MediaNews CEO Dean Singleton acknowledges that that buying up of The Mercury News and 30 smaller Bay Area papers between 2006 and 2007 has been a drag on the company, but he tells the NYT that California is still the place to be. Singleton made the acquisitions just as the California real-estate market bottomed out, pulling down the state’s economy while newspapers were struggling with the transition from print to digital. And even though MediaNews’ California bets have contributed to conditions that led Moody’s Investors Service to downgrade the company’s $962 million debt to junk status, Singleton sees a bright side in the economic downturn: his competitors are getting squeezed just as much if not more. For example, E.W. Scripps (NYSE: SSP) is trying to put the Rocky Mountain News—a rival to MediaNews’ Denver Post—up for sale. And Minneapolis’ Star Tribune, which is looking for unions to help it cut $30 million in costs or face closure, could leave MediaNews’ Pioneer Press in nearby St. Paul unchallenged.

SEE ALSO: MediaNews CEO Singleton: Consolidating Newsrooms, Outsourcing Could Equal Survival

—Catch 22 on website buildup: The emergence of sites like Craigslist, which have severely cut into newspapers’ classified revenues, began in California, right in the backyard of the Merc News. As result, the paper has fallen on particularly hard times, even by newspaper standards. In order to compete with online, George Riggs, the paper’s former publisher, told the NYT that, “The answer for newspapers has to lie in building their Web sites better and better, and promote, promote, promote. We haven’t seen that.” But with others at the paper saying that “grand plans” have given way to day-to-day survival, the San Jose paper’s editor David Butler, online enhancements will have to wait. Butler: “Until or unless we see that those things pay for themselves, we make a serious mistake in focusing too much on that.” But the catch is, how can the website start attracting ad dollars and readers if Merc News doesn’t offer a better online environment?