By: ARTHUR H. ROTSTEIN
Arizona’s oldest continuously published daily newspaper could get a reprieve as a federal judge considers the state attorney general’s complaints that the Tucson Citizen’s owner stopped publishing it simply to make more money.
A federal judge was to rule Tuesday on whether Gannett Co. must resume publication of the Citizen, even though Gannett had printed what it considered its last issue Saturday.
A partnership jointly owned by Gannett and Lee Enterprises Inc., publisher of the larger Arizona Daily Star, handled printing and other non-editorial functions for both Tucson newspapers until Saturday. Under that joint operating agreement, the two companies shared costs, profits and losses.
Such JOAs, an exemption to federal antitrust law permitted under the 1970 Newspaper Preservation Act, gave newspapers competing in the same market a way to survive ? by sharing business operations, such as advertising, publishing and distribution costs, while keeping newsrooms separate. But they became less profitable as newspaper readership and advertising revenues began to decline, and costs to report and publish the news went up.
Nancy Bonnell, chief of the state attorney general’s antitrust unit, argued in court Monday that Gannett’s decision to end the 138-year-old Citizen violates antitrust laws by eliminating competition and fostering a monopoly situation, while injuring the community by silencing an editorial and news voice.
Because the Citizen was losing money, Gannett and Lee determined their joint business entity, Tucson Newspapers Inc., “would make more money if they closed one of the papers” and only operated the profitable Star, Bonnell said.
“Even in recession last year, the parties made $16 million ? but that wasn’t enough,” Bonnell said.
Gannett plans to continue the Citizen as a Web-only, blog-like commentary site for local issues, but without news coverage. Plans also called for a printed Tucson Citizen editorial weekly to be distributed with the Star.
Although the Tucson JOA was terminated with Saturday’s final edition, Gannett and Lee are continuing to share costs and profits equally from those operations and the Star’s.
Kate Marymont, vice president for news with Gannett’s community publishing division, said that even though the company won’t be printing its own newspaper, it is allowed to earn money from the partnership because it will help pay the costs of producing the rival newspaper. She said Gannett and Lee both come out ahead by eliminating the costs of producing the money-losing Citizen.
It isn’t the first time a company keeps making money from a JOA after closing its money-losing newspaper, said Rick Edmonds, a media analyst at the Poynter Institute.
When Gannett announced Friday it would stop publishing the Citizen, Attorney General Terry Goddard sought a temporary restraining order late that day to block the move. But U.S. District Judge Raner Collins wasn’t available to hear the case until Monday.
The afternoon Citizen has struggled for years against the Star, a 102,000-circulation morning newspaper. During the Citizen’s heyday in the 1960s, circulation was about 61,000, but it had fallen to about 19,000.
“The Tucson Citizen is a failing newspaper,” said Gordon Lang, an attorney representing Gannett. “There simply aren’t enough people to buy the Tucson Citizen, and the sad truth is that it costs more to publish than the partners get from it.”
Don Kaplan, a lawyer representing Lee Enterprises, said that if partners in a JOA can’t help out a healthy newspaper by shutting down the one that is failing, “then this industry is in very serious trouble.” The Citizen, he said, was losing more than $10,000 a day.
Bonnell said Santa Monica Media Co. LLC offered to buy the Citizen for $250,000 immediately or $400,000 over time for Citizen assets. Gannett said the newspaper’s assets were assessed at $760,000, and its asking price was $800,000, according to court documents.
“Gannett rebuffed the offer,” stopped negotiations and shut down the newspaper, Bonnell said.
The JOA had required both Gannett and Lee to publish newspapers in Tucson through 2015, and any changes require Justice Department approval. According to a document Gannett filed in the case, when Gannett advised Justice of its intention to drop that requirement, the department reviewed the case for 6 1/2 months and decided not to object on antitrust grounds.
That paved the way for Gannett to quickly close the newspaper, insisted Stephen Hadland, CEO of the Santa Monica Media Co., a group of weekly newspapers in California.
“I believe that was always their intention. I don’t believe they ever intended to sell it,” Hadland said.
Gannett denied that.
“Obviously, we put it up for sale, and entertained offers, and yes, we did offer it for sale,” Marymont said. “If there was a buyer, absolutely, we would have sold.”
Marymont said Gannett had no firm plans for rehiring staff if the judge orders the newspaper to publish again.
“I am thinking about all options, but waiting to see what happens before really getting aggressive about it,” she said.
There were 62 full-time and four part-time staffers at the time of the newspaper’s closing. Other than eight people retained for a transitional period, some of whom are working on the Web site, all were terminated Friday, Marymont said. “So, it’s not like they’re sitting there waiting for that phone call,” she said.
At one time, there were 28 JOAs in the U.S., but only six remain: Detroit; Charleston, W.Va.; Fort Wayne, Ind.; Las Vegas; York, Pa.; and Salt Lake City. Seattle’s JOA dissolved with Hearst Corp.’s March decision to turn the Seattle Post-Intelligencer into a Web-only operation.