Fitch analyst says "several cities" could have no newspaper by 2010... McClatchy said to be in serious jeopardy

A number of newspapers and newspaper organizations are likely to go out of business next year, according to a shocking report published in Editor & Publisher. The report says McClatchy is facing a serious possibility of default.

Newspaper and newspaper groups are likely to default on their debt and go out of business next year -- leaving "several cities" with no daily newspaper at all, Fitch Ratings says in a report on media released Wednesday.

"Fitch believes more newspapers and newspaper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010," the Chicago-based credit ratings firm said in a report on the outlook for U.S. media and entertainment.

Fitch is generally pessimistic across the board, assigning negative outlets to nearly all sectors from Yellow Pages to radio and TV and theme parks. But the newspaper industry is the most at risk of defaulting, it says.

"Much of the business risk for the media sector is likely to continue to be concentrated within the newspaper sub-sector," the report says. "Fitch expects newspaper industry revenue growth will be negative for the foreseeable future as both ad pricing and linage will be under pressure within each of the four main components of newspaper companies' revenue streams: circulation and local, classified and national advertising. Newsprint costs could rise, and it could be difficult to offset revenue declines with cost cuts.

"Fitch rates the debt of two newspaper companies, The McClatchy Co. and Tribune Co. as junk, with serious possibilities of default. It also assigns a negative outlook to both the companies and the newspaper sector, meaning their credit ratings are likely to deteriorate further.