Content Bridges

In Real Estate Sell-Off, Newspaper Symbols Slip Away

The Symbols Are Slinking Away: A couple of weeks ago, I wrote about the sale of the Santa Cruz Sentinel building in downtown Santa Cruz, one of that city's most historic buildings. Now we see that the real estate housing the un-bought out and the un-laid off is going to be auctioned off around the country. (In Philadelphia, staff reduction means that only 40% of the building is now inhabited by newspaper staff.)

(Addendum: Jay Devine, representing the Philly newspapers, has added a clarification on the real estate history there, in a comment at end of this post.)

Here in this Wall Street Journal story, we see moving and potential moving signs in Philly, Chicago, L.A., Boston and Minneapolis as well, though the a deal involving the Strib looks like it just fell through.

You can't fault new Philly owner Brian Tierney's reasoning:

"We're in the news business," he says. "You have to make choices in life."....Mr. Tierney holds out hope that the paper may be able to stay on the same property, convincing a buyer to develop an office building on adjoining land which it would then lease back. "We want to make sure our building is iconic, because we're doing the people's work," he says. "But we want people to look at it and say, 'There's the future.'"

But you can't make light of architecture dean Michael Lykoudis' assessment either:

"These are buildings that were designed to be visible and vibrant. Their style reflects their mission: to inform the citizenry about the issues of the day."

No one wants it this way. But it's a war out there, and this is part of the collateral damage.

MinnPost: A Broadside of Next Wave Journalism?

Consider today's modest press release announcing MinnPost a broadside. Broadside, as in a shot across the bow. Broadside, as in a rough, early shout of journalism. Some broadsides fall harmlessly, leaving barely a nick. Others start revolutions.

It would be foolhardy to say MinnPost will be revolutionary, but I'm betting that Joel Kramer's broadside -- today's announcement of a new Twin Cities-based news website to be launched before year's end -- will make an impression. It already stands out from the current crowd of sprouts emerging from the scorched earth of traditional journalism. What makes it stand out:

• The funding names behind the new non-profit: Cowles, Cox, Lynch and Kramer. Those are old journalism (or in the case of Lynch, advertising) names. Old journalism money funding new journalism, in part out of hope, in part out of desperation. And of course, this hallowed name: Knight. As in Knight Foundation.

• The journalist names behind the company:  "People want to experiment with us," Kramer told me today. From Doug Grow and John Camp and Dave Beal to Kay Harvey, Steve Scott and Greg Patterson, the couple of dozen names who have volunteered to commit journalism on the site is an impressive one. These are not names that echo nationally. But regionally, these are names that readers have grown comfortable with over decades.

• The money put up to give the new site some breathing room: It's $1.1 million to start, with $850,000 coming from the four families and $250,000 coming from Knight. That money is intended to provide sustenance over a couple-of-year period, as the site finds advertising revenue legs. With those names, though, you know more money would be available if need be. And the site offers an answer to the question of readers who notice the decline of journalism around them, but don't know what they can do about it. MinnPost offers them the chance to join the non-profit, from Cub Reporter to Media Mogul status. Three Media Moguls have already signed up at the $5000 a year level.
  

• The guy who is CEO and Editor: Joel Kramer was my competition when I worked at the Pioneer Press (1986-1997), and it was a great journalism war. The way journalism ought to be committed, with  competing resources and an eye to doing a better job for the readers than the other guy. Kramer ( a young 59) is old journalism, and that's a departure from some of the sproutlings we've seen. He's been both the top editor and the publisher of the Star Tribune. He's got the gravitas and the credibility with readers and advertisers -- if MinnPost can quickly and smartly leverage those.

• The site is news-based, not opinion-based: Though MinnPost tortures the Internet lingua by maintaining its writers are doing posts, not blogs, its point is a straightforward one. It draws on journalistic tradition -- breaking and reporting news -- rather than on opining about the news. The blogosphere has liberated opinion from the decaying confines of editorial pages, but too often it's just an endlessly peelable onion of opinion, with no core of news itself. MinnPost declares itself a news site, breaking and reporting news -- to start -- days a week with at least two stories worthy of a metro Page One and a half-dozen news-based posts.

• The Twin Cities environment: Minneapolis, Saint Paul and the metro area generally are receptive places for journalism. I recall stats indicating that of all metro areas, Sunday readership was highest in the Twin Cities (and not just in the five-month-long winters). It's a literate place, a goo-goo good government place and one in which public policy is still part of public life. Though it can learn from models as diverse as New Haven's Independent, San Diego's Voice of San Diego and the Pacific Northwest's Crosscut, its strength will be building inside out with deep knowledge of its local readers and local businesses.

So all that helps make this a great test of what emerges in the next wave of journalism.

There's one other factor that makes it compellingly watch-able. While metro papers are reeling across the country, the carnage has been particularly visible in the Twin Cities. By Kramer's count, something more than 100 journalists have departed the Star Tribune, the Pioneer Press and alternative weekly City Pages in last year or so. The Par Ridder Fiasco, in which the Pioneer Press publisher alighted to the Star Tribune, has resulted in a messy lawsuit. That combined with staff and newshole cuts have sent a clear message to readers of both daily papers that neither is what they used to be.

So those papers -- like many others across the country -- have unknowingly opened a market for competition. Certainly, most don't think of it that way, and can easily dismiss a million-dollar start-up. But look at it this way. What does it take to do journalism going forward?

First and easiest answer: It takes journalists.

We used to white board the core competencies of newspaper companies back in the '90s. Sure, they had printing presses, trucks, finance departments, ad sales people and journalists. But we figured out that the competencies hardest to duplicate were two: sales relationships with key advertisers and ability to produce reams of content every day. The others could be matched, or bypassed by the emerging Internet competition.

Flash forward, and we see that the ad relationships are worth less than we thought. Complex ad matching systems owned by others -- chiefly Google and Yahoo -- are rapidly replacing those relationships.

It is the ability to produce readable content quickly and in sufficient volume that's key.

And against this backdrop, the stage is set in the Twin Cities.

Numbers Are a Nuisance: Tribune, WSJ, Cable and the Unreal O.C.

Numbers that caught my eye recently:

• When 50/50's not even: Out of our Zellous digging into the Tribune sale, consider this. While about 70% of Tribune's revenues come out of its newspaper division and only about 30% from broadcast and enterainment, a little more than half of its profits ($110 million to $102 million in the second quarter) come from broadcast and entertainment. So..........if the plan for the New Tribune is keep the newspapers intact, as CEO Dennis FitzSimons says, and it sells off Cubs and Cable (already announced as up for sale), the Food Network 30% share and more/almost all of its remaining 23 broadcast stations, it will be left with the part of the business that's sinking.

         That's a little like Best Buy having to cut back and selling off its HDTV and iPod departments and keeping its tube TVs and Walkmans.

• 20.9%: That's the amount Wall Street Journal ad volume was down in July. That's a big number. Look at it as one in five advertisers or a fifth less spending from all its advertisers, though it's certainly a combination of the two. Though it's a  one-month number, it's a scary one. Ad revenue was only down 7% for the month. But if volume continues to decrease, it's going to be increasingly harder to price up the ads that do sell. Who's the culprit here? Tech advertising in print crashed, down 75% in volume. Tech advertisers -- an early barometer of advertiser behavior -- are finding interactive ads increasingly useful, effective and cheaper.

• $3.26/mo., 24 cents a month: That's the amount that cable operators -- like Comcast, Charter and Time Warner -- pay respectively to ESPN and the Golf Channel. That's right, the networks -- good WSJ story here on how cable operators are stiffing the new NFL-owned network -- get paid for creating content and the distributors, who extract monthly fees from us the cable subscribers pay them. Just worth remembering when we consider the dismemberment of the news industry, which produces news and feature content and then merrily casts it into cyberspace, getting very little for it. As news publishers feed Yahoo and other search aggregator companies, it's a model worth considering. The world doesn't need to be completely ad-monetized. Content, especially content amassed and contracted centrally, could still get some fees from online networks that want it, with a bonus of ad rev shares as well.

• The Unreal O.C.: Think your newspaper has woes. According to Editor and Publisher:

Earlier this month, Editor Ken Brusic wrote in a memo to staff that revenue at the paper is down 14% compared to the year before. Profit is 38% behind the prior year.

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9 Questions for the Tribune Shareholder Meeting

As one reporter said to me today, "I'm not sure the meeting itself is that big a story, but......"

Indeed. Tuesday, the board has asked Tribune shareholders to finally give their ascent to the privatization of the company. The vote is a foregone conclusion; the shareholders would love the $34 a share -- tomorrow if possible. But assuming the vote goes positive, the sale isn't likely to close until December, four long months from now after the FCC provides some waivers on newspaper/TV cross-ownership in some markets.

There are lots of questions ("Sam Zell and the Prisoners of Excel") on why Tribune stock has been treading in the $25 a share range. It got pushed up today -- on some enthusiasm for tomorrow's vote apparently -- to 27.02. But that's still a 20%+ declaration of no-confidence that the deal will go through as currently structured and priced.

So while there may be no drama as to the final vote Tuesday, the interest could be in any questions that can be raised and potentially answered at the meeting.

Here are nine I've got:

• If the financing is just as set this week as it was before the credit meltdown, what factors or covenants could give the four banks providing the next $4.2 billion in debt reason to cancel or demand higher rates?
• With Tribune off 59% in operating income in the 2Q report, what's the expectation for 3Q and 4Q?
• If profits continue to drop -- squeezing free cash flow that's necessary to pay down debt -- where will management make additional cuts this year to make sure that interest payments can be made?
• What does management make out of the credit markets placing the chance of insolvency at 57%?
• Given the further real estate turndown, what will the impact of a housing recovery delayed to 2009 be to Tribune revenues?
• Is it true that some Florida real estate markets are seeing more monthly foreclosures than monthly sales?
• Given the turmoil in all markets, is it worth waiting for FCC approval in cross-ownership to close the deal? Just what is the continuing value to the new Tribune in that cross-ownership, since we know the ad bundling strategy hasn't yielded much? Is it wanting to hold on to the steadier (if mature) profits of the broadcast companies as newspaper profits head toward zero? Or is it mainly to keep together the Chicagoland empire, which may be Mr. Zell's endgame?
• What's the current status of the pension fund, and what's the plan on securing it as post-sale future contributions would go into the ESOP?
• Any twinge of would-be seller's remorse in unloading the Cubbies when they are in first place?

What's your question?

More on Tribune sale, here

Sam Zell and the Prisoners of Excel

On Tuesday, Tribune shareholders meet, asked to give their blessing to a drawn-out sale of the company. It's a sale in sloooow motion, having been set into action in April, but unlikely to be finished -- if it's finished -- until December. It's playing out like some satire, with the main characters in the drama, including Tribune CEO Dennis Fitzsimons, would-be new Tribune chairman Sam Zell and the board acting as if this were a normal sale in normal times. These guys are in the foreground. In the background, a company that has badly underperforming its own industry, a news industry that is in free-fall, all in an overall market suddenly hypersensitive to debt. It's like two different movies playing on the same screen.

There are certainly lots of questions about the Sam Zell buyout deal and whether it will go through at anything near the $34 a share sale price, should it finally close after Tribune gets, in December, its expected FCC grandfathering its cross-ownership of newspapers and TV stations. Richard Perez-Pena runs those all down well in a piece in Monday's New York Times. 

In essence, outside observers are scratching their heads at this big disparity: though the deal is announced at $34 a share and Tribune management has recently reiterated the solidness of the financing, the share price closed at $25.67 on Friday, a 24.5% discount to the would-be buyout price. That says few believe the sale will end up closing at or near the $34 a share price.

In short, the outcomes appear to be:
---The deal goes through as outlined, and Tribune takes on total debt of about $13 billion, when it closes its final $4.2 debt package in the fourth quarter.
---The deal falls through and Tribune is left holding on to the new debt it assumed in June -- $ 4 billion -- plus its $5 billion or so in ongoing debt.
---The deal gets renegotiated, at a lower share price. That might mean the company could borrow less money to complete the deal, but the rub is it might well be at a higher rate, given the current credit near-panic.

I'd pick door #3 at this point, simply with the logic that Sam Zell, like the would-be buyers of Home Depot's wholesale supply business or J.C. Flowers, which is threatening to renege on its Sallie Mae deal, will simply say: "Hey, look the market's changed. Let's talk."  It's just good business, and familiar to Zell in his day job as a buyer of distressed assets. Certainly, he can quite properly cite Tribune's further ad revenue plunge -- ad revenue down 11% in the second quarter; total revenue down 9% -- and wider market uncertainty.

But any of these realities lead to an inescapable solution. Tribune, the 4500 people who work at its dozen or so newspapers and their millions of readers are all prisoners of Excel.  The numbers don't lie; the spreadsheets yield what the spreadsheets yield. More on those numbers in a moment, but the short story is whatever happens, the further pressure on Tribune resources -- on its newsgathering ability -- will grow appreciably. Expect more buyouts, more layoffs and thousands of years of experience to vanish from these newsrooms -- and their readers' lives -- within the next year, no matter how this drama plays out.

Par Transcripts: What Passes for This Summer's Reading

The Par Ridder trial in Saint Paul is both is a journalist's nightmare and a dream: You can't make this stuff up.

In case you missed, Editor and Publisher got a hold of the transcripts and has been wisely parceling them out daily -- old-fashioned serialization.

The trial, which began on June 25, and corralled some of the highest-priced legal talent in the Twin Cities is good reading. In total, you can read the comments of Par, his father Tony Ridder, MediaNews Group head Dean Singleton, McClatchy CEO Gary Pruitt and analyst John Morton, among others.

Start here, with day one.

A few choice tidbits, until you have an hour or so:

Avista's Founding Partner Questioned:

Q During the course of your conversation with Mr. Ridder, did he ask you whether or not he should shred the noncompete agreement?

A On March 2nd?

Q Yes.

A I don't know if he said "Should I shred them." I don't -- I don't know if he said that. He might have said "What should I do with" -- he wasn't sure if he should take them home, if he should let his secretary take them, if he should let his secretary even keep them because he wasn't sure what she might do with it. And what I remember saying is, "Obviously I can't tell you to shred the documents and I'm telling you you can't shred them. You need to call your lawyer and get advice on what, if anything, you should do about this." And that was -- that's all I wanted to convey to him.

Gannett and Web P.R. 2.0

What's a little 10-Q filing between friends?

Normally, not much. But Gannett's 10-Q filed on Thursday got people thinking.

There it was in section 10.1, something called a Transitional Compensation Plan. It takes a Big Four accounting firm to decipher, but Gannett is making changes to what happens to "key executives'" compensation in event of a change of control.

To quote the lead-in:

As is the case with most publicly held corporations, the possibility of a Change in Control (as defined below) of the Company exists, and that possibility, and the uncertainty and questions which it may raise among key executives concerning future employment, may result in the departure or distraction of key executives, to the detriment of the Company and its stockholders.

The filing then goes on to change the definition of change of control, lowering it apparently to an acquisition of 20% or more of the company's stock. Then it provides protections around key execs' salary, bonuses and stock options.

When the news of the filing hit the web, analysts and reporters were stumped, trying to find their decoder rings. By Friday, Gannett spokesperson Tara Connell had issued a release describing
the changes as routine, saying the idea was to "modernize language to a plan that has been in existence since 1990." Also, on Friday, Gannett CEO Craig Dubow issued a release, picked up here by Jim Romenesko, to Gannett employees, saying:

We updated plans that already were in effect. Actually, our plan for dealing with a change of control has been in place since 1990. It's been amended on occasion before and reported on over the years.

So, stand down. Relax. Gannett - along with the media industry - is facing some tough times but we are actively and aggressively moving forward with our strategic plan. We are seeing success and creating more of it everyday.

Okay, point well taken. But Dubow plainly can understand the heightened nerves of everyone in and around the press these days. Especially since a question emerging on many lips -- post Knight Ridder sale, post Tribune sale agreement, post Dow Jones sale agreement -- is: "What About Gannett?"

To the company's credit it has moved decisively and wholly, embracing newsroom restructuring and announcing on Friday a company-wide mobile plan. Kudos on both of those, as all involved work through tough execution issues.

But the question of what about Gannett still holds? Look at its financials. It is broadly doing a tad better than the industry overall, and it is known as a tough, margin-oriented operator. But classifieds revenue still fell 7.5% in the second quarter, while retail fell 5%. Online growth slowed to 12%. Those numbers mean that Gannett is facing the same mountain everyone else is.

How is America's largest newspaper company (and a major player in the U.K. with Newsquest) going to weather the intensifying storm? How is the company planning on girding itself for decreased cash flows? How is the heavily-dependent-on-newspaper-revenue company going to further diversify?

Bridgin': Ads, Access, Innovation Links

Why It's ALL About Ads: Another sign of the ad-dominating future. Google is dropping pay-by-viewer video downloads on its site, in this Bloomberg report. With YouTube ad monetization, the wave of its future, this consumer-pay business is just a distraction. And Rupert's talking about taking down the WSJ wall in comments soon after the sales agreement. Which in turn could push competitor FT.com to do the same. I'm in agreement with Larry Kramer on this one. It's better to do a segmentation strategy of milking sub revenue for the Journal while using Marketwatch as the free online (and Fox Business Channel partner), as I wrote last week.

Why It's ALL About Access: Making the rounds recently is a quick five-pager from McKinsey, entitled "What Online Readers Want From Online News." Lots of consultant speak packed in -- "brand promiscuity," "digital cynics," and "citizen readers" -- but the points made are clear. They reinforce much of what we're learning about web news reading. Access -- finding lots of sources easily through an easy-to-use interface -- is number one with readers, polling up the 50% percentile range. Quality's the least valued, at 20% and less. The study reinforces the need for news publishers to both get into best content wrappers -- online and on the phone -- and to better understand that digital use isn't at all the same as print. Worth taking a minute to register, for the report, here.

Why It's ALL About Innovation: The Knight News Challenge's next deadline is coming in a couple of months. The Knight Foundation is one of the few good funding sources for innovative online journalism. I've written about its first set of awards -- lots of good potential there. Next deadline is Oct. 15. I think it's a great chance for younger and older (okay, experienced) journalists to get together and put together projects and winning business models. Link here.

What Would Anderson Cooper Smell Like?

You gotta smell, uh listen, to this piece. Great interview of New York Times perfume critic Chandler Burr on this week's On the Media.

As Bob Garfield reports, blogs (damn blogs) had reported that Anderson Cooper might be getting his own perfume. Not true, apparently, but Burr offered these ideas for news anchors:

---Anderson Cooper: "coat of armor"
---Wolf Blitzer: "manly, a little dirty, not too dirty"
---Keith Olbermann: "bitter orange and peppermint"
---Bill O'Reilly: "synthetic civet"

But best to listen to this, Burr's commentary is wondrous.

If you were a perfume, what would you smell like?

Freakonomics Signing Another Sign of Times Select's Short Life

Reason #44 (at least) Times Select will have a tough time surviving.

This week, the Times proudly announced a new blog. This one's by the Freakonomics partners Stephen Dubner and Steven Levitt. Basically, they've brought their Freakonomics blog to the Times. In an interview, Dubner said he was happy with the Times' home, and agreed to it with an important term: that it not be put into Times Select, firewalled away from public access.

"As much as I love The Times, I didn’t want to be part of TimesSelect,” said Mr. Dubner. “That would have been the only deal-breaker," he told the New York Observer.

So you can see the handwriting growing larger here. The Times is smartly moving beyond its stable of high-end staff columnists, picking and choosing intriguing voices on the web and stamping them with the Times brand. This may be the first "outside" blog licensed by the Times, but expect others to soon follow. In fact, the Times has appointed an editor, Melissa Lafsky, previously of The Huffington Post, for the blog, and we would presume work beyond solely Freakonomics.

That's an essential long-term strategy for all significant news players on the web. Most writers, and I believe, many reporters, will become free agents, contracting with major distributors like the Times, search aggregators like Yahoo, MSN and Google, and niche sites of many kinds.

As they do that -- and as the Times competes for their services -- Dubner's insistence on being on the open web would be heard often. The fact that Freakonomics is out on the open web, and Frank Rich and Maureen Dowd are not has got to further fry them. So let the countdown continue.