You gotta love the description of the San Diego Union-Tribune buyer, private equity company Platinum Equity: a firm that acquires businesses facing complex operational challenges in declining or transitioning markets.
Now, that's a delicate way of describing the mess newspaper companies have gotten themselves into. It's an apt description of how once a much-sought jewel of NewspaperLand, the Union-Tribune, could go for (an undisclosed) song, after being thrust out in the worst newspaper market ever last July.
If it were bought for a song -- and I hear the underlying tune of hard real estate assets providing the most known value here -- then let's see what we can predict about the dance step following the first major metro sale in awhile.
Most telling is the news that Platinum Equity -- mainly a tech company buyer -- has brought in a decidedly low-tech strategic adviser, David Black. Black Press is a major publisher, but unknown to most in the US industry. Its roots are in Canada and strongly in smaller, community papers. It first arrived on many radar screens when it unexpectedly bought the Akron Beacon-Journal from McClatchy, after Gary Pruitt divested some of the Knight Ridder newspapers it bought in 2006.
That purchase registered surprise. Why was Black Press buying a small-metro daily, competitive with the Plain Dealer and host of other adjoining papers, and what would it do with it?
What's happened in Akron shouldn't buoy hopes for Union-Tribune staff or for its readers.
Mainly, the Beacon-Journal, like most of its brethren, has gotten smaller. At least three rounds of layoffs have reduced the staff by more than a third. David Black himself, in recently visiting the paper, told people the newsroom looked "thin."
In other ways, the Black ownership has been unremarkable. The Beacon-Journal has not distinguished itself in pushing its newsroom to embrace web-first, web-only, blog-friendly reporting. The online sales side is a work in progress.
Judging from Akron,we can intuit that the new private equity owners and David Black will look first to "efficiencies." That means less headcount and a concentration on lower-paid, less-experienced reporting staff. Morale -- never a newspaper strong suit -- will take another hit.
We don't see savvy Internet savvy in the new DNA, but we know so little about Platinum here that we could -- and would like to -- be surprised.
Interestingly, if you talk with restructuring firms working with newspaper companies these days, one of their questions is: "Are they cutting too deeply?" Uh-oh. If the restructuring guys, the guys who know how and where to wield the efficiency knife in assorted industries, think that newspaper companies may be cutting too much of their core, then, we see the depth of the problem.
Indeed, since Knight-Ridder hit the market in 2006, numerous PE companies have kicked newspaper tires and eyed their books. The near-universal verdict: this isn't a business we can get into and out of in three to five years at a good profit. Why is this one different?
My best guess: The Union-Tribune will get smaller and much more local-local focused. And that real estate under its building (and the Union-Tribune's other San Diego real estate holdings, which we assume are part of the deal), that may be a real motivator for the purchase. Commercial real estate has seized up in the recession and the credit crunch. But that's cyclical. It will come back -- and far faster than metro newspaper value.