Reader’s Digest Files for Bankruptcy Yet Again

Could this really be the end of an era? Who hasn’t grown up with the Reader’s Digest? If you’re in your 30s or older, you certainly know that “Laughter is the Best Medicine” and “Word Power” are just two of its most popular sections. However, the 91-year-old Reader’s Digest Magazine could soon be just a part of nostalgia.

On Sunday, Reader’s Digest Association (RDA), the magazine’s publisher, filed for bankruptcy. This is the second time that the company has filed for Chapter 11 protection since 2009. The development stemmed from print media feeling the brunt of the world’s dependence on digital media and gadgets. The company wants to cut its $465 million debt and shift to North American Operations.

No Happy Ending for Reader’s Digest

A closer inspection at the Magazine’s finances revealed a consistent dip in revenue. Its earnings went down to as much as 26% from last year. This is a direct result of fewer and fewer customers buying books, magazines and other products. The company admitted that they restructured their financial contracts to avoid defaulting, and  had amended their financial covenants to avoid defaulting on its debt. It has a $464.4 million balance on a secured loan that will mature by the year 2017.

In August 2009, Reader’s Digest filed for bankruptcy the first time owing to private-equity deals that have gone bad. After Chapter 11, the company’s debts were reduced by more than $2 billion in just a few months. Analysts had thought that the company would be able to stand on its feet again after that. On the contrary, its balance sheet still showed dismal earnings.

RDA Holdings, which is based in New York, operates in more than 40 countries globally. They are in charge of printing 75 magazines, and this includes 49 different versions of the beloved Reader’s Digest Magazine.

Reader’s Digest Isn’t the Only One

Sadly, Reader’s Digest isn’t the only iconic business to have filed for Chapter 11 protection. More and more businesses are going belly up simply because something better, faster, or without cost has come along.

Earlier, Hostess Brands Inc., the company that makes Twinkies and Wonder Bread has filed for bankruptcy, too. Eastman Kodak Co., the inventor of the classic Instamatic camera and Kodachrome, also decided to cut their losses while they still could.

Reader’s Digest was originally established by DeWitt and Lila Wallace. The company first went public in 1990. In 2007, Ripplewood Holdings LLC, a private-equity firm, bought the floundering company for a hefty sum of $1.6 billion and assumed about $800 million in debt as well.

As sad as millions of Reader’s Digest fans would be to see another icon from their childhood disappear, this seems to be the future looming over print media. With magazines and newspapers constantly losing money because of high printing and overhead costs, might as well join the bandwagon and just have everything posted online.