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January 20 2011

21:00

The shakeup at MediaNews: Why it could be the leadup to a massive newspaper consolidation

[Our regular contributor Martin Langeveld spent 13 years as a publisher in MediaNews Group. That gives him an inside perspective on the company's bankruptcy filing, which he shares with us here. —Ed.]

Back in the early 1990s, Dean Singleton predicted that ultimately there would be just three newspaper companies left standing, and he intended his MediaNews Group to be one of them.

It was an audacious prediction, because at the time, after a decade of wheeling, dealing and sometimes ruthless management, MediaNews Group still consisted of just a dozen newspapers, and the company’s board meetings, as he was fond of saying, “could be held in the front seat of a pickup truck.” But Singleton often repeated his prediction of industry consolidation, and it was the driver behind MediaNews’s growth into the sixth largest newspaper company (in terms of circulation) over the past 15 years. Today MediaNews has 54 daily newspapers with a total of 2.4 million weekday circulation. (On its own site, MediaNews claims to be the “second largest media company,” but that’s a double stretch: Its properties are nearly all newspaper entities, and, by my count, Gannett, Tribune, News Corp., McClatchy and Advance have more daily paid print circulation — and are certainly all bigger media companies than MediaNews.)

MediaNews’s growth was accomplished not only through acquisitions but through innovative regional partnerships such as the California Newspaper Partnership, and was paid for through a complex and ever-changing leverage structure put together by the financial wizardry of Singleton’s associate Joseph “Jody” Lodovic IV.

But over the past few years, opportunities for Singleton to pursue his vision came to a halt. MediaNews could not outrun the ticking clock of debt accumulation; revenues plummeted; newspaper values tumbled; and lenders threatened foreclosure. Lodovic engineered a strategic and very quick bankruptcy that wiped out $765 million in debt by placing nearly all of the company’s stock in the hands of the former bondholders. Remarkably, the bankruptcy reorganization left him and Singleton in charge and with a small equity stake, plus the opportunity to earn back an equity position up to 20 percent. They also had theoretical control in the form of the power to appoint a majority of the board.

The shakeup

It was an unusual outcome — in other major newspaper bankruptcies, the lenders have imposed new management. For example, there have already been several changes at the top in Tribune’s ongoing bankruptcy process; at Freedom Communications, longtime chief Burl Osborne was replaced by Mitchell Stern, whose background includes CEO stints at Fox Television Stations, Inc. and Direct TV; at the Phildelphia Media Network, the publisher of the Inquirer and Daily News, Greg Osberg, a veteran of Newsweek and U.S. News & World Report, was handed the reigns; and at the Minneapolis Star-Tribune, Michael Klingensmith, a longtime Time Inc. executive, became CEO following the paper’s emergence from bankruptcy.

And then there is Journal Register Company, which emerged from bankruptcy in August 2009 and was once known as one of the most rapacious of publishing firms. “Tell me a Jelenic story,” Singleton would ask new refugees from Journal Register hired by one of his papers, referring to the sometimes ludicrous anecdotes of skinflint budget management attributed to Journal Register CEO Robert Jelenic and his lieutenant, CFO Jean Clifton. But under its post-bankruptcy CEO, John Paton, Journal Register Company has become a forward-thinking, innovative organization with a digital-enterprise management style, and has even instituted a profit-sharing plan which was on track, as of October, to make a substantial year-end payout.

So given that the normal pattern is for the post-bankruptcy owners to dump the old leadership team, it should not be surprising that the MediaNews creditors-turned-owners considered Singleton and Lodovic to be on probation. And it turns out that their trial period is over. On Tuesday, MediaNews announced a shakeup in which Lodovic (who has no street-level newspaper or digital operating experience, and whose financial skills were no longer relevant in the post-bankruptcy structure) was ousted and Singleton was reassigned to “executive chairman of the board” — ostensibly with strategic and deal-making responsibilities described specifically as “opportunities to optimize the company’s portfolio of properties and consolidation opportunities in the newspaper industry.”

On the surface, this looks like a way for Singleton to pursue his vision of consolidation, something he alluded to at the time MediaNews emerged from bankruptcy. But in reality, the shakeup robs him of nearly all his clout. The Singleton-Lodovic appointees to the MediaNews board are gone, replaced by new directors representing the stockholders group led by Alden Global Capital, a hedge fund firm which has acquired a large, though not controlling, stake. Several interim executive positions were also filled by people related to Alden or its parent, Smith Management LLC. While Singleton may have ideas for strategic consolidations, without Lodovic he lacks the necessary financial engineering savvy, and without control of the board, he can’t make anything happen. The new title for Singleton looks and feels like a face-saving ambassadorial position.

Consolidation?

So the question becomes, what will happen next? For clues, it is worth digging into Alden Global Capital and a web of investment cross-connections that tie it and several other hedge funds and investment banks to most of the major newspaper firms that have experienced bankruptcies in the last few years.

Consider the following list of investment banks, hedge funds and investment managers that have been reported to be involved in various bankrupt or post-bankrupt publishing companies (note, though, that because most of these are private investments by relatively secretive players, it’s not possible to know whether all of them are still involved as listed, or what their ownership percentages are):

MediaNews Group: A large stake is held by Alden Global Capital; the reorganization was led by BankAmerica and involved 116 lender-creditors.

Philadelphia Media Network (publisher of the Inquirer and Daily News): Alden Global Capital, Angelo, Gordon & Co, Credit Suisse, Citizens Bank, CIT Group.

Journal Register Company: Alden Global Capital, JPMorgan Chase.

Freedom Communications: Alden Global Capital.

Tribune Company: Alden Global Capital, Angelo, Gordon & Company, Greywolf Capital, Oak Tree Capital Management, JPMorgan Chase. (Note, in this case, the players are not on the same page yet, with Alden and others filing suit against JPMorgan and others.)

Minneapolis Star-Tribune: Angelo, Gordon & Company, Credit Suisse, Wayzata Investment Partners.

Postmedia Network Inc.: The Canadian group acquired the newspaper holdings of bankrupt Canwest Global Communications Corporation with backing from Golden Tree Asset Management as well as Alden Global Media and a number of smaller investment funds. John Paton, CEO of the above-listed Journal Register Company, serves as an advisor and recruited its CEO, Paul Godfrey, a media executive who also did a stint as CEO of the Toronto Blue Jays.

Morris Communications: The lone publisher with no apparent overlapping investors shared with the others; its principal creditor in bankruptcy was Wilmington Trust FSB. But Wilmington is a bank, and in most of these cases the banks have been flipping their holdings to the hedge funds.

Clearly, Alden is the outfit with the most skin in the game, having investments in MediaNews, Freedom, Philadelphia Media, Journal Register, Freedom, Tribune and Postmedia. (Incidentally, as a further extension of this network, JP Morgan Chase, which has been involved in the Tribune, Freedom and Journal Register reorganizations, is the largest stockholder at Gannett, with a 10.2 percent “passive” investment.)

With all these interrelationships among investors and “distressed” newspaper firms, it’s not hard to see why Dean Singleton might say that achieving some kind of “consolidation” will be a full-time job. Still, it seems unlikely that Singleton will get to pull the strings, when the money behind the interlocking investment structures is controlled by billionaire Randall Smith, Alden’s founder, who built his fortune through investments in junk bonds and distressed properties. Alden acquired most of its newspaper stakes through its Alden Global Distressed Opportunities Fund, which it launched in 2008 and which is now worth nearly $3 billion. Alden has offices in New York, Dallas, Dubai and Mumbai, along with a tax-haven presence on the Channel Island Jersey.

The tip of the iceberg of consolidation shows in rumors of a possible merger between Freedom and MediaNews. This would be of strategic value particularly in California, where MediaNews already controls about 26 percent of the newspaper market by circulation through its California Newspaper Partnership created by Singleton and Lodovic. MediaNews, Gannett and Stephens Media Group all contributed newspapers to the partnership, in which each firm holds a proportionate equity stake and profit share, but which is controlled and managed by MediaNews. Combining MediaNews and Freedom would add another 7 percent, bringing the total to 33 percent. Antitrust is unlikely to be a big hurdle, since the MediaNews and Freedom holdings compete only at territorial margins and the continuing decline in newspaper revenue and circulation is a sufficient argument for the need to consolidate.

Alden could be seeing the California opportunity not only as a chance to find additional cost savings through production efficiency, but more importantly as a way to gain revenue through market share, both in print and online. Conceivably, because of Alden’s role in Tribune, the Los Angeles Times could end up as part of the partnership as well, boosting the consortium to about half the state’s paid circulation.

This California consolidation opportunity could be used as a model for similar possibilities elsewhere. For example, in New England, a combination of MediaNews, Journal Register and Tribune would have properties in Connecticut, Rhode Island and Massachusetts — totaling about 25 percent of circulation in those states, on a par with the current California partnership. On a countrywide basis, the companies in which Alden appears to have a stake and some degree of influence, as detailed above, have about 15 percent of all circulation and if fully merged, would be about 10 percent bigger than the current champion, Gannett. Gannett currently holds only about 13 percent of total circulation, and when compared with most other media such as television, cable, radio and magazines, the patchworked map of newspaper ownership and its lack of concentration of ownership both now seem outdated and inefficient. Singleton’s early vision of three principal players owning most of the newspaper landscape is increasingly likely.

But it must be done right. Strategic geographic consolidations, if operationally led (one hopes) by someone of Paton’s caliber, could be a potent force for the rejuvenation of the industry, including a renewed focus on what, after all, is the principal product and potential strength of all three companies: local journalism, along with Paton’s strong emphasis on digital-first, print-last thinking.

MediaNews’s own statement on the reorganization seems to echo this: “These measures will strengthen the company’s performance in its core markets, and continue the transformation of the business from a print-oriented newspaper company to a locally focused provider of news and information across multiple platforms.”

It’s really the last hope for the newspaper business, but a pessimistic view is possible, of course. Randall Smith, Alden’s CEO, is a shrewder and more sophisticated financial engineer than Lodovic was as Singleton’s second-in-command, and Alden’s ultimate interest is in earning a strong return on its investments, not in the future of journalism, so its strategy is at heart a financial one. And, yes, consolidation will come at the cost of jobs.

But Smith also knows that the only way to win his big bet on the future of newspapers is to turn them into nimble, modern digital news enterprises, and even Singleton (who rarely touches a computer) seems to agree.

Let’s hope they both listen to Paton, who said in a December speech:

Stop listening to newspaper people. We have had nearly 15 years to figure out the Web and as an industry we newspaper people are no good at it. No good at it at all. Want to get good at it? Then stop listening to the newspaper people and start listening to the rest of the world. And, I would point out, as we have done at JRC – put the digital people in charge – of everything.

Disclosure: I worked for MediaNews Group for 13 years as a publisher in its newspapers in Pittsfield and North Adams, Mass. and Brattleboro, Vt. In a previous post, I asked whether Singleton could steer MediaNews to a digital future.

September 08 2010

14:30

July 06 2010

14:00

The ASCAP example: How news organizations could liberate content, skip negotiations, and still get paid

Jason Fry suggested in a post here last week that current paywall thinking might be just a temporary stop along the way to adoption of “paytags — bits of code that accompany individual articles or features, and that allow them to be paid for.” But how? As Fry recognizes, “between wallet friction and the penny gap, the mechanics of paytags make paywalls and single-site meters look like comparatively simple problems to solve.”

I suggested a possible framework for a solution during a couple of sessions at the conference “From Blueprint to Building: Making the Market for Digital Information,” which took place at the University of Missouri’s Reynolds Journalism Institute June 23-25. Basically, my “what-if” consisted of two questions:

  1. What if news content owners and creators adopted a variation on the long-established ASCAP-BMI performance rights organization system as a model by which they could collect payment for some of their content when it is distributed outside the boundaries of their own publications and websites?
  2. And, taking it a step further, what if they used a variant of Google’s simple, clever, and incredibly successful text advertising auction system to establish sales-optimizing pricing for such content?

News publishers have been tying themselves in knots for the last few years deciding whether or not to charge readers for content, and if so, how much and in what fashion — micropayments, subscriptions, metered, freemium and other ideas have all been proposed and are being tested or developed for testing.

As well, publishers have complained about the perceived misuse of their content by aggregators of all stripes and sizes, from Google News down to neighborhood bloggers. They’ve expressed frustration (“We’re mad as hell and we are not going to take it anymore,” Associated Press chair Dean Singleton said last year), and vowed to go after the bandits.

But at the same time, many publishers recognize that it’s to their advantage to have their content distributed beyond the bounds of their own sites, especially if they can get paid for it. When radio was developed in the 1920s, musicians and music publishers recognized they would benefit from wider distribution of their music through the new medium, but they needed a way to collect royalties without each artist having to negotiate individually with each broadcaster.

A model from music

That problem was solved by using a non-profit clearinghouse, ASCAP (American Society of Composers, Authors and Publishers), which had been formed in 1914 to protect rights and collect royalties on live performances. Today the performance-rights market in the U.S. is shared between ASCAP, BMI (Broadcast Music Incorporated, founded by broadcasters rather than artists) and the much smaller SESAC (formerly the Society of European Stage Authors & Composers). Using digital fingerprinting techniques, these organizations collect royalties on behalf of artists whose works are performed in public venues such as restaurants and shopping centers as well as on radio and television stations and streaming services such as Pandora.

Publishers have put a lot of effort into trying to confine news content to tightly-controlled channels such as their own destination websites, designated syndication channels, apps, and APIs in order to control monetization via advertising and direct user payments. But when content moves outside those bounds, as it can very easily, publishers have no way to regulate it or collect fees — so they cry foul and look for ways to stop the piracy or extract payments from the miscreants.

Among the content-protection schemes, AP is rolling out News Registry, which it touts as a way of at least tracking the distribution of content across the web, whether authorized or not, and Attributor offers “anti-piracy” services by “enforcement experts” to track down unauthorized use of content. But for now, content misuse identified by these systems will require individual action to remove it or force payment. In the long run, that’s not a viable way to collect royalties.

Suppose, instead, that news publishers allowed their content to it be distributed anywhere online (just as music can be played by any radio station) as long as it were licensed by a clearinghouse, similar to ASCAP and BMI, that would track usage, set prices, and channel payments back to the content creator/owner?

To do this, perhaps the paytags Fry suggested are needed, or perhaps publishers can learn from the music industry and use the equivalent of the digital fingerprints that allow ASCAP’s MediaGuide to track radio play. (The basic technology for this is around: AP’s News Registry uses hNews microtags as well as embedded pixels (“clear GIFs”); Attributor’s methodology is closer to the digital fingerprinting technique.)

How it could work

The system for broadcast and performance music payments is a three-way exchange consisting of (a) artists and composers, (b) broadcasters and performance venues, and (c) performance rights organizations (ASCAP and BMI).

In the news ecosystem the equivalents would be (a) content creators and owners, (b) end users including both individual consumers and “remixers” (aggregators, other publishers, bloggers, etc.); and (c) one or more content clearinghouses providing services analogous to those of ASCAP and BMI.

The difference between a news payments clearinghouse and the music industry model would be in scale, speed and complexity. In the news ecosystem, just as in the music world, there are potentially many thousands of content creators — but there are millions of potential end users, compared to a manageable number of radio stations and public performance venues paying music licensing fees. And there are far more news stories than musical units; they’re distributed faster and are much shorter-lived than songs. In the radio and public performance sphere, music content still travels hierarchically; that was true in the news business 20 years ago, but today news travels in a networked fashion.

To handle the exchange of rights and content in this vastly more complex environment, a real-time variable pricing model could be developed, benefiting both the buyers and sellers of content. Sellers benefit because with variable pricing or price discrimination, sales and revenue are maximized, since content goods are sold across the price spectrum to various buyers at the price each is willing to pay — think of the way airline seats are sold. Buyers benefit because they can establish the maximum price they are willing to pay. They may not be able buy at that price, but they are not subject to the take-it-or-leave-it of fixed pricing.

When it comes to news content, a variable pricing strategy was suggested last year by Albert Sun, then a University of Pennsylvania student; now a graphics designer with The Wall Street Journal. (Sun also wrote a senior thesis on the idea called “A Mixed Bundling Pricing Model for News Websites.”) The graphs on his post do a good job showing how a price-discrimination strategy can maximize revenue; it was also the subject of one of my posts here at the Lab.

A well-known real-time variable pricing arrangement is the Google AdSense auction system, which establishes a price for every search ad sold by Google. Most of these ads are shown to users at no cost to the advertisers; they pay only when the user clicks on the ad. The price is determined individually for each click, via an algorithm that takes into account the maximum price the advertiser is willing to pay; the prices other advertisers on the same search page are willing to pay; and the relative “Quality Score” (a combination of clickthrough rate, relevancy and landing page quality) assigned to each advertiser by another Google. It works extraordinarily well, not only for advertisers but for Google, which reaps more than $20 billion in annual revenue from it.

Smart economist needed

What’s needed in the news ecosystem is something similar, though quite a bit more complex. Like the Google auction, the buyer’s side would be simple: buyers (whether individuals or remixers such as aggregators) establish a maximum price they are willing to pay for a particular content product — this could be an individual story, video, or audio report, or it could be a content package, like a subscription to a topical channel. This maximum price is determined by an array of factors that will be different for every buyer, but may include timeliness, authoritativeness, relevance to the buyer’s interests, etc., and may also be affected by social recommendations or the buyer’s news consumption habits. But for the purposes of the algorithm, all of these factors are distilled in the buyer’s mind into a maximum price point.

The seller is the content creator or owner who has agreed to share content through the system, including having remixers publish and resell it. Sellers retain ownership rights, and share revenue with the remixer when a transaction takes place. The price that may be acceptable to a content owner/seller will vary (a) by the owner’s reputation or authority (this is analogous to Google’s assignment of a reputation score to advertisers), and (b) by time — since generally, the value of news content will drop quickly within hours or days of its original publication.

The pricing algorithm, then, needs to take into account both the buyer’s maximum price point and the seller’s minimum acceptable price based on time and reputation; and at least two more things: (a) the uniqueness of the content — is it one of several content items on the same topic (multiple reports on an event from different sources), or is it a unique report not available elsewhere (a scoop, or an enterprise story) — and (b) the demand for the particular piece of content — is it popular, is it trending up, or has it run its course?

The outcome of this auction algorithm would be that different prices would be paid by different buyers of the same content — in other words, sales would occur at many points along the demand curve as illustrated in Sun’s post, maximizing revenue. But it’s also likely that the system would establish a price of zero in many cases, which is an outcome that participating publishers would have to accept. And of course, many remixers would choose to offer content free and step into the auction themselves as buyers of publication rights rather than as resellers.

In my mind, the actual pricing algorithm is still a black box, to be invented by a clever economist. For the moment, it’s enough to say that it would be an efficient, real-time, variable pricing mechanism, maintained by a clearinghouse analogous to ASCAP and BMI, allowing content to reach end users through a network, rather than only through the content creator’s own website and licensees. Like ASCAP and BMI, it bypasses the endless complexities of having every content creator negotiate rights and pricing with every remixer. The end result would be a system in which content flows freely to end users, the value of content is maximized, and revenue flows efficiently to content owners, with a share to remixers.

Clearly, such a system would need a lot of transparency, with all the parties (readers, publishers, remixers) able to see what’s going on. For example, if a multiple news sources have stories on the same event, they might be offered to a reader at a range of prices, including options priced above the reader’s maximum acceptable price.

Protecting existing streams

Just as ASCAP and BMI play no role when musicians sell content in uncomplicated market settings the musicians can control — for example, concert tickets, CD sales, posters, or other direct sales — this system would not affect pricing within the confines of the content owner’s own site or its direct licensees. But by enabling networked distribution and sales well beyond those confines, it has the potential to vastly increase the content owner’s revenue. And, the system need not start out with complex, full-blown real-time variable pricing machinery — it could begin with simpler pricing options (as Google did) and move gradually toward something more sophisticated.

Now, all of this depends, of course, on whether the various tentative and isolated experiments in content pricing bear fruit. I’m personally still a skeptic on whether they’ll work well outside of the most dominant and authoritative news sources. I think The New York Times will be successful, just as The Wall Street Journal and Financial Times have been. But I doubt whether paywalls at small regional newspapers motivated by a desire to “protect print” will even marginally slow down the inevitable transition of readers from print to digital consumption of news.

A better long-term strategy than “protect print” would be to move to a digital ecosystem in which any publisher’s content, traveling through a network of aggregators and remixers, can reach any reader, viewer or listener anywhere, with prices set efficiently and on the fly, and with the ensuing revenue shared back to the content owner. The system I’ve outlined would do that. By opening up new potential markets for content, it would encourage publishers to develop higher-value content, and more of it. The news audience would increase, along with ad revenue, because content would travel to where the readers, listeners or viewers are. Aggregators and other remixers would have be incentivized to join the clearinghouse network. Today, few aggregators would agree to compensate content owners for the use of snippets. But many of them would welcome an opportunity legitimately to use complete stories, graphics and videos, in exchange for royalties shared with the content creators and owners.

Granted, this system would not plug every leak. If you email the full text of a story to a friend, technically that might violate a copyright — just like sharing a music file does — but the clearinghouse would not have the means to collect a fee (although the paytag, if attached, might at least track that usage). There will be plenty of sketchy sites out there bypassing the system, just as there are sketchy bars that have entertainment but avoid buying an ASCAP license.

But a system based on a broadly-agreed pricing convention is more likely to gain acceptance than one based on piracy detection and rights enforcement. Like ASCAP’s, the system would require a neutral, probably nonprofit, clearinghouse.

How could such an entity be established, and how would it gain traction among publishers, remixers and consumers? Well, here’s how ASCAP got started: It was founded in 1914 by Victor Herbert, the composer, who was well-connected in the world of musicians, composers, music publishers and performance venues, and who had previously pushed for the adoption of the 1909 Copyright Act. Herbert enlisted influential friends like Irving Berlin and John Philip Sousa.

Today, just as a few outspoken voices like Rupert Murdoch are moving the industry toward paywalls, perhaps a few equally influential voices can champion this next step, a pricing method and payments clearinghouse to enable publishers to reap the value of content liberated to travel where the audience is.

Acknowledgments/disclosures: The organizer of the conference where I had the brainstorm leading to this idea, Bill Densmore, has spent many years thinking about the challenges and opportunities related to networked distribution, payment systems, and user management for authoritative news content. A company he founded, Clickshare, holds patents on related technology, and for the last two years he has worked at the University of Missouri on the Information Valet Project, a plan to create a shared-user network that would “allow online users to easily share, sell and buy content through multiple websites with one ID, password, account and bill.” Densmore is also one of my partners in a company called CircLabs, which grew out of the Information Valet Project. The ideas presented in this post incorporate some of Densmore’s ideas, but also differ in important ways including the nature of the pricing mechanism and whether there’s a need for a single ID.

Photo by Ian Hayhurst used under a Creative Commons license.

January 22 2010

15:06

This Week in Review: The New York Times’ paywall plans, and what’s behind MediaNews’ bankruptcy

[Every Friday, Mark Coddington sums up the week’s news about the future of news and the debates that grew up around them. —Josh]

The Times’ paywall proposal: No question about media and journalism’s biggest story this week: The New York Times announced it plans to begin charging readers for access to its website in 2011. Here’s how it’ll work: you can view an as-yet-unidentified number of articles for free each month before the Times requires you to pay a flat, unlimited-access fee to see more; this is known as a metered system. (If you subscribe to the print edition, it’ll be free.) Two Times execs answered questions about the plan, including whether you can still email and link to articles (you can) and why it’s different from TimesSelect, the abandoned paid-content experiment it tried from 2005-07. Gabriel Sherman of New York’s Daily Intel, who broke the rumor on Sunday, has some details of the paywall debate within the Times.

There’s been a ton of reaction to the Times’ plan online, so I’ll tackle it in three parts: First, the essential reading, then some other worthwhile opinions, and finally the interesting ephemera.

Four must-reads: It makes sense to start with New York Times media critic David Carr’s take on the plan, because it’s the most the thorough, cogent defense of the Times’ paywall you’ll find. He argues that Times execs “have installed a dial on the huge, heaving content machine of The New York Times,” giving the site another flexible revenue stream outside of advertising. If you’re up for a little algebra, Reuters’ Felix Salmon has a sharp economic analysis of the paywall, arguing that the value of each article will become much greater for subscribers than nonsubscribers. For the more theoretical-minded, CUNY prof C.W. Anderson has some fascinating thoughts here at the Lab on how the paywall turns the Times into a niche product and what it means for our concept of the “public.” And as usual, Ken Doctor thoughtfully answers many of the practical questions you’re asking right now.

Other thoughtful opinions: Poynter’s Bill Mitchell poses a lot of great business questions and wonders how the Times will handle putting the burden on its most loyal online-only users. Steve Yelvington reminds us that we’re not going to learn much here that we can apply to other papers, because “the Times is fundamentally in a different business than regional dailies” and “a single experiment with a single price point by a single newspaper is just a stab in the dark.” Before the announcement, former Editor & Publisher columnist Steve Outing, Forrester Research’s James McQuivey, and Reuters’ Felix Salmon gave the Times advice on constructing its paywall, almost none of which showed up in the Times’ plans. Two massive tech blogs, TechCrunch and Mashable, think the paywall won’t amount to much. Slate’s Jack Shafer says people will find ways to get around it, NYU’s Jay Rosen echoes C.W. Anderson’s thoughts on niche vs. public, and CUNY’s Jeff Jarvis doesn’t like the Times’ sense of entitlement.

The ephemera: The best stuff on Twitter about the announcement was collected at E&P In Exile and the new site MediaCritic. Steve Outing and Jason Fry don’t like the wait ’til 2011, and Cory Doctorow is skeptical that that’s even true. Former E&Pers Fitz & Jen interview a few newspaper execs and find that (surprise, surprise) the like the Times’ idea. So does Steven Brill of Journalism Online, who plans to roll out a few paywalls of his own soon. Dan Gillmor wants the Times to find out from readers what new features they’d pay for, and Jeff Sonderman makes two good points: “The major casualty of NYT paywall is sharing,” and “Knowing the ‘meter is running’ creates cautious viewing of the free articles.”

Apple’s tablet to go public: Apple announced that it will unveil its “latest creation” (read: its new tablet) next Wednesday. Since the announcement came a day after word of the Times’ paywall plans broke, it was only natural that the rumors would merge. The Daily Intel’s Gabriel Sherman, who broke the story of those Times plans, quoted Times officials putting the Times-tablet-deal rumors to rest. The Wall Street Journal detailed Apple’s plans for the tablet to do to newspapers, magazines and TV what the iPod did to music. Meanwhile, Columbia j-student Vadim Lavrusik and TechCrunch’s Paul Carr got tired of the tablet hype — Lavrusik for the print industry and Carr for tech geeks. (The Week also has a great timeline of the rumors.)

MediaNews goes bankrupt: Last Friday, MediaNews Group — a newspaper chain that publishes the Denver Post and San Jose Mercury-News, among others — announced it would file for bankruptcy protection. (A smaller chain, Morris Publishing Group, made the same announcement the day before.) For the facts and background of the filing, we’ve got a few sources: At the Lab, MediaNews veteran Martin Langeveld has a whole lot of history and insight on MediaNews chief Dean Singleton. News business analyst Alan Mutter tells us about the amazing fact that Singleton will come out of the filing unscathed but Hearst, which invested in MediaNews to save the San Francisco Chronicle, stands to lose $317 million in the deal. And MinnPost reports that the St. Paul Pioneer Press was the only MediaNews paper losing money.

Looking at the big picture, Ken Doctor says that bankruptcies like these are just a chance for newspapers to buy time while adjusting their strategy in “the fog of media war.” Steve Outing takes a glass-half-full approach, arguing that the downfall of old-media chains like MediaNews are a great opportunity for journalism startups to build a new news ecosystem.

How much do Google News users read?: An annual study by research firm Outsell and Ken Doctor on online and offline news preferences made waves by reporting that 44 percent of Google News users scan headlines without clicking through to the original articles. PaidContent noted that Outsell has a dog in this fight; it openly advocates that news organizations should get more money from Google. Search engine guru Danny Sullivan was not impressed, giving a thorough critique of the study and its perceived implications. Syracuse j-prof Vin Crosbie also wondered whether the same pattern might be true with print headlines.

In a similar vein, BNET’s David Weir used comScore numbers to argue that Google, Yahoo and Microsoft support big newspapers, and Jeff Jarvis made one of his favorite arguments — in defense of the link.

Heartbreak in Haiti: I’d be remiss if I didn’t mention the journalism and media connections to the largest news story in the world for the past two weeks — the devastating earthquake in Haiti. Several sites noted that Twitter led the way in breaking news of the quake and in raising money for relief. The money aspect is new, but as Columbia j-prof Sree Sreenivasan noted last June, Twitter came of age a long time ago as a medium for breaking global news. That’s what it does. The coverage also provided an opportunity for discussion about the ethics of giving aid while reporting.

Reading roundup: In addition to being out in front of the whole New York Times paywall story, Gabriel Sherman authored a nice, long think piece for The New Republic on the difficulties of one of America’s other great newspapers, The Washington Post. For what it’s worth, Post patriarch Donald Graham thought it was “not even a molehill.”

Over at Snarkmarket, Robin Sloan uses the economic concept of stock and flow to describe the delicate balance between timeliness and permanence the world of online media. It’s a brilliant idea — a must-read.

Finally, a promising new site named MediaCritic, run by Salon veteran Scott Rosenberg, citizen journalism advocate Dan Gillmor, and Lucasfilm’s Bill Gannon, had its soft launch this week. It looks like it’s going to include some nifty features, like Rosenberg’s regular curation of Twitter commentary on big media subjects.

January 18 2010

17:51

Singleton’s next chapter: Can he steer MediaNews to a digital future?

[Our regular contributor Martin Langeveld spent 13 years as a publisher in MediaNews Group. That gives him an inside perspective on the company's bankruptcy filing, which he shares with us here. —Ed.]

In August 2006, as part of a deal that netted MediaNews Group the Contra Costa Times, San Jose Mercury News, and the St. Paul Pioneer Press, the Hearst Corporation agreed to make a $300 million equity investment in MediaNews. At that point, the peak of MediaNews’ company’s expansion and with revenue and cash flow at an all-time high, the holdings of the principal stockholders — the Singleton and Scudder families — net of debt, were arguably worth more than $500 million each.

But last Friday, whatever was left of that equity, as well as Hearst’s stake (not finalized until a year later), evaporated as part of an announced plan to file a “prepackaged” Chapter 11 bankruptcy. For Hearst, it’s a hefty writeoff of a bad investment. For the Scudders, it’s a bitter payoff after nearly 25 years of active participation in MediaNews management. For MediaNews CEO William Dean Singleton and his financial wizard, company president Joseph (Jody) L. Lodovic IV, it’s a fresh start (which includes a 20 percent equity stake for the duo, and retained control of the company).

Could readers of the company’s papers now see new investment in its newsgathering capabilities, long hammered by budget reductions? For MediaNews employees, could this be an opportunity to participate in the transformation of the company into a truly digital enterprise? Both answers depend on what kind of vision is shared by Singleton, Lodovic, and the former bondholders who are now their equity partners.

MediaNews’ story

In 1983, Singleton, then a brash 32-year-old newspaperman who already had bought and sold several newspapers, enlisted the help of his friend Richard B. Scudder to buy  the Gloucester County Times in New Jersey. Scudder, former publisher of the Newark Evening News (which his family owned for three generation before selling it in 1972), was founder and president of the Garden State Paper Co., the first commercial-scale producer of recycled newsprint.

Singleton and Scudder went on to create MediaNews Group in March 1985, and steered the company through a long series of deals that eventually built it into the sixth-largest newspaper group (by circulation) in the country — today it owns 54 daily newspapers with a total weekday circulation of about 2.3 million, plus a slew of weeklies and niche products. It also has a television station in Anchorage and a group of radio stations in Texas.

From the outset, Singleton and Scudder agreed to manage MediaNews for growth, and never to pay dividends. Neither of the partners ever personally owned any stock — they put it in trusts for Scudder’s children and grandchildren and for Singleton’s future children. Singleton was only 33, unmarried and childless at the time, but Scudder was 72, so the trust strategy would avoid inheritance taxes in the event of his death.

The company never went public, but because a small portion of its debt was publicly held, it was required for years to file disclosures with the SEC, providing a detailed window into the complex financial structure that enabled its growth. (That window closed in 2008 when the company reached an agreement with bondholders to avoid the filings.)

The financial wizard behind the company’s financial maneuvers was Jody Lodovic, who became chief financial officer in the early 1990s and rose to become president. Together, Singleton and Lodovic created partnerships with Gannett in Texas and New Mexico and with Gannett and Stephens Media in California to which each company contributed its newspapers, with MediaNews assuming the management. They pioneered the concept of “clusters” of papers that could realize economies of scale. They deftly exploited joint operating agreements in Detroit, Charleston, W.V., York, Penn., Salt Lake City and ultimately in Denver at the conclusion of a long battle between MediaNews’ flagship paper, the Denver Post, and the Rocky Mountain News. At times, when cash was tight or they got offers they couldn’t refuse, they sold papers, including the original New Jersey cluster dear to Dick Scudder’s heart.

For Singleton, the elimination of most his company’s debt is a long-delayed goal. As early as 1996, at a retreat for the group’s management and publishers, he outlined strategies including a few more years of acquisitions followed by a push to reduce debt. But somehow, acquisition opportunities kept coming along, and debt reduction was put off. Singleton began to feel that at some point, there would be only two or three newspaper companies left standing, and he wanted MediaNews to be one. To be in the running, the company had to keep growing. Ultimately, revenue tanked not long after the final big deals with McClatchy and Hearst, and MediaNews found itself in workout last April. Given the complexity of its financial structure, it’s not surprising that it took eight months to package the bankruptcy.

For Singleton, it’s not the first disappointing turn, but certainly the biggest. In 1975, pre-MediaNews and at the age of 24, Singleton was involved in an attempt to revive the Fort Worth Press, which had been closed by E. W. Scripps after losing money for two decades. The venture ended in failure after three months. MediaNews bought, but couldn’t make a go of the Dallas Times-Herald, which was closed a few years after Singleton sold it. Later, MediaNews bought the Houston Post but couldn’t make it profitable and sold the assets to Hearst, which owned the dominant Houston Chronicle. Hearst paid $120 million and immediately closed the Post. (The laid-off staffers, calling themselves the Toasted Posties, set up an early social networking site of sorts to stay in touch and swap gossip about Singleton; it was succeeded by a now-dormant blog, and later by a Facebook page.)

Known as a cost-cutter

Though he continues to have a reputation for ruthlessly cutting costs when necessary, Singleton takes a genuine pride and interest in his newsroom staffs. When visiting newspapers, before heading out for dinner with the publisher, he makes of point of visiting the newsroom to see what’s going on. He keeps an eye on editors, reporters and photographers with promise and has promoted some to the Denver Post. He has a mail subscription to every one of his dailies, and when he’s traveling, his sister and personal secretary Pat Robinson sends some of them to his destination in Fedex boxes so he can keep up. Editors are not surprised to get a call from Singleton asking about a local story, or exhorting them to run more local news on the front page. He lets each local paper formulate its own editorial views and endorsements. Before the going got rough, Singleton and Scudder convened annual gatherings of MediaNews publishers to talk strategy; they enjoyed these confabs far better than meetings of publishers.

And as Singleton told the Wall Street Journal in an interview relating to the current bankruptcy process, he continues to press his vision for consolidation of the newspaper industry, telling the Journal he wanted to be the “aggressor” in that effort.  The group’s employees fear that by consolidation, Singleton means more outsourcing or more centralization of operations regionally and nationally. There’s been a lot of that already, and there could be more, but Singleton and Lodovic will now be free to expand their partnerships, to seek mergers with other groups, or to rationalize the market through exchanges of newspaper properties. “Look at the map,” Singleton told the Journal in response to the question of where such consolidations might occur.

Singleton has lived with multiple sclerosis for 24 years; the disease has now robbed him of the use of his legs. In a long and particularly revealing interview last year with the Colorado Statesman, he discussed its effects:

I cheated it for many, many years. The last three years, I haven’t cheated it so well, and it has become more aggressive. I’ve lost the use of my legs and partial use of my arms and fingers. I feel fine most of the time. I’ve never missed work because of it. But clearly the current prognosis isn’t particularly good. The good news about Multiple Sclerosis is, it doesn’t kill you. But it does disable you. Not being able to walk or button your shirts or tie your tie — it’s troubling. But I’d rather be disabled and alive than fully able and headed to the other side. So I count my blessings for all the things it hasn’t taken. But it certainly has taken a lot. I look worse than I feel. I feel pretty good.

I’m still very energetic and do what I want to do. I travel if I want to travel, and get around to the newspapers and go anywhere I want to go. I enjoy life a lot, but I just enjoy it differently without some of the physical things I once had. It’s comical when I go on the road. I can’t button a button because my fingers don’t work. I can’t type anymore. I can’t use a computer because my fingers don’t work. If I go to hotels where I stay regularly, I’ve always got a concierge who’ll come up and button my shirts and help me tie my tie. If I stay in a strange hotel, I ask one of the housekeepers if she’ll button my shirts. She almost wants to call the police or something. You get all kinds of weird looks when you ask a housekeeper, “Would you come here and button my buttons for me?”

And I love it. In some places you get somebody who can’t speak English, so you have to explain how to button a shirt. And some places you get somebody who does, and they first think you’re joking. And then they understand your nod and they start laughing and everything. One of the fun things I have in life when I travel is the look on somebody’s face when I ask them to button my shirt. So you make the best of it.

Clearly, the MS puts some urgency in Singleton’s quest for a legacy. The elimination of most of his debt gives him an opportunity to rebuild newspaper operations that have been hammered for years by revenue declines and the company’s inability to invest adequately in its future (many of the papers are still operating on content management systems installed as Y2K solutions).  Whether he, or Lodovic, will have the vision to turn the company into a truly digital enterprise is an open question. Singleton has an understanding of the web (he helped lead the formation of the Yahoo Newspaper Consortium), but he’s not an active computer user. He has often expressed faith in the future of print, and has strongly espoused charging for content in order to protect the print side of the business: “I think print’s going to be important for a long time…Print is still the meat. Online’s the salt and pepper.”

With that attitude it seems unlikely that Singleton and Lodovic come to share the digital vision of another CEO leading his company out of bankruptcy, Journal Register’s John Paton, who told Jeff Jarvis recently (speaking of his previous company, Spanish-language publisher impreMedia):

The first thing we did was to decide that in our company, a print company, when it came to products we would be digital and brands first and print last. It was our radical way of focusing everyone on the future. By recognizing our competitors and our future were digital everything we built and did had to follow that decision.

Paton is free to pursue that vision at Journal Register, which is also newly unencumbered by debt. The readers and employees of MediaNews could benefit from a similarly unequivocal determination at the top to radically reinvent the business in a truly digital direction.

Disclosure: I worked for MediaNews Group as a publisher for 13 years from 1995 to 2008 at its cluster of four dailies in western New England. In a previous post, I outlined in more detail my suggestions for a more digitally-oriented MediaNews Group.

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