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June 4, 2014, 10:51 a.m.
Business Models

The newsonomics of the Orange County Register’s swerves all over the freeway

In less than two years of ownership, Aaron Kushner has changed strategies like changing lanes. A new round of cost cutting suggests the route to sustainability is still uncertain.

Pity Aaron Kushner’s poor driving instructor. We can easily imagine the then-16-year-old’s driving inclinations as he first took the wheel. Heavy on the gas. Lightning quick on the brakes. The art of the teenage lurch. We’ve all been there — but few of us have gone on to own and run newspapers.

Now, a quarter century after those early driving days, the Orange County Register owner and publisher is displaying his latest errant skills behind the wheel. On Tuesday, the Register — not long ago a poster child for confident community news investment and a revival of targeted print — slashed and burned some more, raising new questions about its very viability in the year ahead.

The immediate news confirms that many of the warning signs of the last six months were very real:

  • A mandatory, company-wide, two-week furlough that employees must take before the end of July.
  • Buyout packages offered to as many as 100 newsroom employees. The package is less generous than the one offered in January, which saw a headcount cut of 30. It includes one week of pay for each year worked at the Register, to a maximum of 20, but no company-paid COBRA health care extension this time around. Journalists must make a decision on the offer by Monday evening, a few hours after a Kushner-led “Town Hall” meeting earlier in the afternoon. If the company doesn’t hit its targets, expect layoffs, with lower severance packages to be the standard.
  • Immediate layoffs in sales, in the name of “restructuring to ensure sustainable, cost-effective growth.”
  • The Long Beach Register, the paper’s first big expansion, is being scaled way back. The L.B. Register moves from a six-day edition to largely being absorbed within the newly launched L.A. Register (“Six things to consider about the new L.A. Register”). On Sundays, a Long Beach-only section will wrap around the L.A. Register and be delivered, for free, to a select 61,000 Long Beach households, in addition to the relatively few subscribers the Register has picked up there.

As a package, the announcement — delivered by email, without a newsroom meeting — shocked the company. It’s a big red flag, screaming we’re running out of money really soon, following numerous months of yellow flags.

Even as Aaron Kushner surprised everyone with an announced plan to publish an L.A. Register in December, those yellow flags had already started to pop up.

Two months earlier, it announced the purchase of the neighboring Riverside Press-Enterprise for $27 million from A.H. Belo. Before the deal finalized around Thanksgiving, Kushner suffered public embarrassment as the high-wire act required to locate the cash and close the deal became clear. Then, in January, weeks after the L.A. Register announcement, the Register took 32 jobs out of the newsroom and saw its four top newsroom leaders, including longtime editor Ken Brusic, quit, in something between protest and pure emotional resignation. Who would staff the Los Angeles Register — serving a three-times-larger population in neighboring L.A. County — if jobs were being cut in Orange County? Forty or so staffers soon were prepped to be sent over the county line; no new journalism jobs were to be added.

About the same time, its much ballyhooed five-day-a-week print community sections — colorful and well designed, the centerpiece of its community reporting investment — went back to weekly.

Throughout it all, we knew that Freedom Communications, the parent company that Kushner and his business partner Eric Spitz had bought out of bankruptcy two years ago, was a pencil-thin financial operation. Even as it’s tried to innovate, expand, and impress among the multiple challenges of modern-day, digital-disrupted journalism, it’s had little cushion. It had only $6 million on hand in November. Payrolls reportedly weren’t easy to make, though the publicity machine rolled on. In May, it once again made payroll, but you can assume not by much. Now the paper’s vendors are seeing slower payments. Then, Tuesday, this seemingly panicked lurch back to massive — and immediate — cost-cutting.

The yellow flags have turned red. What happened?

First, we can look at the strategy — and some observers question how much there has been one all along — and see a series of lurches.

Take the Long Beach Register as just one example. Last July 15, Kushner announced that he was moving into Long Beach, a large and always-somewhat-separate community of 465,000 just over the Orange County border in L.A. County. He’d be doing so with a staff of 20 journalists — doing it right, investing in journalism, smartly leveraging the Register’s presentation workflows, editing hubs, and sales staff — and proclaiming to Long Beachites that the new five-day-a-week would become their trusted new community paper. The paper launched on Aug. 19. On Nov. 24, its new Sunday edition hit the streets.

Six months later, the experiment is dramatically reduced, the promise quickly changed.

It seemed like the Register’s strategy in Long Beach matched that of its original Orange County investment. Kushner’s early hiring spree expanded a recession/bankruptcy-damaged newsroom of 188 to as many as 400. Today, it stands at 345. His promise to readers, advertisers, and the communities the Register serves: “We care deeply about Orange County’s communities, and the best way to help them grow and connect the people of each city to one another is to cover them with greater depth and frequency.”

The strategy: Rebuild the product. Boost subscription pricing. Reap the ad benefits.

Then the Riverside buy offered a different strategy: regional consolidation. Not a bad idea on paper, but fundamentally different than the OC/Long Beach plan.

Then, the L.A. Register plan — by removing O.C. resources and adding no new ones — flew in the face of the original strategy (“The newsonomics of the Orange County Register’s new, newer, newest plan”).

All of these moves, amid financial tightness, occurred in rapid succession. Amazingly, Kushner’s and Spitz’ revolution has spun itself into a hole in less than two years — they took possession of the paper on July 26, 2012.

A few months ago, I asked Aaron Kushner how long would it take to really replace the incumbent Long Beach Press-Telegram as the go-to news source of Long Beach? Kushner told me it was a 10-year play, acknowledging that no matter how good a product you put into the marketplace, it takes time to change reading habits.

Six months later, the strategy is changed again.

Second, the Kushner contrarian business strategy hasn’t worked. The over-investment in print, as print continues to slowly die off, and the under-investment in digital, has only exacerbated the effect of ownership’s poor driving habits.

The enthusiasm of Kushner and Spitz is hard to dislike. In a short period, they’ve brought numerous good marketing ideas forward (“The newsonomics of Aaron Kushner’s virtuous circles”). But those have been swamped by the many issues of money and management. That newsroom, built up to a level of 375, may be down to 245 soon. That’s still more than 50 greater than when Kushner and Spitz took it over, but several dozen of those 245 are interns and trainees, young journalists with more enthusiasm than experience covering their communities. Certainly, a case can be made for the massive change in the staffing, but the problem that now dogs the O.C. duo is credibility. How can they convince readers, advertisers, staffers, and their communities that they are really invested for the long haul?

Overall, it’s been a down year for those looking for out-of-the-box models to local newspapering.

First, AOL’s Tim Armstrong finally succumbed to investor pressures and jettisoned Patch late last summer. Though the new privately held Patch still employs 65 journalists, and had The New York Times buy its turnaround story, its model-making days seem long ago. Digital First Media’s digital-first revolution has been suspended, as its owners prepare for sale. Advance’s day-cutting fervor is producing new problems along with its new solutions. Now, the Freedom revolution seems more like a school play than a way forward for the industry. Big broad ideas, though sexy, may matter less in rebuilding the news business than brick-by-brick, block-by-block work.

Finally, the wider area — the Register’s playbox of southern California — emerges as ground zero in whatever comes next for metro newspapering. Tribune is about to spin off Tribune Publishing and its L.A. Times; its eventual fate and ownership is unknown. The Los Angeles News Group, soon to be up for sale by Digital First Media, faces its own uncertainties. And now, we have to wonder what the next turn of the Register will be.

Will it be further cut back, or be able to cajole new investment, or be sold, or embark on court-supervised restructuring? All are possible. One thing’s likely: We probably won’t have to wait too long for next act.

Photo of sign by CasparGirl used under a Creative Commons license.

POSTED     June 4, 2014, 10:51 a.m.
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