Monopoly mergers, or die?
By Steve Greenberg | January 27th, 2010 | PERMALINKEveryone knows the daily newspaper industry is in rough times. Is wiping out all remaining competition the only path to survival? That’s what’s being heard a lot more these days.
MediaNews Group, run by William Dean Singleton, has become the second-largest newspaper company (after Gannett) in America, thanks to amazingly leveraged borrowing schemes that might have made Countywide Mortgage risky-loan underwriters blush a couple years ago. MediaNews is also the latest newspaper company to go into bankruptcy to ease its debts.
Singleton has been able — and willing — to buy under-performing newspapers around the country, usually on someone else’s dime. He has partnered with such companies as Gannett and the Hearst Corporation to either take troubled properties off their hands (and their books), or to acquire collections of newspapers using their money, hoping that his expertise (he’s generally been put in charge of those properties) would reward their investments with nice returns. That might have been true five years ago, but in today’s distressed climate those investments are evaporating. Hearst, one of Singleton’s biggest investor-partners, stands to see perhaps $317 million disappear in the MediaNews bankruptcy.
Singleton’s signature strategy has been “clustering” — that is, buying up several adjacent newspapers in a region — and then using “synergy” efficiencies — that is, sharing resources and staffs among these properties, such as common printing facilities or sports reporters feeding the same pro sports stories to all the papers. It’s a smart strategy… and often a ruthless one.
He built a scary reputation for cost-cutting. Staffs have been whacked repeatedly at his properties, positions and departments eliminated and copy desks merged and purged. He also acquired his properties in Oakland and Long Beach via “asset sales” that were used to void union contracts, with all staffers forced to reapply for their existing jobs; those who were rehired had to come back at much-reduced salaries.
On the other hand, I do give Singleton points for being willing to buy up newspapers at all these days, and for having bought many that would have died long ago if it wasn’t for his intervention. Weakened papers with shrunken staffs are sad things, but certainly less sad than defunct papers.
In the San Francisco Bay Area, he bought up, bit by bit, many of the mid-sized papers serving the counties surrounding San Francisco: the Oakland Tribune, San Mateo Times, Fremont Argus, Marin Independent Journal and so on. I briefly worked for him when he bought the Marin IJ from Gannett a month after I started there (a purchase that initially panicked the staff, given his reputation), and I had a perfunctory handshake with him when he made one of his perfunctory tours of his properties.
When the once highly respected Knight-Ridder newspaper chain was forced by impatient, whining institutional investors to put its properties up for sale in 2006, McClatchy newspapers (based in Sacramento) grabbed them, including such prized California papers as the San Jose Mercury News and the Contra Costa Times. However, McClatchy wanted to concentrate on its most profitable papers and chose to quickly sell off several of its newly-acquired papers, including the Merc and the CC Times.
MediaNews, in part funded, oddly enough, by Hearst (owner of the rival San Francisco Chronicle), acquired the Merc, CC Times and other properties. Suddenly, it had the Chronicle completely surrounded, now with twice the Chron’s circulation.
In Southern California, a similar surrounding happened. MediaNews gradually bought up the Daily News of Los Angeles, Long Beach Press-Telegram, Pasadena Star-News, South Bay Daily Breeze and other properties, leaving the dominant Los Angeles Times nearly surrounded and, again, with a larger combined circulation than the big metro paper.
But the Southern California newpaper landscape is bleak. Beyond bleak. The L.A. Times, through its parent Tribune Company, is also in bankruptcy; like Singleton, Sam Zell over-leveraged in boom times, only to see the floor drop out when the recession hit the newspaper business.
Just down the freeway in the next county, the once-mighty Orange County Register is in the same bankruptcy boat. And one more county south in San Diego, the Union-Tribune fell onto hard times, selling to a private equity group from Beverly Hills in 2009 (that can’t be good!) and hiring a former Daily News publisher known for his vicious cost-cutting.
The talk lately has been that none of these newspapers can stay profitable, or perhaps even survive, alone. They need to merge into one unit to make it, they say. Think of it: the L.A. Times was so powerful that it was perhaps the biggest single force in creating Southern California as we know it. And the OC Register was so successful, it whipped the Times’ ass in the OC as its ad-fat newspapers thudded onto subscribers’ driveways.
A MediaNews- L.A. Times merger would mean one company controls nearly every daily newspaper in the most-populous county in the nation. Adding the Register would mean one company controls nearly every daily in the nation’s second-largest metro area.
And the exact same thing is being proposed up north, with even more urgency and liklihood: a MediaNews-San Francisco Chronicle merger would mean one company controls nearly every daily newspaper in another of the nation’s biggest metro areas. Similar mergers are being mentioned in Minneapolis-St. Paul and other regions.
Would the U.S. government give the green light to such outrageous consolidations of voices? They might. The newspaper biz is in such poor shape these days, their lawyers and executives will be able to make strong arguments that merge-or-die is the only choice. And you can kiss goodbye the few remaining Joint Operating Agreements that remain in places like Detroit and Salt lake City. Unprofitable second papers have not been saved by their JOAs (although that was the intention of the act decades ago)… witness the deaths of the Seattle Post-Intelligencer, whose financial woes threatened the survival of the stronger Seattle Times as well, and Denver’s Rocky Mountain News.
And even if there was a mega-paper in L.A. or San Francisco, would it be great, comprehensive and fearless in its news coverage? Probably not. All the affected properties have been whacking their staffs in layoff wave after layoff wave. Sections have been shrunken, merged or eliminated. The editorial cartoonists have all been laid off or reduced to part-time status, and whole graphics departments have been wiped out. The comics pages have shrunk, along with the width of the printed pages, to become nearly unreadable, and popular columnists have been given the boot. Fewer local reporters mean fewer local stories, while fewer copy editors mean way more errors in print. And what kind of editorial voice and advocacy would it have? Even if it wasn’t watered down, there would at least be one less editorial voice — probably many fewer voices — in a merged product.
Thinner, crappier papers have turned off the readers. They’re getting less product for their money, and are lately being asked to pay more for it. Print newspapers may be getting killed by Craigslist and Google and by giving it away for free online, but their own fingerprints are on the knives in their bellies as they seriously weaken the very product they’re trying to sell.
The cartoons posted here are the national and L.A.-specific versions of my take on the subject.
Would I buy and read the mega-paper? Yes, because I’m a life-long newspaper reader, but there are ever-fewer of us. Would I work for the mega-paper? Not sure… the employment picture at newspapers right now is somewhere between insecure and downright miserable.
Would William Dean Singleton come out well in a mega-paper? No doubt. Hey, there’s at least some good news for somebody in all this.
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