Checkmate!

By: Matt Coker

If you’re looking for examples of ways to run today’s newspaper, come to Southern California, where the existential strategy depends on the occupant of the publisher’s office you are visiting.            

Don’t like the way they are doing things at California’s largest daily newspaper, the Los Angeles Times? Well, just hop on the freeway. Doesn’t matter which direction you go. In Orange County, it’s all about print. Over in the San Fernando Valley, it’s all about digital. Down south in San Diego, it’s all about print and digital and television and other media platforms.            

Southern California’s newspaper wars of the 1980s through mid ‘90s had the Times and the region’s second-largest daily, the Orange County Register, going head-to-head. Now, following the bankruptcies of owners of both papers, the region may not be experiencing a war, although there has been plenty attrition recently.            

Freedom Communications, the Register’s owner, has not only in recent months purchased the (Riverside) Press-Enterprise daily newspaper and the Easy Reader weekly out of Hermosa Beach, it has created a new Long Beach Register publication in Long Beach—in the territory of the daily Long Beach Press-Telegram, mind you—and announced the Los Angeles Register, coming April 16 to the Los Angeles Daily News’ and (here we go again) the Times’ circulation areas. Then, and try to keep up here, on Feb. 21 Freedom announced the launch of the Desert Enterprise, a weekly that will cover the desert cities of the Coachella Valley, competing for advertising dollars with Gannett’s daily, the Desert Sun.            

Most would attribute these unsettling times to Aaron Kushner, the Freedom and 2100 Trust LLC CEO and Register publisher, who, along with business partner and company president Eric Spitz, bought Freedom 1½ years ago. They have devised a “print-first” strategy that makes ink-stained wretches in newsrooms gooey on the inside because it diminishes the importance of that newfangled online content in favor of stories and advertisements actually printed on paper.            

And, even with the Los Angeles Register, Kushner told E&P he still wants to own the Times.            

So, maybe we are at war again.            

Those who run Southern California papers that Kushner does not own (yet) say they have been monitoring his bold moves but are too busy running their own businesses to give him much mind. See, they don’t think “print-first” is going to work, and they point to recent chinks in Kushner’s armor as evidence.  

Times are a changin’

The Tribune Co., the Los Angeles Times’ owner since 2000, emerged from bankruptcy “with a strong balance sheet” and “continues displaying high upside potential,” according to Edwin C. Ciskowski, senior vice president and co-portfolio manager of Keeley Asset Management Corp. But his endorsement is based on Tribune’s recent splitting of its much more valuable television holdings from its solid-as-quicksand print properties. It’s with Tribune’s WGN in Chicago, KTLA in Los Angeles and the Food Network that Ciskowski sees “high upside potential.”            

On the print side, Tribune announced on Nov. 20, 2013, it would cut 700 newspaper jobs as advertising revenues continued to free fall. The Times is being dangled out there for sale after a first decade of the 21st century when it experienced a change in ownership, a bankruptcy, a rapid succession of editors, reductions in staff, decreases in paid circulation and a need to increase its web presence.            

Here’s something to send shivers up the sides of L.A.’s Westsiders, provided to E&P by Ken Doctor of the Newsonomics website and author of the Newsonomics column for the Nieman Journalism Lab: “When the L.A. Times moves on to its next incarnation, what happens after it spins off, a new company issues stocks, and then we’ll see who buys stock. What about the Koch brothers at that point?”            

The conservative sugar daddies sniffing at the Times caused an uproar on the left that didn’t die down until the Kochs claimed they did not see Tribune as a good investment. Doctor warns that may have been a ruse. “It’s also possible the current owners of the Tribune Co. did not want to deal with the repercussions of a sale to the Koch brothers. They could have decided to take a timeout for a year, spin it off to whoever buys the new stock—maybe the Koch brothers, Douglas Manchester and Aaron Kushner.”            

Manchester, the owner of U-T San Diego (formerly the San Diego Union-Tribune), has a reputation for supporting conservative causes and has expressed interest in acquiring Tribune (see sidebar below). Kushner has pointed to his and his paper’s political philosophies towing the line of the Register’s libertarian founder R.C. Hoiles.            

Reaching out to the Times for comment on this story, E&P was told it would only come down to this from Nancy Sullivan, vice president of communications: “The L.A. Times’ first and foremost mission is serving Southern California, as we have for 132 years. With one of the largest news-gathering operations in the country—and the majority of our editorial staff based in downtown Los Angeles—we continue to bring the world to California, and California to the world.”  

How will it all Register?

The bit about being based in downtown Los Angeles is a direct salvo at Kushner, who has said about 75 of his 370 editorial staffers will be covering Los Angeles for the L.A. Register. The news, copy and design desks will be centralized in Orange County at the Register’s Santa Ana offices, about 25 miles from downtown L.A. That could be the plan’s downfall, according to Doctor, who says, “L.A. County does not need superficial reporting.”            

Freedom’s push into Long Beach was something of a no-brainer because some already see the city of 460,000 as an extension of neighboring Orange County and the increased market share can offset the cost of 20 editorial staffers and additional sales staff producing the Long Beach Register. But Long Beach is one community. While the Register from Santa Ana adequately covers 34 incorporated cities and unincorporated areas of Orange County, the third most populous in California, Los Angeles County boasts 88 incorporated cities and unincorporated areas and is the most populous county in the U.S.            

With 75 staffers going up against Times and Daily News reporters for Los Angeles County scoops, Doctor wonders of Kushner, “How is he going to get enough L.A. news to really seem local, and what does local mean to the L.A. Register? How many editions will he have? There are 10 million people in that area.” He surmises expansion may be more about spreading out costs as print and digital revenues are underperforming for Freedom.            

"One of the things that is different is newspaper publishers are forced to figure out a lot of economies of scale,” he explains. “You’re essentially bringing something of interest, producing it once and distributing it to many.”            

That strategy was attempted before by the Times, which used to have editorial staffs and ad salespeople in San Diego and Long Beach before closing those bureaus.            

Troubled Tribune’s seven other newspapers that are not the Times as well as Digital First Media’s L.A. Daily News and Long Beach Press-Telegram also rely on the same national and international news content and central copy, news and design desks. That “cheap” way of covering the rest of the world over multiple newspapers “makes sense to me if the local part of what you’re doing is sufficient in size that the reader says, ‘There’s really good stuff here,’ ” Doctor says.            

Doctor wonders if Kushner’s L.A. strategy is a nicely timed bluff as the Times remains “in limbo” while the Tribune Co. accepts sale offers. As Doctor notes, pulling off that deal “comes down to money,” something he’s not sure Kushner has enough of, considering the reported troubles he had closing the deal to buy the Riverside newspaper.            

Hello, Koch brothers and “Papa Doug” Manchester?  

Meanwhile, over at LANG…

Digital First Media, which owns the Los Angeles News Group (LANG) that includes the Los Angeles Daily News and Long Beach Press-Telegram, is seeing solid digital growth across its many platforms, according to Michael A. Anastasi, Digital First Media’s region editor and vice president of news with Los Angeles News Group.            

“We launched 10 niche apps in 2013 and are seeing excellent download numbers,” Anastasi said. “We launched redesigned websites that are providing a richer, more dynamic user experience. We accomplished an ambitious community-engagement agenda. We launched redesigned print products, we’re seeing explosive mobile growth, and we have completed numerous substantive journalism projects. And that is of what I’m most proud.”            

His company has the distinction in Southern California of facing Kushner’s expansion on two fronts, but Anastasi does not exactly sound worried about the upstart Registers of Long Beach and Los Angeles.            

“What I can say about Long Beach is that the Press-Telegram has not lost a single digit of market share” to the Long Beach Register, said Anastasi, who added advertising revenue in Long Beach is up year over year as are single-copy sales. His company’s weekly Grunion Gazette, also published in Long Beach, is experiencing similar success, he said, and both papers are routinely breaking news in Long Beach that the Register is not, such as the city’s police chief tossing his hat into the ring to become the next county sheriff.            

Anastasi agrees with Kushner that print is still viable. “We earn many millions of dollars in revenue from print and devote many resources to do it well,” he said. Where he parts ways from print-first is the opportunity for growth. There isn’t any, Anastasi maintains. “If a huge investment in print was all it took to grow audience and revenue, then everyone in the industry would be doing that,” he said. “And if someone out there hits on a successful print-centric formula, believe me, we’ll all be jumping on that strategy tomorrow.”            

Anastasi also believes the Register is not achieving the audience or circulation-revenue goals it set for itself so it’s expanding into L.A. to increase market share, “especially since that has not happened in Long Beach.”            

But Anastasi welcomes having competition because it “always makes for better journalism, which better serves our communities.”  

The experiment continues

Soon after bursting onto the sunny Southern California newspaper scene out of Boston, where the former greeting card executive had sought unsuccessfully to buy the Boston Globe, Kushner joined Spitz in quickly making a series of counter-intuitive moves. They beefed up the staff at the flagship Orange County Register at a time other newspapers around the country were cutting theirs. More pages and sections were added to the paper while his industry brethren cut back on theirs. And a hard paywall was put up while others gave content away online for free or close to it.            

“The Orange County Register investment experiment stands out uniquely among American daily newspapers last year,” Doctor says. “As others continue to cut back or a relative few held the line, the massive investment Kushner has made in the Register is one everyone is watching. People in the industry are rooting for it to work, although they don’t believe it will work.”            

Doctor first spoke with E&P from his car as he was heading out of town. He was back home by Jan. 15, when 35 staffers at the Press-Enterprise received layoff notices, which could have been expected since consolidating operations would have been part of the appeal in Freedom acquiring the daily in the neighboring county from A.H. Belo Corp. for $27.5 million in November. But the following morning Freedom announced a shocker: 32 employees had been laid off at the Register, including Editor Ken Brusic, four of his top lieutenants and several veteran reporters. It was an ah-ha moment for Kushner critics.            

Still, the Register publisher was downright bully about his papers and print-first strategy when he spoke with E&P less than a week later. And when asked if, despite the layoffs and the L.A. Register start-up, he still wants to acquire the Los Angeles Times, Kushner quickly corrected: “Our interest is in all the Tribune papers. That has not particularly changed.”            

Kushner characterized the layoffs as an expected part of his acquisition and consolidation strategy. “We have added 170 people to the newsroom in the last 18 months,” he said. “We are structuring for the next leg of our growth. Three hundred seventy was the number we wanted to be at, which makes us one of the largest newsrooms on the West Coast. It puts us in a good position to continue to grow and expand into Los Angeles and significantly [grow the] Register in Orange County.            

“There has been no particular change in strategy. What every business should do that is growing and evolving rapidly is to constantly evaluate its structure to most effectively deliver its product.”            

He claimed circulation and advertising revenue “are up nicely” and “we expect to continue to grow in 2014.” But keep in mind staff and newsprint costs must also have risen while online traffic has been down 40 percent since the Register’s paywall went up, certainly resulting in a loss of ad revenue there.           

It should be noted that Kushner and Freedom also own more than 30 community papers, including Spanish-language Excelsior and La Prensa.            

Asked whether his moves are good for journalism in Southern California, Kushner confided, “Uh, we don’t do what we do for journalism in Southern California. We do what we do to serve our local community, the subscriber. We think on a local community level, there are over 20 cities in Orange County, and we think about each one, both individually and in aggregate as a whole. We try to think about each subscriber in the communities we live in.”            

He had “no particular comment” on what his industry peers think of his moves and said he was “quite happy” with the Long Beach Register, adding it will be “a multi-year process” to achieve success.            

As for joining with the Koch Brothers or anyone else to purchase the Los Angeles Times, Kushner seemed dumbfounded at the question.            

“I don’t know why we would do anything other than run our own business.”

The Word, According to 'Papa Doug'

U-T San Diego, led by Douglas Manchester, puts its own stamp on the Southern California media scene

Shortly before Freedom Communications revealed that a group led by Aaron Kushner would be the media company’s new owner, Douglas Manchester made some noise down in San Diego that he would be taking over the Orange County company.

Things didn’t go that way for “Papa Doug,” the flamboyant owner of the Manchester Grand Hyatt in San Diego, Playboy Enterprises and, since November 2011, the former San Diego Union-Tribune, which has since been rebranded U-T San Diego to reflect its 11 print, digital, television and other media platforms.

Manchester was too busy traveling to speak with Editor & Publisher, so U-T San Diego CEO John Lynch pinch hit. Lynch had been running U-T’s day-to-day operations at the time, but that has since changed. At the time Lynch spoke with E&P, he stressed his company, and not the one of that young fellow up the San Diego Freeway in Santa Ana, had unlocked the secret to financial success with newspapers.

"Like Aaron Kushner, we believe in acquiring additional papers,” Lynch said. “We believe that with the major metropolitan newspapers reaching five times more people with all their platforms than any other media in all those markets, we can galvanize those folks and repurpose them for all our platforms and control them for years to come. That’s kind of our strategy. We are very high on this business.”

U-T San Diego diverges from Freedom when it comes to investing mainly in the print side of the media business.

"Where we see this business flourishing is with newspapers to multimedia companies,” Lynch explained. Kushner’s “more focused on the newspaper side; God bless him and I hope it all works for him.”

Lynch declared his is “the number one newspaper in the country in year-to-year revenue. We accomplished that because of multi-media platforms. We’re not competing for the $240 million in newspaper advertising in San Diego, we’re competing for the $3 billion in all media, including television and digital. … That’s why we are able to be more successful.”

Like Kushner, U-T has been swallowing up other newspapers in their region, most notably the North County Times and its subsidiary, The Californian, merging them into the Union-Tribune. But Lynch does not see his competition as other newspapers; it’s anyone vying for the same print, digital and/or television advertising dollars. He believes U-T San Diego will prevail over competitors on any platform because his company “is run more efficiently,” he said at the time.

Well, apparently not efficiently enough for Manchester. In a Feb. 6 memo to employees, Mike Hodges, U-T’s president and chief operating officer, revealed he would be taking over management of day-to-day operations from Lynch.

“Beginning today, Papa Doug has assigned our vice chairman and CEO, John Lynch, to focus on our [mergers and acquisitions] and bringing these deals to fruition,” Hodges wrote. “Papa Doug has assigned me to run our day-to-day operations. Starting today, all divisions with U-T San Diego will report up through me.”

Hodges conceded, “While we had a strong year in a number of areas, we did not meet our financial goals in 2013. Accordingly there will be a restructure of our senior management team. Details will be forthcoming.”

Some employees fear the shakeup in the executive offices will lead to cuts below, San Diego Reader’s Don Bader reported.

Being in charge of mergers and acquisitions still has Lynch playing a vital role at U-T, which recently acquired nine local newspapers “that we are utilizing as models on how to cover the county,” he said. “If we believe we can take our model to other markets, we will do that.”

Speaking of other markets, Manchester, like Kushner, has expressed an interest in acquiring the Los Angeles Times. Could they join forces (and wallets) to do so?

“No,” Lynch answered flatly. “We have such divergent views of philosophy, I couldn’t imagine that.”

But they do share similar political philosophies, right?

"The truth is, I think that while we have been depicted as being conservative Republicans, we’re really pro-business in San Diego with a pro-military editorial page,” Lynch said. “We’re really about running things in an efficient way. The editor runs the editorial side of the paper his way. We’re just running a good business. We believe we have a formula that works. It gives us a tremendous advantage with advertisers having 11 channels of opportunity to reach more people than anyone else. We try to take advantage of that and expand into other markets. I don’t think we would partner with anyone.