The Demise of Lean Dean Singleton and the Rise of Private Equity

Dean Singleton worked the deals in corners of the U.S. for decades, building from scratch a major chain, that by circulation (though, not revenue) is probably the second largest in the country. If he was once dismissed by his more patrician peers as Lean Dean, for his lower operating cost philosophy and practices, he did okay for himself, serving as chair of the Newspaper Association of America and now as chair of the Associated Press board.

He expertly used OPM (Other People’s Money) to finance often complex deals, deals that the company’s 2010 bankruptcy filing only partially brought to light. If he was known as Lean Dean, he also became the Count of Clustering. Why not put together groups of contiguous newspaper titles, and then bring basic corporate principles of consolidation to them. Consolidate advertising sales and production, circulation, finance, HR, and as much as possible, editorial across the titles, and you’ve saved lots of headcount, lots of FTEs. It was a formula that many others in the industry soon tried to copy, but Dean seemed the master of it, until time ran out.

It ran out officially today, as MediaNews announced that Dean Singleton, his long-time #2, Jody Lodovic, and three Singleton-appointed board members would all step down from their positions. The new CEO search has begun, with Lodovic gone immediately and Dean retaining chairman and publisher posts at his flagship Denver Post (where he finally drummed the Rocky Mountain News into the dustbin of history in 2009) and the Salt Lake Tribune. Singleton will also “focus on opportunities to optimize the company’s portfolio of properties and consolidation opportunities in the newspaper industry” and remain as executive chairman of the company when he steps as CEO, which will happen when his successor in that position is announced.

Dean fought as tenaciously to keep his empire alive as he had fought to build it over the years. Yet, in the end, he was overcome by the same forces that have brought chaos to the whole industry: a failure to satisfactorily transition the business from print to multi-platform, and by the depth of the recession, which seems only to have accelerated that transition.

This change in leadership won’t be a matter of rearranging the deck chairs, and therein lies the next MediaNews chapter, and one that we’ll see written for several other newspaper chains now effectively controlled — after bankruptcy reorganization or simply extensive restructuring of debt — by private equity and bankers of several kinds.

Look at whom is replacing the three departing Singleton-ites on the MediaNews board, from the release: Heath Freeman, Managing Director at Alden Global Capital; Bruce Schnelwar, Executive Vice President and Chief Financial Officer of Smith Management LLC and Managing Director and Chief Financial Officer of Alden Global Capital; and Eric Krauss, who was most recently Chief Financial Officer of Action Sports, Inc.

If the name Alden Global Capital is starting to sound vaguely familiar, it’s because the company has been mentioned in stories about shake-ups at Freedom Communications and the new Philadelphia Media Network, both of which it owns stakes in.

This phenomenon of private equity and bank owners asserting their controlling stakes in news companies has been little discussed publicly. In part, that’s because the new owners have been largely silent; one journalist expressed dismay today when he went to the Alden site, and found a single page. To get into the site, you need a client log-on.

We can look at this new ownership phenomenon two ways. The easy one is to decry largely silent control of the press by bankers, whose main motive is to create something of value of their woebegone holdings, and then sell out in the next several years. Bankers, after all, don’t come with the public service gene that have defined even the most profit-seeking traditional publishers. We are naturally suspicious of what they may do with the newspapers.

Another way to look at it, at least for a moment, is through the eyes of these new owners. The owners are looking at their properties as the only advertising-oriented media that didn’t make a comeback in 2010. With ad revenues down in single digits, the companies continue to shrink in revenue, as other media, particularly digital-only and broadcast, but even magazines, frame a growing future. Those media tell a better story, and you’d better have a better story if you want to establish value in these newspaper companies — to sell them and recoup at least part of your investment — over the next two to four years.

Several years into their new ownership, we’re seeing increasing impatience among the new owners with the old leadership. A growing conventional wisdom among them: too many newspaper CEOs just aren’t moving faster enough to grasp the mostly digital, multi-platform future. In fact, some of the new owners are meeting directly, without company leadership, with technology players who are offering shortcuts to the digital future. That’s one sign of the impatience.

Another is the replacement of leadership, today Singleton and Lodovic, with new talent. At Freedom, the new owners brought in as CEO Mitchell Stern, who came from DirecTV. In Philly, they brought in Greg Osberg as CEO and publisher; Osberg comes both from magazines and digital start-ups. The new Star Tribune owners brought in Mike Klingensmith, a Time Inc. alum. The new formula: out with the newspaper-only people and in with media people, whose experience is non-newspaper or newspaper-plus. Expect to see a similar move when the new MediaNews CEO is named.

For Dean Singleton and the industry, it’s a sea change. He built a company of great size and uneven journalism, from great to deeply mediocre. He made digital investments and then dismantled his central digital staff last year. He fought the spectre of bankruptcy hard, cutting deeply into the staffs of his newspapers. In the Bay Area, where I live, the result is palpable. Such papers as the Mercury News, the Contra Costa Times and the Santa Cruz Sentinel are shadows of their former selves; those shadows will soon be tested as some of them try metered pay walls this year, and customers, asked to pay, weigh whether the old papers have just cut too much.

One former MediaNews editor told me he did the requisite city tour with new owner Singleton, soon after Dean bought his paper. On the tour, Singleton told him, he says, that as long as the distinct local masthead was preserved, you could fill inside of the metro section with news from the wider (in the Bay Area case, more than a hundred miles) area, and readers wouldn’t know the difference. That contention is now sorely contested.

So, as he flash forward to 2011, the year of the tablet and more, the new leaders tapped by the new owners may, in fact, be what’s needed to both let go of the past and invest in the future. Some of the new owners fear that in all the restructurings, too much and/or the wrong things have been cut. The optimistic picture is that new leadership will help revive fractured franchises, and actually produce better journalism, en route to sustainable profitability. The pessimistic one, of course, is that we’re just in for more chaos and cutting.

1. 

   D.B. Hebbard says:

   January 19, 2011 at 8:28 am

   The one thing I would have added is “if you want to know how this all turns out look at the B2B media space”:

   After I left the newspaper industry I joined McGraw-Hill, then other B2Bs including Reed Business Information. During that time, the nineties, the banks came in and bought up properties with the idea that they could play musical chairs with their investments and cash out on top. Some did, most did not.

   What the banks did not bring to B2B was innovation, publishing knowledge and a sense of commitment to the industry, its readers or advertisers. The results were predictable.

   And so were those chosen to be in executive management. Look who is the interim CEO now at MediaNews — the name should sound familiar to those who remember the Hollinger/Conrad Black mess. The financial companies who own many of the B2B magazine companies tend to bring in their own, as well.

   Finally, what goes around, comes around. The Bay Area paper I worked at was once owned by Dean Lesher, who founded the company. The competition was owned by another family company. That publisher eventually sold out to Dean Singleton. Later the Lesher chain was sold to Knight-Ridder and finally they were sold to Singleton. Now the bankers own them all.

   Newspapers are like baseball trading cards now, except that baseball trading cards increase in value over time.
2. 

   Joe Little says:

   January 19, 2011 at 9:22 am

   It’s Mitchell Stern not Michael Stern as CEO of Freedom. A great guy. Get to know the name.
3. 

   Ken Doctor says:

   January 19, 2011 at 9:25 am

   Joe: Thanks for the catch. Ken
4. 

   Lisa Williams says:

   January 19, 2011 at 11:06 am

   I love this post. There hasn’t been anywhere near the amount of focus on the role of private equity in forming and flipping chains in the US media scene. After the Telecommunications Act of 1996 lifted the controls on how many media properties could be owned by a single company, it cleared the way for all kinds of media conglomerates to spring up (think Clear Channel, for example, which is a direct product of deregulation). But who finances the creation of the chains? Well, private equity firms. But I’ve never seen an interview with a partner at one of the private equity firms bankrolling these deals where many media properties are bought up to create a new conglomerate.

   What are these guys thinking? What’s their rationale? Do they care about media in particular, or to them is it just a different kind of widget?
5. 

   Roger Kranz says:

   January 19, 2011 at 2:31 pm

   Well, good riddance to the king of Killing Newspapers. Singleton was the worst example of greed in the newspaper industry. Never improved a single product he bought. Probably responsible for more journalists losing their jobs, homes and families than anyone in the media business. I never worked for him, thank goodness, but saw how his ideas failed miserably, over and over again. Why? For the same reason most of today’s newspapers that are owned by non-founding members/family will fail. They just don’t get it–it being that newspapers were created by local citizens who cared about their community and the commerce it created. Public service was second to making a profit, and that would only happen if there was a voice–the local newspaper– promoting local commerce and new roads, water systems, schools, and honest goverment at the same time. Singleton did not care about anything but profit, and the bankers/investors who fed him cash and now control much of the industry only care about the profit. It is a crying shame what has become of most newspapers. But I ain’t crying about Singleton.
6. 

   Ken Doctor says:

   January 19, 2011 at 4:34 pm

   Robert: Thanks for the note. WordPress hiccup first time, but now fixed. Ken
7. 

   Dan says:

   January 22, 2011 at 11:57 am

   Ken, I was wondering your thoughts on how well (or not well) you think Gannett will weather all this …
8. 

   Ken Doctor says:

   January 22, 2011 at 12:01 pm

   Dan: Will be writing on it in the future. Briefly, my sense is that the same twin big PE-backed push — 1) find new ways to cut legacy costs as quickly as possible and 2) innovate mobile products faster — is what Gannett is embracing. A big question is where it does fit in the same potential consolidation/roll-up of newspaper companies. It is used to be #1 in the US and that may not be the case in a couple of years.
9. 

   Denise Tsylor says:

   August 11, 2011 at 3:18 pm

   Is it possible to contact a news outlet, newspaper or any media form that will publicize the fact that private equity and banks have bought up so many newspapers in the US. What Rupert Murdoch did in England, Australia and with the NY Post, has also been done in the US. The only difference is that it is not publicized in the US.
10. 

    Denise Taylor says:

    August 11, 2011 at 3:22 pm

    Is it possible to contact a news outlet, newspaper or any media form that will publicize the fact that private equity and banks have bought up so many newspapers in the US. What Rupert Murdoch did in England, Australia and with the NY Post, has also been done in the US. The only difference is that it is not publicized in the US.People are not aware of this.
11. 

    David says:

    April 7, 2012 at 6:50 am

    I know these guys at the former MediaNews Group and there are several things you should be aware of with respect to the demise of MNG.

    1. I wrote these guys a paper or powerpoint presentation in the late 90′s that ink was going to go away or be greatly reduced in size and scope for several reasons but principally because of the internet.

    2. Fixed costs of printing a newspaper everyday is so stinking high that cuts had to be and still have to be made. Energy, fuel costs, newsprint, labor unions and other costs keep growing higher to make the newspaper business less competitive.

    3. Newspaper articles are a minimum of six (6) hours old. Who wants that today?

    Singleton’s recent Glorification of Obama is strictly selfish. He is OUT or a puppet at MediaNews at best, he is out at AP and he has no personal life outside the newspaper business. One reason is that he was totally newspaper driven. Everything he did was for the good of the Newspaper. A great attribute. However, the old Newspaper model has changed and he, in this case, did not have the vision to understand technology changes and adapt to the “new world”. Hell, he cannot operate a computer, much less operate e-mail. Pat, his sister, prints his e-mails and puts them on his desk to read. He will respond on paper for her or someone to respond to the e-mails accordingly. How efficient is that? Clearly, someone who cannot operate a computer and function within an e-mail program is someone who has lost touch with the market. You expect that “someone” to run a newspaper company such as MNG to drive the vision of MediaNews Group? I suggest that answer to be a resounding “NO!”

    Dean’s recent switch to the party line of Obama IS selfish. (This is the same guy that asked Obama what he chase Obama Bin Ladin into Afghanistan at the AP conference … check it out on YouTube.) So, the back room deal here is that Dean has positioned himself to be an Ambassador to Russia after the dust settles from Dean’s step down from the AP. Singleton will support the reelection of Obama and if that happens, Singleton will be appointed to that post after the fact. It is that simple.

    Brilliant manipulation by Obama to set the bait for a guy that has no where to go after his stint at the AP and becoming a puppet at MNG. Politics and Newsprint … it is an awful combination.