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April 25, 2014

San Diego's Union Tribune: Out of the Private Equity Pot and Into Local Political Fire

It makes so much sense. Who’s left to buy (and maybe pay too much) for America’s declining metro dailies than political advocates?

The San Diego Union-Tribune moves back to private ownership, after Platinum Equity swooped in during a seeming bottom of newspaper recession — 2009 — and turned its $35 million investment into a sale for $110 million. Nice cash pick-up for Platinum, a classic vulture move, sprucing up the carcass turned loose finally — and way too late by the Copley family.

Now $110 million isn’t a lot of money for what was once one of the most coveted newspaper properties, one that could have fetched ten times that if the Copleys timed their sale better. And the seeming tripling of “value” in two years has left a lot of people confused about what newspaper properties may be worth today.

My sense: The supposed tripling only tells that the Copleys panicked in selling so low two years ago, or that the details of the real-estate-influenced deal are obscuring actual news to news value. Whatever, here’s what we know about the deal:

  • The Union-Tribune, like all other metro dailies, is seeing an interrupted trail of print advertising woes. I’ve written recently how most metro forecasts put print ads down another 5-12% in 2012. That means the Union-Tribune, like all other metros, is now taking in less print ad revenue than it was when it was sold two years ago.
  • Any current or future profitability scenarios have got to be based more on increased cost control than ad revenue increase. The Union-Tribune deserves some credit for being a leader  in Groupon-like local deals, having created a highly successful program, th0ugh, digital ad increases — while a long-term solution — are still an inadequate band-aid for print losses. Fact of life: The only way to maintain 2011 profitability for the Union-Tribune’s new owners will be to continue to cut expenses, including people, or subsidize shortfalls.
  • Private equity’s endgame — and think Alden Global Capital’s growing Digital First play — is to get out. Whether it’s real makeover (the Journal Register Company) or lipstick on a pig, the idea is to get local news enterprises into such a state where someone will pay top (of the moment) dollar, and move on. (And now, it’s an odd moment of loss, as some San Diego community members lament the mild progress Platinum has brought to some of the UT’s journalism.) Platinum has now moved on; when will Alden? Last week, I mentioned a vision of local (Digital First-run) newspaper editor who talked about the potential of the community reclaiming its newspaper:

“If Alden [invested strongly in his company as it is in a number of chains] ever wants to sell, I think I can put together a group of 40 families willing to step and invest. They wouldn’t do it to make a big profit, though maybe they could make some, but they’d do it maintain a community voice.”

A family-owned (or families-owned) newspaper future? Back to a future?

Our editor can keep his model safely tucked in his desk drawer for now. We need several things to happen to test the idea: (a) willing sellers; (b) models of community investment and ownership, which could be adapted from other enterprises; (c) a taste of Silicon Valley fervor”.

In fact, the world, as we now know it, intrudes. In the Union-Tribune’s case, it’s Doug Manchester, a strong right-wing advocate and major land developer who is buying the paper. That’s the sense it makes. As the silliness of our current politics distracts America, as a nation and in too many communities, from the common work of building our future, this silliness can well infect daily newspapers. Will Manchester honor long-held separations between impartial news reporting and opinion?

Don’t hold your breath. Manchester’s new CEO-to-be  John Lynch, sounded something Sam Zell — with conservative, pro-development, anti-tax and anti-gay rights positions added – in talking about the coming sale, as quoted in the Voice of San Diego (and that’s a fledgling institution whose importance now grows):

“Lynch said he wants the paper to be pro-business. The sports page to be pro-Chargers stadium. And reporters to become stars.

“It’s news information, but it’s also show biz,” Lynch said. “You get people to tune in and read your site or the paper when there’s an ‘Oh wow’ in the paper.”

He wants that sports page to be an advocate for a new football stadium “and call out those who don’t as obstructionists.”

“To my way of thinking,” Lynch said, “that’s a shovel-ready job for thousands.”

More changes will be evident after the deal closes between Nov. 30 and Dec. 15. Lynch said they want a stronger editorial page and to attract younger readers. Lynch hopes to bring other media into the building. He wants to be a newspaper industry precedent-setter.

“You change now or you die,” Lynch said…

“We’d like to be a cheerleader for all that’s good about San Diego,” Lynch said. “Our motivation, both of us, was to do something good for San Diego.”

We can see where this is going. The ideologically inclined see the bully pulpit value of these declining economic assets — assets still owning significant community sway and agenda-setting abilities — and pick them up. Traditional journalistic standards are simply collateral damage in a world of too much change. Who knows the difference; same masthead, right?

It’s a lot easier for a single, monied advocate, regardless of political stripe, to buy a cheap property than it is to put together a group of 40 to reclaim it for a “community.”

In San Diego, we’ve moved from an old-fogy, often clueless, newspaper family (the Copleys) to on-so-private equity and now onto more overtly political ownership. The saga of dailies is taking some odd turns, and I fear this is a new chapter we will soon see written in other cities.


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