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Sept. 18, 2015, 9:45 a.m.
Business Models

Newsonomics: At the Times, the need for a private owner is L.A. consequential

We know what continued ownership by Tribune Publishing looks like for the Los Angeles Times: cuts, cuts, and more cuts. A private, local owner would offer a better chance for sustainable success.

It’s a trademark line of Austin Beutner’s: “I cannot imagine Los Angeles without a vibrant L.A. Times.”

As anyone who follows media knows, the Los Angeles Times publisher’s imagination short-circuited the day after Labor Day, when he was fired by Tribune Publishing CEO Jack Griffin (“Tribune to fire L.A. Times publisher Austin Beutner”). Unfortunately, too many citizens and readers can imagine that day. Today, the Times can only claim a household reach of 7.4 percent in the L.A. designated market area. That’s right: Only one of 14 households take the paper. Yes, the Times’ digital reach is much greater, but that print reach number tells the story of civic decline.

It’s the place of the Times in greater L.A. — the digital, print, and in-person Times — that should drive the Tribune/Times story forward. Don’t be distracted by the sometimes-cartoonish depictions of the drama. We’ve seen all the familiar storylines quickly dusted off: Chicago vs. L.A. Chain vs. local. CEO vs. publisher. Tyrant vs. hero. Billionaire philanthropist vs. corporate chieftains. While each offers elements of truths, they don’t offer the insight we need.

In short, it’s the Austin Beutner model — however flawed anyone thinks its execution was, or would be — that should compel us. It’s what makes this particular tale of newspaper chaos distinguishable from the long list of examples elsewhere. It’s what makes the L.A. Times case consequential to news publishers everywhere, and what makes the coming fight over the Times’ ownership a point of national interest.

The civic argument

Yes, the words “community” and “Los Angeles” haven’t been a perfect duo.

Yet, at the Times, that word — even, in Los Angeles, the place Dorothy Parker (perhaps apocryphally) called “72 suburbs in search of a city” — assumed a central editorial and business role in the short Beutner era.

In his Facebook post upon being fired, Beutner laid out his strategy once again:

I agreed to become the Publisher and CEO of the Times because I believe in Los Angeles and recognize the unique role the Times plays in our community. It is the civic conscience which holds accountable those with power in Los Angeles, helps celebrate what is good in our community, and provides news and information to help us better understand and engage with the world around us…the Los Angeles and California story really does begin here at the Times.

In a matter of months, Beutner mapped a different, involved future for the Times. His own one-hour televised and streamed interview with Gov. Jerry Brown on California’s drought drew the most attention. What drew less was a budding business motive that sprouted from it, a possible topical focus on water. Some new ad money from irrigation and drilling companies literally opened a small but intriguing tap of new revenue.

He intended that Brown forum to be a prototype for a series of Times forums to shine light on community issues, to be accompanied by to-the-point Times’ journalistic coverage.

On a more enduring issue, the Times announced its new education focus with the August-launched Education Matters. The intention: Serve the audiences of parents, educators, and children as distinct ones, and to pivot coverage accordingly. Some detractors may paint it as naive, but read through the announcement and see what you think of this idea to make L.A. Times newly essential to its communities.

Essential: That’s a key word in the strategy. In fact, the Times’ first big newsletter foray is called Essential California, and it has already begun building a list of known readers — the same strategy now being successful plied at best-practice national sites from the New York Times to Quartz.

Being essential served as Beutner’s attempted antidote to the Times’ increasing irrelevance to the wider community. (How much has the Times lost its central importance to a city whose agenda it once, for good and bad, set? Consider that in 1999, it had “more than 1,000 staff members — editors, reporters and photographers,” a daily circulation of more than a million and a Sunday circ of 1.3 million. More here on the 1999/2015 comparison at Kevin Roderick’s L.A. Observed.)

If all of that seems goo-goo nice-making, let’s note that a profit-making motive rode alongside. In the few months the strategy has been in place, it may be able to count just a couple to several new millions of dollars of revenues, if that. The bigger plan, which I outlined in May (“What are they thinking? Austin Beutner’s California turnaround plan”) included new ad sponsorships, native advertising, events income, general and niche reader subscriptions and more, largely again borrowing from the playbook of what we’ve seen nationally. In that column, I noted Beutner’s plan would easily take three to five years to be tested.

Beutner also reached out more widely to L.A.’s majority non-white communities, both in his hires and in his intended products. His new emerging teams at the Times sometimes left him, ironically, the only older white guy in the room.

It’s noteworthy that both Latino communities and African-American politicians have supported him publicly since he was fired; the Times hasn’t always had the greatest relationships with the new L.A.

Word is that even parts of the newsroom were coming along, although it’s hard to how big those parts were — or may be. (Anyone who’s been around this business knows that waiting for whole newsroom buy-in is an impossible proposition.)

All of these initiatives raised eyebrows at Tribune’s Chicago HQ; they weren’t part of Griffin’s own turnaround plan. They were audacious and could only be led by someone with as big an ego as Beutner. Beutner was doubly the man for the job.

Now, maybe Austin Beutner may not be the best guy to lead a rededication of the Times as a muscular player in the journalism and life of the city. Though everyone proclaims him to be “the smartest guy in the room,” he had never been a publisher, or a media guy, before. Some say his inexperience with the basic blocking and tackling demanded of a publisher complicated the change he sought, and that he hadn’t yet figured out how to line up his commercial management ducks in a row. None of that would be surprising, and I’m sure it would be vexing to any involved. At the same time, let’s remember that the Times had seen only one year of this kind of change — though God knows it’s been buffeted by so many changes in management over the years as to turn even an optimistic analyst cynical. Importantly — to the point of the civic strategy — he’s the guy who stepped forward.

What is L.A.’s civic interest worth, to whom?

This question of the Times’ future is still open; expect it to be resolved in weeks rather than months. Businessman/philanthropist — and friend of Austin Beutner — Eli Broad has already tried to buy the Times and its now-sister San Diego Union-Tribune, which was bought by Tribune and put into a single California News Group company four months ago (“Newsonomics: Tribune Publishing wraps its arms around San Diego — and all of Southern California”). In fact, the Tribune board rejected his expression of interest at the same meeting two weeks ago at which Beutner was fired. This week, the 82-year-old Broad is fixated another big project: He’s opening the Broad Museum, a $140 million investment that will house the art collection of Broad and his wife Edye.

Behind the scenes, though, there’s much strategizing. Broad signed his name, along with the 50-plus other L.A. leaders, including two former mayors (though not, conspicuously, the current one) in calling for Tribune to return to local control of the paper. His interest remains, and his pockets are deep, at a net worth of more than $7 billion. In a cash game, Tribune can’t play. But it’s not yet a cash game. The Tribune board rejected Broad’s overture — he didn’t name a number, wanting to see current financials — and last night Tribune issued a statement saying it was “deeply committed to…the communities of Southern California” and called the Times and U-T “a cornerstone of our Company’s portfolio and a key component to our success in the future.”

But that’s likely just a first step in this process. If Broad is willing to consider a bid for all of Tribune’s nine properties, the game will be on.

Two years ago, Broad — then partnered with Beutner — was willing to buy all the Tribune’s papers. Then, you’ll recall, the apparition of Koch Brothers jittered the landscape, and Tribune decided to spin the papers into a separate company rather than sell them.

Given the spirit and possibly letter of the Revlon principle, Tribune’s board must listen to legitimate bids that are in its best interest. Whose best interest? Not the readers’, or the community’s, of course; we haven’t yet found that legal principle in U.S. law. What matters is the financial interest of the Tribune’s shareholders. The largest, at 15 percent, is Oaktree Capital Management, headed by Bruce Karsh, himself a significant L.A. player.

A sale would undoubtedly force change in Tribune management, and likely in its current strategies, but it’s the price — the number — that will matter most if Broad proceeds. Even if he doesn’t, there’s now much stir in L.A. about local ownership, Beutner having shown a new light on what may be possible for a revivified Times. Could Beutner himself be a funder of the deal? He’s got at least some of the money to get a deal done, but may not want to go it alone.

What’s TPUB worth? Less than it was a year ago. Its share price is down by about 60 percent. With a market cap of $285 million and debt, after cash, of about $360 million, it will take less to buy Tribune papers than it did a year ago. We can figure that the new combined Times/U-T may be worth a third to 40 percent of the company.

Tribune, unsurprisingly, has been very quiet, saying publicly that it was “grateful” for the rush of civic concern that’s made itself known over the past week. Then, Thursday, its board issued a “vote of confidence” in Jack Griffin’s plan and Beutner’s successor, new publisher Tim Ryan.

Civic leaders, the L.A. City Council, and L.A. County of Supervisors have all recently run to the barricades to demand local leadership and ownership, plus the restoration of the Beutner order. Meanwhile, Ryan, who came directly from Tribune’s Baltimore Sun, owns the unpleasant task of implementing deep budget cuts that Beutner wouldn’t. By the end of the month, we expect newsroom cuts nearing 10 percent of the 500-strong workforce, in addition to other organizational efficiencies.

While community and civic interest may be the biggest story here, the question will turn out to be: What is L.A.’s civic interest worth, to whom? (And we should note, despite Beutner’s strategic intentions, the city of San Diego — California’s second largest — has become a bit player.)

Newspapers’ public face

Tribune Publishing has assumed the role of the heavy in the so-far largely local drama. National media are working angles, while the Times’ coverage of the intrigue has been fair but meager, and certainly not ahead of the story.

In my early conversations with Jack Griffin, I could hear his intention to make both the journalism and the business better. Now, though, in the pressure-packed, quarterly-earnings-driven world he’s chosen to live in, time isn’t on his side. Unlike Beutner, Griffin didn’t believe he had much time to spend on imagining. Instead, he’s had to deal with financial analysts and investors who care only a little about 2017 and who, in some cases, understand next to nothing about the local newspaper business.

It was a year ago that Griffin took on the near-impossible task of turning around a single-class public newspaper company, in public, on a digital dime. His five-point transformation plan hasn’t yet shown transformative results. While Beutner had plotted out the longer-term vision, beginning to put a team into a place that could achieve it, he refused to play his bosses’ shorter-term, care-about-the-quarterlies game. Further, suffering fools, or company foolishness, is not one of Beutner’s core competencies, and, he does little to disguise it. All that explains why this arranged marriage — put in place by Tribune Publishing board chairman Eddy Hartenstein, the Times’ former publisher who has made himself noticeably scarce since the firing — was fated to fail. That it lasted a year is remarkable, though the increasing financial pressures and corporate organizational changes I’ve noted brought it to a head.

Consequently, the public sees a Tribune — despite Griffin’s best efforts — playing a lot more defense than offense. Beutner is all about offense, and not much of a team player for a team he never really wanted to be on.

Consider the wider context. Consider all the publishers nationwide taking meat cleavers to their 2016 budgets. That’s the context in which Griffin and Tribune must try to move forward. In general, the newspaper business is worse off this year than last year, down maybe two or three points of revenue from 2014, something we know from both public newspaper company financials and many conversations.

How bad is it? Well, newspapers’ trade group, the Newspaper Association of America, still hasn’t published its final 2014 data, now four months late. Just in the last two days, we’ve heard of one of Montreal’s two big dailies dropping daily print, of the New York Daily News considering the Advance model of non-daily printing — and of Advance itself, at New Orleans’ Times-Picayune, cutting another 21 percent of its newsroom, telling us its model isn’t working out quite as well as planned.

At the same time, the big national publishers are investing in technology to gain leverage in advertising sales, in analytics, and in content creation and distribution. This Age of Distribution (“BuzzFeed and The New York Times play Facebook’s ubiquity game”) heavily favors scale, as in national and global. That’s a further blow to regional publishers operating on a shoestring. As the Lab’s Joshua Benton recently summed up the current condition so well: “As giant platforms rise, local news is getting crushed.”

Crushed.

Josh and I are among those who’ve been searching for words to describe the devastation we’re witnessing. I’ve tried to describe it in numbers (“Newsonomics: The halving of America’s daily newsrooms”) and in prose, out of the ongoing Digital First Media debacle (“Newsonomics: When news companies are no longer built to last”). Folks, fellow citizens, this is a news emergency. As our eyes fixate on the Trump circus, we know less and less about our communities every day.

Private, long-term

Language alone would seem to imply that a public news company would operate in the public’s interest. Given the industry’s turmoil, though, we’re seeing nearly the opposite. You might think that a public company would think long-term, but that’s not the way public markets work.

So we get to the word private. A not-very-public-service seeming term, right? We’re used to nonprofit, maybe, signifying a public good, but other than two handfuls of great nonprofit news organizations (think ProPublica, the Center for Public Integrity, and the Center for Investigative Reporting nationally, and Texas Tribune, MinnPost, and Voice of San Diego regionally) news nonprofits of scale have filled only a small part of the vacuum created by newspapers’ decline.

One of those nonprofits making a major contribution is L.A.’s KPCC public radio station, which pays a staff of 100 to cover L.A. In his own recent Facebook post, KPCC president Bill Davis said:

The point is that newspaper publishers who don’t meet their revenue and margin targets rarely stay in their positions very long. Newspapers are for-profit, commercial enterprises. I liked Beutner’s championing of local coverage, civic engagement and even membership — probably b/c a lot of it could have been lifted straight out of KPCC’s strategic planning documents. But I also know that the public media model is profoundly different from the commercial model and doesn’t translate well into for-profit structures.

Davis’ point is on the mark, but describes a world that is now vanishing: publicly owned, profitable newspapers that could also do a lot of community good. I think we’ve got to revisit these notions of expected community service and what private now means.

Private. I’ve sometimes made light of the small — but significant — trend of billionaires buying newspapers, calling it Billionaire Bingo. It’s a lottery of sorts. Every billionaire, like every chocolate in Forrest Gump’s box, is different, and you don’t know what you may get. We do know, two years into billionaires trending, that the news readers of Washington (Jeff Bezos’ Post), Boston (John Henry’s Globe) and the Twin Cities (Glen Taylor’s Star Tribune) are better off for the billionaire buying of the local paper. They are the 50/50 men — strong business instincts married with civic interest — and they may be the best current hope on the landscape. At Bloomberg View, Justin Fox explains well why he’s come around to the same point of view.

Which brings us back to the Los Angeles questions, of truths and consequences. At this point, it’s harder to see a better consequence for the readers of the Times under public Tribune control than under private ownership, led by Eli Broad or someone else. We know the former is likely to bring a big newsroom cut and, given all the history of the last eight years, more cuts to follow. That’s the only sure way that Tribune — just like its peers — can promise an even future cashflow to increasingly skeptical investors. We know that the latter — assuming Austin Beutner and his civic strategy return — may create a better future. We also know that without that return, we’re unlikely to see this kind of laboratory in civic-building business transformation tested elsewhere soon. And that would be just another small tragedy in the extended, tragic decline of the American local press.

Photo of L.A. skyline from Griffith Park by Darin Kim used under a Creative Commons license.

POSTED     Sept. 18, 2015, 9:45 a.m.
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