Wednesday, Oct. 8, 2008 | Two months after it put itself up for sale, The San Diego Union-Tribune has been courted by four major suitors. One’s premier property is a famous Gray Lady. Two are run by larger-than-life CEOs who send their newsroom employees running for the Excedrin. And the fourth is a little-known dark horse from Canada whose name is mud in Akron.
All the companies — New York Times Co., MediaNews Group, Tribune Co. and Black Press, Ltd. — would have to overcome major financial hurdles in order to buy the U-T, which announced in July that it’s up for sale. The entire newspaper industry is in a major slump, and the economy’s credit crunch could make it impossible for the companies to borrow the money needed for the purchase.
Another complication: some local businesspeople are said to have their eyes on the paper, although none of them would confirm their interest to voiceofsandiego.org.
Then there’s the state of the U-T itself: Would a newspaper company even want this property? The U-T has suffered from sliding circulation and rapid declines in advertising, and some of its most talented and well-known journalists have left during rounds of buyouts.
On the other hand, the U-T’s dire straits are hardly unusual in the newspaper industry. And despite its troubles, the U-T is attracting interest: The four newspaper companies have all been in contact with U-T executives about a possible purchase, according to a source familiar with the proceedings.
Officials at Black Press and MediaNews didn’t respond to requests for comment. Spokespersons for Tribune Co. and New York Times Co. declined to comment. U-T officials have been mum about the sale since the paper announced it was on the block. A company spokesman wasn’t immediately available for comment Tuesday.
Here’s a look at the possible buyers:
Company: Black Press, Ltd.
Headquarters: Victoria, British Columbia
Holdings: About 150 newspapers, mostly weeklies, mainly in Canada. Also owns the Honolulu Star-Bulletin, the Akron Beacon Journal in Ohio and newspapers in Washington state.
Finances: Black Press is privately held, so its financial situation isn’t publicly known.
The Akron newspaper, like many papers, has undergone major layoffs in the last two years — 25 percent of its newsroom staff lost their jobs in 2006 — and executives announced a new round of buyouts last month.
However, weekly suburban newspapers, the heart of the Black Press business, appear to be doing much better financially than major metropolitan dailies.
Background: The Union-Tribune, whose value is estimated to be in the range of $200 million to $300 million by Outsell consultant Ken Doctor, would be a large purchase for a company that owns just two metro-area dailies, neither of which is very large.
Black Press bought the Star-Bulletin newspaper in 2000 for a reported $25 million. At the time, the Star-Bulletin had 64,000 subscribers.
The purchase of the Akron newspaper for $165 million came in 2006. The paper had a weekday circulation of 135,000. (The U-T’s weekday circulation is 288,000.)
In an August conference call with reporters, company President/CEO David Black acknowledged that it has become more difficult to borrow money. “The banks are being careful with their money and it’s hard to get it,” he said, “and what they will give you is substantially less than before.”
The worldwide credit crunch has worsened significantly since Black made those comments.
As for the prospects for the U-T under ownership by the Black Press: It is a privately held company and could, theoretically, be less susceptible to financial pressures than a publicly owned company. That could allow it to delay cutbacks longer than a company with stockholders to answer to.
In a 2006 Cleveland Plain Dealer story about the purchase of the Akron paper, a Honolulu union representative said Black had told employees that “he is not publicly traded and tells us he can live with lower profit margins.”
However, being privately held didn’t stop the U-T from laying off staff members in recent years. And there’s plenty of evidence that Black Press isn’t averse to cutting costs.
Bernard Lunzer, president of the Newspaper Guild, the industry’s leading union, said Black “tends to run products very lean.” Indeed, the company closed a money-losing daily newspaper in Washington state shortly after buying it in 2006.
In Akron, Black Press been has on a major cost-cutting tear. When a current round of cuts are finished, the paper should have about 70 newsroom employees, compared to about 150 in 2000, said Bob DeMay, the Beacon Journal’s photo editor and a top official at Guild.
“There’s not a person in this newsroom who wouldn’t take a job if he could find one,” DeMay said.
But he said the Black Press has brought something new to the paper: independence. The former owner, the Knight Ridder chain, “was full of corporate control, mandated this and that,” he said. “Black stays out of the news-gathering operation and just lets them run it.”
Company: MediaNews Group
Headquarters: Denver
Holdings: Fifty-four daily newspapers in 11 states including The Denver Post, (Los Angeles) Daily News, The Detroit News, San Jose Mercury News and The Salt Lake Tribune. Owns large clusters of daily papers in Northern and Southern California (including those in Ontario, San Bernardino, Long Beach and Torrance).
Finances: MediaNews is privately held, so its finances aren’t a matter of public record, although analysts say the company is carrying a significant amount of debt.
In June, the Standard & Poor’s credit-rating service expressed concern about the company’s future. A S&P analyst said the chain’s cash flow was declining, and it was unclear if the chain’s “business partners” would continue to support it.
MediaNews newspapers have gone through major cutbacks in recent months, and CEO William Dean Singleton told paidContent.org last month that the Golden State has been particularly hard hit.
“It was less than two years ago that some of our California newspapers were seeing 80 percent annual growth in print real-estate ads,” he said. “Today, it’s down 60 percent.”
In a July memo, Singleton and another executive told employees that “MediaNews is not currently looking to acquire more newspapers. We believe our resources should be more internally focused on reinventing our current newspaper model to support future growth plans.”
Background: In California, MediaNews means one thing: consolidation. Singleton has bought up clusters of newspapers in Northern and Southern California and tried to save money by slashing jobs and combining resources.
In Los Angeles area, for instance, nine dailies have consolidated not just news operations but also advertising, circulation and other departments.
“What’s clear with Dean is he likes to buy and consolidate and use fewer people to get more done,” said Lunzer. “He’s a capitalist first and a publisher second. I don’t even think Dean would quibble with that.”
Singleton’s cost-cutting and union-busting tactics have made him unpopular among journalists.
For his part, Singleton told an audience in Sweden in June that “the printed space allocated to news and newsroom staffing levels will continue to decline, so it’s time to get over it and move to a print model that matches the reality of a changing business.”
As for the naysayers, he said: “Too many whining editors, reporters and newspaper unions continue to bark at the dark, thinking their barks will make the night go away. They fondly remember the past as if it will suddenly reappear and the staffing in newsrooms will suddenly begin to grow again.”
The MediaNews newspapers tend not to be known for their quality, although its flagship paper — The Denver Post — won a Pulitzer Prize for its coverage of the Columbine High School massacre.
Several years ago, Singleton declared that he wanted to make The Denver Post one of the nation’s premier newspapers and planned to hire 200 new newsroom employees, said Michael Roberts, who covers the media for Westword, a Denver alternative weekly.
But the economy’s troubles spelled the end of Singleton’s hopes, Roberts said. He added that the publisher’s cost-cutting in the Bay Area could be a sign of the future at the U-T if MediaNews buys it.
“He took a great newspaper in the San Jose Mercury News and has cut the fat and gone straight into the muscle,” Roberts said. “It’s hard to imagine him picking up a property and preserving every last employee and position. He’s trying to find a way to make newspapers work economically, and his first instinct is to cut.”
Could MediaNews find the money to buy the U-T? “I think MediaNews would have trouble borrowing funds at this juncture but Singleton has proven to be among the more creative financiers in the industry,” said Lauren Rich Fine, a retired Merrill Lynch newspaper analyst who teaches at Kent State University.
The U-T “fits geographically for him,” she said, “and he remains among the most enthusiastic execs in the industry.”
Company: New York Times Co.
Headquarters: New York City
Holdings: The New York Times (long known as the Gray Lady, even though it prints in color these days), the International Herald Tribune, The Boston Globe and 16 other daily newspapers, plus a radio station. Its only California daily is the Press Democrat in Santa Rosa.
Finances: Like other newspaper companies, NYT Co. has had a rocky year thanks to declines in newspaper advertising, and it doesn’t have much in the way of non-newspaper properties to pick up the slack in revenue.
Its second-quarter revenue dropped 6 percent from last year.
The company’s newspapers have cut jobs in recent years, including The New York Times itself.
Background: The NYT Co. doesn’t own many large newspapers. If it bought the U-T, the paper would be its third largest newspaper property in terms of circulation after the NYT and the Boston Globe.
Of all the known possible newspaper company buyers for the U-T, the NYT is the most likely to thrill newsroom denizens because of its reputation for quality journalism. It’s “above average on journalism and employee treatment,” said Doctor, the newspaper consultant.
“Quality news still is preeminent at the New York Times as opposed to some of these other companies that will put the bottom line before that in every case,” said Lunzer. “I don’t think that’s true at the New York Times yet.”
Company: Tribune Co.
Headquarters: Chicago
Holdings: Los Angeles Times, Chicago Tribune, Baltimore Sun, Sun Sentinel (South Florida), Orlando Sentinel and three other papers; radio and TV stations and the Chicago Cubs baseball team.
Finances: The Tribune Co. went private last year, and the New York Times reports that it tripled its debt by doing so. According to the Times, some analysts think the company is at risk of defaulting on its debt, estimated by Forbes at $12 billion.
Background: Tribune Co. had a rough few years even prior to its sale to real-estate mogul Sam Zell in 2007. The Los Angeles Times in particular has lost much of its luster amid severe newsroom cutbacks and high drama involving resignations by top editors in protest.
Zell has hacked away at hundreds of jobs across the Tribune papers, although he promised in February to eventually stop the decline in quality: “I promise you, in time, we will end that downward spiral.”
But the cuts continue, with another 75 jobs rumored this week to disappear from the Los Angeles Times newsroom. The staffs at Tribune newspapers have protested mightily while Zell’s brusque approach to complaints hasn’t improved the situation. Meanwhile, last month, a group of Los Angeles Times employees filed suit trying to gain ownership of Tribune Co.
While the U-T would fit into Tribune’s portfolio of papers, “they appear to have their hands full,” said Lauren Rich Fine, the newspaper analyst.
A purchase of the U-T by the Tribune Co. would be a homecoming of sorts: The company owns TV station KSWB and owned the daily Times Advocate newspaper of Escondido prior to a merger that produced the North County Times in 1995.
Randy Dotinga is a San Diego-based freelance writer. Please contact him directly at rdotinga@aol.com with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.