled by owner Glen Taylor, including the NBA’s Minnesota Timberwolves, according to the paper’s publisher and chief executive, Michael Klingensmith.

The Star Tribune’s ad revenues from the current quarter are down more than 40% year over year, he said, leading the company to institute furloughs affecting about 500 employees.

Walter Hussman Jr., the publisher of the 200-year-old Arkansas Democrat-Gazette, thought this would be the year the paper returned to profitability. Instead, ad revenue is down more than 50% in April. “Before this, newspapers were really struggling,” he said. “The question now is whether they are going to be able to survive.”

Mr. Hussman opposes a newspaper-specific bailout, though he supports changing the small business rules so that newspapers like his would qualify.

The idea of directing federal advertising dollars — for publicizing things such as the census and new programs — to local media has gained momentum. A majority of House and Senate members have signed a bipartisan letter calling for such a measure.

“Any advertiser regardless of their government affiliation would be helpful to us at this time,” said Grant Moise, publisher of the Dallas Morning News, which is owned by A.H. Belo Corp.

Others in the industry and Congress, including Sen. Richard Blumenthal, (D., Conn.), are pushing for a pool of public funding that would be granted directly to local news organizations in the next aid package. Sen. Blumenthal described that funding pool as potentially hundreds of millions of dollars. “We’re really investing in democracy,” he said in an interview.

For newspapers that were able to get PPP help, it immediately saved newsroom jobs. Paul Tash, chairman, and chief executive of Times Publishing Co., which owns the Tampa Bay Times, said his company received an $8.5 million PPP loan. “The money comes with no strings on our journalism,” he said.

Mr. Tash said the paper’s advertising revenue is down by about half since early March; as a result, the Tampa Bay Times publishes print editions only on Wednesdays and Sundays.

The parent company of the daily newspaper and website LNP/LancasterOnline in Lancaster, Pa., got its PPP loan distribution April 19. But the newspaper, which has about 69,000 subscribers, had already furloughed or laid off about 30 people, according to Robert Krasne, chairman and chief executive of Steinman Communications Inc. The stimulus money won’t be used to hire them back but will prevent further cuts — for now.

“The long term impact of the virus is going to be more far-reaching than we can imagine,” Mr. Krasne said.