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The newsonomics of 50/50 and the unchaining of the U.S. press

For decades, newspapers moved from local ownership to nationwide chains. Now, the shift is in the other direction — with the help of your friendly neighborhood billionaire.
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Asked last week whether he was buying the Star Tribune for business or altruistic reasons, Glen Taylor said a lot in a two-word answer: “50/50.”

News observers have parsed and poked at every recent big buy over the last year. Is this the turnaround? Why are these billionaires buying? What do they see? What’s the reason?

Life — even business — is sometimes a little more nuanced. We race to make money, even when we seemingly have enough. We acknowledge our roles within our wider communities. 50/50 is a perfect way to capture the spirit of some of the new personalities and money entering news company ownership. Almost all of them have a sense that they are buying near a financial bottom. And of course, there’s the ego-stroking that still comes with putting your name atop a masthead. Then there’s the mix of civic and sometimes political motivations we see ushered in by these new owners. It’s never quite a perfect 50/50 split, of course, and it varies with each of the new owners.

50/50, though, is an eloquently simple way to describe this new era of Bezoses, Buffetts, Henrys, and Taylors. Warren Buffett has been the most obscure in his motivations, but that’s explained by his use of publicly traded Berkshire Hathaway as a buying vehicle. John Henry laid out civic motivations in a way we haven’t heard from incumbent publishers in a long time, in his fall piece “Why I Bought the Globe.”

Now that new class of owners has unexpected company: Alice Rogoff.

Rogoff (illuminating in-house bio here) shot to national prominence Tuesday. Her purchase of McClatchy’s Anchorage Daily News for $34 million, and its planned merger with her six-year-old digital startup the Alaska Dispatch, re-electrified the local news debate. Another billionaire buying; another chain selling. Is it a trend? Are we seeing the deconsolidation of the U.S. press?

Our new Alaska tale can be read as a David taming a Goliath. The digital-only Alaska Dispatch, with a scrappy staff of less than 20 journalists, takes over the print incumbent, with the Daily News’ publisher and editor retiring with the sale. (While the Dispatch is small, it’s not a perfect David: Rogoff is a former chief financial officer of U.S. News and World Report, and her husband David Rubenstein has an estimated net worth of $3.1 billion.)

Rogoff, 62, shares that sense of place, of legacy, and of impact with Glen Taylor. Last week, the group that bought the Star Tribune out of bankruptcy in 2009, announced it was agreeing in principle to sell to Taylor, best known for owning the Minnesota Timberwolves. Seventy-five percent of the ownership has been split among GE Capital and the local Wayzata Investment Partners, and they’ve been rewarded for their above-average stewardship of the Star Tribune (“The newsonomics of Pulitzers, paywalls and investing in the newsroom”). I estimate the sale price at about $100 million, built both on healthy profits of $20 million-plus and an ahead-of-the-curve community-reaching, ad-servicing, reader-paying strategy. We knew the current owners were involved for the short term; the news here is that ownership will stay local, have deeper pockets, and keep management in place.

Glen Taylor is a 72-year-old Minnesota-bred billionaire who earned his way to his mini-Buffett empire of 50 or so companies through Taylor Corp., along with ownership in 30 other companies. He also has served as a moderate Republican state legislator from 1981 to 1990. He grew up reading newspapers and understands the value of a strong news organization in the life of a city (or two) and a state.

“I’m interested in this one because it’s a Minnesota paper,” Taylor told the Star Tribune. “For the long run, if we can continue to have a news media that’s consistent, fair, broad-based…I think it’s in the interest of our state. I would be proud to be part of that.”

Taylor and his fellow new newspaper publishers share at least three qualities. The first is what gains the headlines: They’re billionaires. They have enough money to buy a property worth a tenth or so what it would have gone for 15 years ago. Second, they have civic impulses, understanding that the world is about more than making money. Third, they are optimists, now apparently on the loose.

Washington Post executive editor Marty Baron outlined his nine excellent reasons (“Optimism is the Only Option”) to be optimistic about the news business, a seeming act of bravery in a trade that has long embraced cynicism is a professional religion. I’ve pointed to this emerging “outrageous optimism” as key driver of news business rebirth, and this week Capital New York’s Joe Pompeo pointed to it in the air in the NYT Now launch. Watch out: It could be contagious.

Let’s be clear about this particular rush of money. What’s most interesting about this spate of buys is that they are local.

National news media is in a new go-go mode, with diverse investment capital announced in the last year alone. Read Marc Andreesen’s well-noted manifesto and you can see the financial justification for everyone from Vox Media to ESPN and NBC Universal pouring millions in national/global news sites.

Then there’s Pierre Omidyar’s First Look Media, still in embryonic stages. Its founder and funder is a 50/50 figure: clear about his pro-democracy reasons for building First Look, but also envisioning it at better than break-even — though that may take more than five years. For all of the moneyed individuals now investing in news, it’s a melding of market discipline and civic value.

The one thing Andreesen left out, as he prophesied hockey-stick-like growth for new media — “The big opportunity for the news industry in the next five to 10 years is to increase its market size 100×” — is local. In fact, almost all the movement of high-profile free agent journalists — the Ezra Kleins, Nate Silvers, Matt Yglesiases, and Kara Swishers — has been within the national news sphere. That 5,000-person increase in journalist hiring, noted in Pew’s recent report? The great majority are national, especially in the wake of Patch’s demise.

The local digital opportunity is real, but it’s a tough, years-long slog. It can never offer the sheer multiplying scale of a global audience or that hockey-stick dream return. It demands patience. It requires at least a 50/50 approach to business and life. That’s why these billionaire bets are timely: They bring money and time to the business of reviving a local American press.

Will this go off the tracks in certain cities? Many will say we already have our proof in millionaire Papa Doug Manchester’s tenure owning U-T San Diego (née the Union-Tribune) in San Diego. But then again, we’ve always had a wide spread of viewpoint and journalistic quality among the daily newsrooms spread across America.

All else equal, though, local ownership is a good thing. That may be especially so in this age. Look at the broad history of chains sweeping up most of American’s dailies in the ’60s, ’70s and ’80s, and you can see all kinds of patterns. Great local papers were homogenized; wretched local papers were made much better, with some even made great. It depended on which chain owner you got in your city. Today, the financial pressure on the chains makes their own reinvestment in the print/digital future hard to pull off. So, local buyers, with deeper pockets and good intentions, can be a very good thing for the local news business and its readers.

The slow unchaining of U.S. daily journalism

We’re not seeing the end of newspaper chain journalism. But we clearly see a weakening of the links, especially in metro markets. (Consider this historical footnote: The Anchorage Daily News was McClatchy’s first outside-of-California paper acquisition, the beginning of its chain growth.) Make no mistake: The rationale for chain ownership — those sometimes-real, sometimes-elusive synergies of multiple properties across broad geographies — still has some purpose. The new, post-bankruptcy GateHouse/New Media Investment Group, funded by Fortress Investment Group, is currently the most aggressive in rollup. (Here’s a good explainer by the Boston Business Journal’s Jon Chesto.) Even as some of the old chains sell, new chains are replacing them.

Still, overall, we’re seeing some significant unchaining of newspapers. Alice Rogoff’s purchase in Anchorage is only the latest example. In the past year, we’ve seen the New York Times Co. complete the process of de-chaining itself, selling The Boston Globe to John Henry. A. H. Belo sold off its Riverside Press-Enterprise to Aaron Kushner’s Freedom Communications (now more a multi-title local news company than a chain, as it launches the L.A. Register next week) and has placed its Providence Journal on the market. When the ProJo is sold, A. H. Belo will be back to being a Dallas-area company. Could McClatchy ultimately peel back to its own California roots, with its three Bees and two other properties? The company will take $24 million in post-tax gains from the Alaska sale, as it tries to thread its needle, balancing debt reduction and digital investment. It may seem far fetched to think of a smaller McClatchy today, but consider the massive change among McClatchy’s newspaper brethren.

Knight Ridder, not long ago the No. 2 largest newspaper company in the company, sold itself to McClatchy eight years ago. Tribune, the No. 3, is about to spinoff (“The newsonomics of orphanage”) its all its newspapers, with follow-on sales of individual papers the greatest likelihood. MediaNews is no longer with us, merged along with the Journal Register chain into Digital First Media, which itself (“The newsonomics of Digital First Media’s Thunderdome implosion — and coming sale”) looks to be splitting apart. Media General is no longer a newspaper company, selling its largest paper, in Tampa, to single owners for a bargain price and the rest to the newest contrarian chain in the business, Warren Buffett’s Berkshire Hathaway Media.

The Washington Post has moved from a larger diversified company into the singularity of the Post itself. In the Twin Cities, the Cowles-owned paper Star Tribune went chain in 1996 when McClatchy bought it, and now has meandered its way back to individual ownership as Glen Taylor comes forward to buy the paper.

Wow. It’s dizzying change for what used to be a staid industry. Though it’s not clearly moving in a straight line, the unwinding of the chains is real. The post WWII logic of buying and building holds far less logic financially.

Beyond billionaire bingo

Billionaires can be good for the newspaper business. That’s the good news. The bad news: There aren’t that many to go around. We have a paltry 492 in the U.S., and they’re unevenly distributed geographically. (A few of China’s 152 have shown interest in U.S. media. And then there are the 111 in Russia, who may find America a more compelling investment environment in these post-Crimean invasion times.)

Still, the 0.000001% are having an impact. It may soon have more.

In L.A., Eli Broad is once again expressing interest in buying the L.A. Times — and returning it to local control. In San Diego, control — which has been local except for a brief Platinum Equity interim — looks like it is up for grabs again. Given the opportunity to rebut the notion of U-T San Diego is for sale, CEO John Lynch refused to do so.

Of course, for readers in southern California and around the country, it depends on which billionaires or multi-millionaires (yes, you qualify too) you get. You want the ones, whether Republican or Democrat, who believe in a fair, straight-ahead news report.

Consider last year’s allergic reaction to the Koch Brothers’ attempt to buy the Tribune newspapers. Through public protest and private pressure, the Tribune properties never made it to the offer sheet stage — but they’ll come back on the market some time after the spinoff. Given the Kochs’ great understanding of political influence, why wouldn’t they buy newspapers as another lever of political persuasion? As news of the DFM shakeup reverberated around the country last week, smart observers noted that one of the purplest of purple states — Colorado — could see one billionaire newspaper owner, Philip Anschutz, consolidate the state’s press. With its “stridently conservative” stance, those nine electoral votes in 2016 may swing in the balance. While the Roberts Supreme Court has widened the opening for wealthy campaign donations, owning a press still offers an old-fashioned means of influence.

To be sure, relying on billionaires to save the local day would be silly. We’ve seen all kinds of efforts — from tenacious, high-achieving, nonprofit startups to would-be for-profit digital chains, as well as financial strategizing around “low-profit” local news corps. All have their place in the renaissance. This year, though, it is the boys (and girls) with the big bucks who are making headlines.

                                   
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  • SocraticGadfly

    The splitting of chains tells us more about the problems in servicing bad debt from a decade or more ago, with newspaper revenue still stagnant, than it does about whether chains themselves are good or bad. Focusing on chains that had not gone through bankruptcy in the past decade would have provided a better picture.