It almost makes wary Tribune watchers pine for Rupert Murdoch.
In what is shaping up to be the biggest sale of metro U.S. newspapers in history, with six of the top 50 newspapers about to change hands, a new player is finally increasing public awareness of what’s coming. It’s been a torturous process to watch, as all of these top nameplate papers — the Chicago Tribune, the Los Angeles Times, the Baltimore Sun, the Orlando Sentinel, the South Florida Sun Sentinel, the Hartford Courant and The Boston Globe — have been pulled on and off and back on the market, in the case of the Globe, or subject to four years of bankruptcy limbo in the case of the others, all Tribune Company titles (“The agony of Tribune’s metro newspapers”).
If public attention to the meaning of the ownership transfer has waxed and waned over the months, one piece of news has now galvanized it. Credit the Koch brothers.
First reported by Hillel Aron of L.A. Weekly, who has doggedly covered the Times sale, and then expanded upon by both Reuters and The New York Times, it’s now clear that the Koch brothers are interested in — and maybe now the Tribune Company’s lead choice to buy — some of most well known papers in the country. That’s the Koch brothers of political fame or infamy, depending on which way your Tea Party leanings lean. (Good CBS News tour of their lightning rod impact on American politics.) The fourth and fifth wealthiest Americans ($31 billion each) according to Forbes, Charles and David Koch are credited with nurturing the Tea Party movement from grassroots to barn-burning. They bankrolled much of the movement, with contributions in the tens of millions of dollars.
The Kochs’ twin aims of both political influence and business gain — their advocacy against regulation in general and climate change legislation specifically fits neatly with the oil and gas interests that built their fortune — make their candidacy noteworthy. It’s a business/political mix that’s also taken root in San Diego’s newspaper ownership, and one that threatens to become a new model for press ownership. (More on the San Diego experience below.)
How did we get here? How did we get to a place where a half dozen of the top newspaper nameplates in America could fall into overtly political hands? What does it tell us about the reshaping of the U.S. daily landscape? How might the Koch brothers’ ownership fare, a lesson applied here that may both confirm worst fears and offer counterintuitive lessons about the nature of local press power in 2013? Finally, what are the newsonomics of the Tribune sale, as its new board ponders its options?
Sales of newspaper properties long used a common script. If someone wanted out, they priced their paper and called up the usual suspects, almost all of whom were already owners of newspaper companies. It was a fraternity: first, families selling to other families, then public and private newspaper companies selling to other public and private newspaper companies. Newspapering from the 1980s on was a greatly profitable trade, and if you knew how to “operate” — how to keep train on the track — buying more newspaper properties just meant more profits.
Then digital disruption and the Great Recession hit. Too much debt, much of it the result of buying other newspapers at what turned out to be the top of the market, forced 14 bankruptcies of newspaper companies. Nobody in the business wanted to buy more properties; besides, they no longer had capital to spend. Emerging out of all the bankruptcies: new financial owners. Some of the financial owners — banks and private equity — became owners as bankrupted debt was turned to equity; others bought into the industry cheap, post-bankruptcy. In the Tribune’s case, Sam Zell’s one-year-ownership and four-year-bankruptcy resulted in the new (newest?) Tribune finally emerging in January as company majority owned by Oaktree Capital Management, Angelo, Gordon & Co., and JPMorgan Chase.
The Koch potential brings us hard against the reality of what a U.S. metro daily is really worth these days, and what value it has to its community.
The financial value is clear. It’s a small multiple (3-4x) of Tribune papers’ annual earnings, plus whatever premium the buyers can drive from competitive bidding. Figure $550-800 million for all eight papers.
It’s the non-financial value that’s intriguing. I’m thinking about the agenda-setting, what-we-think-of-ourselves value of a daily newspaper. Newspapers have always been both centers of and reflections of their communities.
A few journalistic watchdogs have sounded alarms about the Kochs, but there’s been no wider outcry. It’s America, with freedom of the press a right for all. Or, as A.J. Liebling famously observed, “anyone who owns one.” And that’s the odd thing here: Make all the arguments you want about how the Internet has liberated free expression from the Big Iron of the printing press. These points have been pressed by everyone from Jeff Jarvis to FCC commisioners arguing that the cross-ownership (TV and newspaper) rules are outmoded by the ability of anyone to publish. In the age of monopoly newspapers, even in their reduced state, most dailies still have a major impact on the heart and soul of their regions, even as mismanagement further diminishes that impact in some cities.
For the Kochs, clearly, the would-be newspaper acquisition isn’t a financial investment; it’s an deeper opening into the body politic of major U.S. cities.
Why would the Kochs possibly become the Tribune board’s lead buyer? In a word, simplicity. The board has made it known that it prefers a single buyer of all eight properties. It’s much messier to do three or five or eight separate deals. The timeline would be longer; the separate transaction costs greater.
Find a buyer who is willing to buy all the properties, and Tribune can go on its merry way wholly becoming a TV and entertainment company. If that buyer wants to unload some of the properties immediately — as McClatchy did when it swallowed Knight Ridder’s 30 dailies in 2006 — or down the road, so be it.
While there are groups of local buyers clamoring for individual Tribune papers (most notably the Beutner/Broad/Burkle group in L.A.), a single sale would preclude such deal-making. The likeliest buyers of all eight: the Kochs and then — maybe — Rupert Murdoch’s News Corp. or Aaron Kushner’s 2100 Trust, which bought the Orange County Register and has kicked the wobbly tires of The Boston Globe.
The Kochs’ interest, and Tribune’s reciprocated murmurs of affection, force a reappraisal of the potential of Rupert Murdoch’s as lead buyer in the Tribune transaction. Owner of the largest newspaper company on the planet, he’s been assailed for the broad abuses of Hackgate and for bending his papers to his will. But he’s a businessman and a newspaperman. He did not, as feared, turn The Wall Street Journal into a Fox News-like attack dog. Rather, he invested in the paper when most of his peers were cutting back. He knows the difference between his own political and business interests and what makes publishing a newspaper successful, and, as in the case of the Journal and The Times of London, has opted more for the latter.
In that regard, Murdoch emerges as the relative friendly in this auction. In fact, you couldn’t ask for a better scenario for Rupert: serving as the white knight saving the Times and Tribune from the clutches of those far right-wingers! (Indeed, Rupert’s preparation for taking on the headaches of Tribune is literally mind-boggling. That’s right: He recently tweeted his embrace of Transcendental Meditation. After all, he’s just an (older) child of the 1960s.)
In a single-sale scenario, the Los Angeles Times is the biggest prize, with the Chicago Tribune more appealing to some than others. The smallest papers, in Allentown and Newport News, will be offered up to Warren Buffett’s Berkshire Hathaway Media, while Baltimore, Hartford, and two Florida papers may fall into a new limbo.
Tribune’s new board members, L.A.- and entertainment-experience-heavy, represent the financial interests of their financial owners, bound to do their fiduciary duty in maximizing the value of any assets sold. That’s what boards do. But big deals often take into account factors other than absolute top dollar. Will community gain or loss be a part of the board’s thinking? Will the 100-year-old public service traditions of these papers play any part in their decision?
We’ve got to wonder what those board members — all smart, successful, sophisticated people — want to read themselves. How would they feel waking up to the news, print or digital or whatever, that was a version of what Doug Manchester’s crew has done in San Diego?
Ah, Papa Doug and the San Diego Union-Tribune. Local developer Doug Manchester bought the Union-Tribune from the turnaround equity company Platinum Equity, which it bought at for a fire-sale price from the Copley family.
San Diego is our best cautionary example about what Koch ownership of the Los Angeles Times may mean. We can do more than imagine a partisan ownership of the L.A. Times and other Tribune papers; California’s second-largest city provides an 18-month lab on what it looks like.
Scott Lewis, CEO of eight-year-old online news startup Voice of San Diego, offers a nuanced view.
“On a day-in, day-out basis, daily news coverage is the same — some better, some worse.” Lewis, whose site has consistently done the best coverage of the U-T’s many travails, credits editor Jeff Light for even keeping the paper on a relatively even keel, despite the pro-development passion of its owner and the front-page editorials (three in the recent mayor’s race, alone) that make major waves. He notes how the new owners have invested in a much-needed site redesign and made an investment in a 24-hour cable news station, U-T TV. There’s still investigative reporting, even if it’s overly oriented toward the uncovering of government waste.
But that doesn’t mean traditional journalistic lines aren’t being crossed. Take U-T TV, for instance. As the service launched, the paper greeted it with a special section, seemingly editorial and written as news, touting “a new frontier in news.” That’s just one example of many, of how the paper has tried use its influence to support Manchester’s political beliefs and his own business interests, well-covered in this Media Matters rundown.
Last fall, the U-T bought Lee’s North County Times, its main competitor, and largely shut it down. “The second newspaper in San Diego County is just gone,” says Lewis.
Significantly, Manchester’s mayoral candidate lost.
How is the community of San Diego responding? Circulation is off in mid-single digits — about average for other metros. “There’s quite a bit of blowback,” says Lewis. “People are dismissive of the U-T. ‘That’s just Manchester,’ they say.
“I think I’ve seen the humbling of Papa Doug,” he says. “CEO John Lynch thought he could tell people, ‘This is how it is going to be.’ They are humbled in what they can achieve. It’s a lesson in how newspapers are not that powerful anymore. It’s like a journalist who writes a front-page story and thinks the world is going to change, and nothing happens. We all go through that.”
The TV station foray is an expensive and ambitious investment, says Lewis, and “doesn’t appear to have any influence” — now just starting to earn measurable ratings against the TV incumbents.
Manchester, ironically, has also said he’d like to buy the L.A. Times and maybe other Tribune assets. The notion of a southern California alliance between the Kochs and Manchester would appear to be a natural one, politically and geographically, should the Kochs win the Times — although Manchester has denied any working relationship.
If Papa Doug’s impact on San Diego has been mixed, we’ve got to wonder how the Kochs buying Tribune papers would go. It’s hard to imagine the Kochs respecting the traditional division between news reporting and the opinion pages. They’re using to having their way — a way paved by wealth — but the San Diego experience shows how that can be problematic. There are always those pesky journalists and paying readers that may get in the way.
With all the nameplate and civic value of these newspapers, any new owners will a profound choice in front of them. They inherit the gales of fundamental newspaper change. They inherit newspapers that diminished in newsroom capacity, in circulation reach, and in ad revenues. (A new data point there: The New York Times Co.’s drop of 13.3 percent in print ad revenue, reported in today’s quarterly numbers.) The Tribune papers have suffered more than the average daily for two reasons. First, six of the eight are metros, and metros have seen the deepest revenue declines and newsroom cuts. Second, the mess that Sam Zell’s five-year odyssey hath wrought is incalculable. Despite the sometimes heroic efforts of the surviving top managers and rank and file throughout the company, the Zell hell further damaged the papers’ ability to meet the digital future. Some are near hollowed-out and will be a tougher to rebuild.
So, here we are, on the brink of that biggest metro sale-a-thon in U.S. history. At this point, it looks like the Tribune and Boston Globe sales offer two alternative paths forward. The New York Times Company plans to wrap up its options for selling the Boston Globe soon. So far, its focus is on two buyers, both the kinds of wealthy, civic-minded buyers who appear to be on the outside looking in on the Tribune sale.
It’s in the Tribune story that we best see the sorry journey of part of the American daily industry. First we saw that rupture of the Old Boys Club, that fraternity that kept newspaper properties within a tight knot of traditionalists, for all the good and bad that meant. Then we saw the rupture of the business model, as the advertising that fueled the industry was cut in half over the last seven years.
Then we saw an uneven rupture of public service, as newsroom cutbacks — cutting more than 15,000 jobs — have meant far less community service over a decade.
Now we may be seeing the rupture of public trust. If the Tribune board places its supposed fiduciary responsibility above that trust, a new line will have been crossed. It’s one thing to see it crossed in San Diego; it’s another if the dots on the map light up from Hartford to L.A., as well.
Photo by jpellgen used under a Creative Commons license.