The bids are in and both Tribune Publishing (parent company of the Los Angeles Times) and Digital First Media (parent of the Los Angeles News Group) are contenders to acquire the bankrupt Orange County Register (right), its real estate and the Riverside Press Enterprise. The contest could still be complicated by a third bid from within the Register's own parent, Freedom Communications, but the auction could come as early as March 21 and the deal could close by April Fool's Day.
Newsonomics author Ken Doctor looks at the competition to acquire the Register and why it could matter to Southern California news consumers. He says, by the way, that both bids are reportedly "puny" and that Tribune may be offering around $30 million and DFM $5-10 million less.
Tribune remains, through the drama, the papers’ logical buyer, given the stomach-churning economics of the industry. The buy would not be motivated by revenue. It is the cost savings, expected to be in the $8 to $12 million-plus annual range, that drives the deal, adding to TPUB earnings. The Register sits plum between Tribune’s L.A. Times and its San Diego Union-Tribune, bought last spring. Lots of cost consolidation would be pursued.
For Digital First Media, owned by private-equity player Alden Global Capital, a buy of the Register is both a bargaining chip, and a bit of a defensive play. Alden almost sold itself last spring and intends to dispose of its holdings when the price is right. Owning both the Register and the Press-Enterprise, and combining those operations with its own Los Angeles News Group (L.A. Daily News, Long Beach Press-Telegram, Pasadena Star-News and six other properties) offers two benefits. Short-term, an expanded LANG believes it can achieve cost synergies in the same neighborhood, or more, as Tribune’s $10-12M. Mid-term, as Alden sells, a bigger L.A. group should have more value than its current smaller group. Finally, the Register now prints at least three of the LANG titles. If rival Tribune owned that press as well, the cost of doing business for LANG might well increase, given the paucity of local press capacity.
The third bidder, an in-house one led by current Freedom Communications management and its CEO Rich Mirman, says it would take on the pension obligations. If this group buys, it could operate the papers’ independently, but is more likely to sell to either Tribune or LANG – at a premium.
Given all the chaos in and around Freedom Communications, these papers by themselves aren’t worth much. I’ve estimated perhaps $15 million. As standalones, they have little value. In a bright-white sign of the times, it is only in their combination with others that there is value in the millions.
For Tribune Publishing there's also a potential anti-trust consideration. "One newspaper-based company dominating a region of 20 million people would be unprecedented," Doctor writes. "Two anti-trust arguments could be tested, one along the ad dominance question and the other of one company owning the great majority of the newspaper printing press capacity in the region. The U.S. Attorney General’s Antitrust Division could open an investigation. Perhaps, more problematically, the state of California, under the anti-trust Cartwright Act, seen by some observers as being stronger than federal statute, could be applied. Either act might be ultimately winnable by Tribune, but at what cost to a company with little margin to spare in time or money?"
Add Tribune: Doctor also notes that the new player at Tribune Publishing, Michael Ferro, followed up his grab of the LA Times' Oscars tickets by attending the Gridiron Dinner in Washington last weekend. The Chicagoan and his hand-picked deputy, new Tribune Publishing CEO Justin Dearborn, are also also apparently liking this whole LA thing so far. Per Doctor:
As the L.A. Times itself reported Monday, “[CEO Justin] Dearborn is moving his family to Los Angeles and Ferro has already bought a house in the city, which, technically, makes them local owners.” Further, there’s much new internal TPUB talk about building up the L.A.-based corporate staff.
Also this: Former LA Times columnist and editor Tm Rutten has a take on Tribune Publishing's recent decision to let the editors of its papers, including the Times, also serve as publisher. So the same executive oversees news coverage and priorities, as well as the sale of ads and other business strategies — at a time when there doesn't appear to be a single news executive in Southern California who has a clue on how to stop the revenue bleeding at newspapers and turn them into sustainable digital media outfits.
Rutten thinks it's a lousy idea — Tribune's worst idea yet, and that's saying something. From his media and politics blog:
In difficult times, it can be hard to distinguish innovation from desperation. These days of digital disruption are about as rugged a period as the American newspaper industry ever has experienced. It still ought to be clear, though, that Tribune Publishing’s decision last week to blend the jobs of editor and publisher at its newspapers—including the Los Angeles Times—falls into something worse than the desperate category. ...
What’s really at issue here is whether Tribune Publishing in its current iteration can survive on any foreseeable terms. When Tribune Media spun off its newspapers a bit more than a year ago, it essentially set up the chain to fail. They stripped all of the papers of all their valuable real estate, including their historic headquarters buildings, and money generating digital and other enterprises. They also saddled them with more than $300 million in debt so that the broadcasting company’s shareholders could receive a “special” dividend.
Given the prevailing conditions in the newspaper industry and barring some miraculous intervention, they created a company with a viable shelf-life of 18 months to two years. Then, it will be either liquidation on fire sale terms or back to bankruptcy.
This new [editor-publisher] arrangement won’t work for other reasons. Putting aside the issues of complexity in modern newspaper operations, no one I’ve ever known has the required expertise to run both a business side and a newsroom—let alone the time and energy to do justice to both roles.
Moreover, the separation of newspapers’ business and editorial operations was undertaken after long experience not for purely ethical reasons, but also for pragmatic ones. If both operations are centered in one office, editorial independence inevitably will be compromised and the detriment of the journalism’s quality and, therefore, its salability to readers and advertisers.
Digiday also rounded up some comments from digital media veterans saying it looks like a bad idea to combine those two jobs in one person.
Meanwhile at the LA Times: The Washington bureau has hired Bloomberg's Del Wilber to cover the Justice Department.