slides: Starkman: Memo to Belo - Now, Sell the Projo

Friday, October 11, 2013


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The news out of Dallas is reverberating around Southeast New England: The Providence Journal’s parent company, A.H. Belo, just sold one of the three papers in its portfolio, The Press-Enterprise in Riverside, California, for $27.5 million.

Never mind the price, which isn’t bad, given the market for newspapers these days (more below).

The reason this sale is a thunderclap for the local New England media scene –full of portent and meaning -- is that it leaves Belo with just two properties: its flagship, the Dallas Morning News, and the Projo, which now is sticking out like a sore thumb, the last, lonely outpost of a once mighty empire.

Logic says: It must, too, be sold.

I’ve asked Belo’s CFO, Alison Engel, for comment and will update as I hear back.

SEE Changing Newspaper Industry Slideshow BELOW

Make no mistake: a sale would be good news for the Southeastern New England media scene. Belo bought the Projo in 1996, a sale that came nine years after the untimely, tragic, and ultimately mysterious death of Michael P. Metcalf, the chairman and CEO of the closely held company that owned the paper. Indeed, The Providence Journal is one of the tragic newspaper stories of our time. Metcalf was no miracle worker, but he was one of the more innovative media owners of his day; a shrewd buyer of broadcast stations, an early mover into cellular and cable and other properties just as they were about to take off. Did you know that the Providence Journal Company didn’t just own, but developed the Food Network, which of course has exploded into a money machine? It did! I’m not arguing that the taciturn and intensely private (not to mention principled) Metcalf could have steered the Projo through the digital storm that would arrive more than a decade later. But the truth is, we’ll never know.

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Lack of Innovation

Belo, by contrast, has not been a particularly innovative steward, and its efforts to cope with the digital revolution were particularly maladroit. It was, for instance, the author of one of the great business howlers the Internet age: the “Cue Cat,” a barcode-reader type of device that readers were supposed to use to swipe over a print newspaper page to be taken to an advertiser’s webpage. You had to be there to believe it. Belo sent out 350,000 of these in Dallas alone. Here’s some background ($$).

An analyst was quoted at the time (2000) saying: "One of two things is going to happen. Either it's going to start catching on or it's going to be the first eight-track of the 21st century." As it turns out, that was unfair to the eight-track.

It’s easy to make fun of the Cue Cat – and many did -- but it did symbolize a cultural gap between an old media company and a new digital environment that Belo has never been able to surmount. And, really, 1999 was pretty late in the game to try something as lame as the Cue Cat. When the company split off its 20 profitable television stations in 2007, leaving its three newspapers to struggle on alone, it was akin to raising the white flag and led ultimately to the Riverside sale yesterday. In all, Belo’s 17-year stewardship of the Journal has been one mostly of retrenchment and reaction.

This is not to say Belo is the villain in this story. Not at all. Neither, certainly, is it the hero.

It has been simply caught in one of the greatest media transformations in our lifetime – some say in the 500 years since the invention of the printing press – and has managed it about as badly as most, maybe a little worse.

Collapse of Daily Circulation

One of the remarkable – in a bad way – aspects of Belo’s stewardship of the Projo has been the paper’s near collapse in daily circulation, especially in the last few years. As I showed a couple of weeks ago, revenue declines have been pretty stunning.

But its circulation that has been the real shocker. Described graphically, the Projo’s circulation declines looks this way plotted against the national average.

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Projo circulationdecline outpaces the national decline

And the Projo’s decline continues at a breathtaking pace. Adding in further declines in 2013, the Projo is now at about 79,000 daily papers, less than half the circulation of 2000, when it was 163,000. The national average was off about 20 percent during the period.

And while Rhode Island has suffered more than other states from the financial crisis and its lingering effects, the Worcester Telegram & Gazette, arguably a weaker paper in a market only 40 miles away, has declined at a materially slower pace:

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The fact that Belo’s management has been granting executive bonuses that are far larger than the concessions it has been extracting from the union is a palpable sign of an exhausted leadership bereft of ideas.

What now?

Now, it’s time to sell the Projo, obviously.

The Riverside price is pretty much what you’d expect, given that the Boston Globe went for $70 million and The Washington Post went for $250 million. The sale does not include a vacant building in Riverside that housed printing operations. Belo will keep that, but its value is not large. In July, Belo sold the main building the paper is housed in to Riverside County for $30 million, or more than the value of the paper itself.

What the Projo would fetch is unknown but it would likely be less than Riverside, which had a circulation of 127,000 as of the end of last year, compared to Providence’s 89,000 (at year’s end). But really, what Belo gets is Belo’s problem.

A person at The Press-Enterprise tells me the atmosphere is “pretty upbeat” on news of the sale -- as well it might be. Belo’s strategy, such as it is, has focused on cost cutting there, too. In 2006, the Riverside operation had 1165 employees, this person says. Today, it has 375.

But it’s more than that. The buyer, Freedom Communications, headed by Aaron Kushner, is considered one of the most innovative owners in newspapers. His strategy is utterly counterintuitive and includes reinvesting heavily in the news operations and expanding the print edition.

Since taking over the Orange County Register’s parent in 2012, Kushner has been on what the Columbia Journalism Review in May called “one of the biggest hiring sprees in newspaper history,” boosting the editorial staff by more than two-thirds in less than a year. He started by adding 140 journalists, plus another 100 in sales.

The media analyst Ken Doctor estimated earlier this year that the annual tab for the newsroom hires and new print costs was roughly $10 million – a figure that might be offset by circulation revenue gains. CJR reported that the Register had since hired another 50 journalists, adding perhaps $4 million to $5 million that expense number.

And morale is sky-high. A Register editor is quoted in CJR as saying: “It is like living in a parallel universe. You see the rest of the world, and you’re doing something that’s completely different.”

With any luck, that’s the immediate future Riverside is looking at. Providence should be so lucky.



Related Slideshow: Changing Newspaper Industry

In a column entitled, The smartest guys in media give up on print,  Alan Mutter, the former editor of San Francisco Chronicle, writes "For all the corporate-speak accompanying the dramatic restructurings of Twenty-First Century Fox, Time Warner and Tribune Co., the simple reason these diversified media giants are jettisoning their publishing assets is that their leaders fear for the future of print."

Throughout New England and across the country there is a dramatic decline in the print newspaper business. 

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Boston Globe

The New York Times Company sells the Boston Globe for just $70 million - a loss of more than of more than $1 billion dollars over 20 years.

The new ownership - John Henry - a majority owner in the Boston Red Sox may have purchased the Globe for the value of the real estate. Estimated to be $40 million to $50 million.

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Worcester Telegram

The Worcester daily paper has seen similar loss of circulation, revenue and staff cuts from 550 to now less than 200.

The paper was sold by The Boston Globe to Halifax Local Media for $19 million.

Today, the Worcester Telegram has circulation just over 50,000 per day.

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Providence Journal

The once proud Providence-based newspaper has been devasted by cuts under the ownership of A.H. Belo, the Dallas-based newspaper group.

The Providence Journal has let more than 50 reporters and editors go in less than a year.

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Fall River's Herald News

Now, the Herald News, the newspaper which is owned by Gatehouse Media, went into bankruptcy as the parent company tries to shed over $1 billion in debt.

The fate is now in greater question and circulation has dropped to just above 14,000.

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New Bedford's newspaper is now is flux as its parent group, which was own by Ruppert Murdock's Dow Jones Local Media Group (a subsidiary of News Corp) has been sold off and is being merged into the same company as Fall River's Herald News.  

The newco will be merging both the spinoff Dow Jones Local Media and the bankrupt Gatehouse into one media company.

Circulation is now just above 20,000 during the week.


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