The damages: $5 - $11 millionAn accountant with more than 30 years experience analyzing damage claims in lawsuits testified today that the SF Weekly’s practice of selling ads below cost damaged the Bay Guardian badly – and he put the financial toll at between $5 million and $11 million.
Clifford Kupperberg took the stand in the Guardian’s predatory-pricing suit against the SF Weekly and its corporate owner. The Guardian is charging that the Weekly for more than seven years violated the state law barring companies from selling a product below cost for the purpose of harming a competitor.
Guardian attorney Ralph Alldredge walked Kupperberg through the detailed process of how he evaluated the Weekly’s and the Guardian’s costs, the price of display ad space in the two papers, and the projections he made of how much the Weekly rate-cutting had harmed the locally owned paper.
If the jury finds that the Weekly and Village Voice Media, the chain formerly known as New Times, broke the law, Kupperberg’s calculations will be the basis for awarding monetary damages.
The forensic accountant admitted it’s not an exact science – what he was trying to do, after all, was determine what the financial situation of the Guardian would have been had the Weekly not engaged in predatory pricing.
So he used a series of different benchmarks to measure industry trends and economic conditions in the Bay Area, then compared those to the Guardian’s actual sales.
He looked, for example, at how two other Bay Area alternative weeklies, the Pacific Sun and the Palo Alto Weekly, had fared between 2001 and 2008. He also looked at how VVM/New Times papers nationwide had fared. He looked at how many ads the Guardian and the Weekly together had sold over the period, and how the market share changed. And he looked at state government figures for total retail sales – and particularly, sales of food, drink and apparel – for the period.
From all of those, he came to some basic conclusions.
Charts he presented to the jury showed that after the dot-com bust and 9/11, alternative newspapers in general saw sales and revenues drop. Retail sales for the region fell, too. But they began to rebound by about 2003, and in most cases, weekly newspapers were seeing positive growth and increased revenues between 2003 and 2007. “Other Bay Area weeklies saw a modest revenue drop in 2002, but then it picked back up and continued to rise,” he testified.
The Guardian’s revenues continued to drop in that period – an anomaly that was consistent only with the notion that the paper was losing sales and being forced to reduce rates in the wake of a predatory price-cutting attack by a big chain.
The Weekly’s lawyers love to talk about the impact of the dot-com bust and 9/11 on the local economy, but in fact, the figures Kupperberg presented show that retail sales picked up fairly quickly after 2001 – and food and drink and apparel, two areas that represent a lot of ad money for alternative weeklies, rebounded even faster.
But when you look at both the Weekly and the Guardian during that time, the papers were seeing revenues drop – at a rate that wasn’t happening at the other Bay Area weeklies and wasn’t happening at other New Times publications.
Kupperberg said the Weekly’s price cutting depressed the entire market for alternative newspaper ads in San Francisco, and made it very difficult for either of the two papers to make money. When you have conditioned the market to a low prices, he testified, it’s very difficult ever to raise rates.
That, the Guardian contends, was a central part of the Weekly’s strategy: Cut rate and create a war of attrition, where both papers bled money – and since the Weekly had a corporate parent able to pout $13 million into propping it up over the years, it would be able to handle the losses.
Kupperberg pointed out that the sales figures for the two papers involve tens of thousands of individual transactions, and that it would be almost impossible to track every single one and demonstrate that a specific price was linked to a specific loss of revenue. But the overall figures are dramatic and hard to challenge.
On cross-examination, Weekly attorney Rod Kerr showed figures from the Guardian’s past, and argued that the paper never had huge profits. Which is true: Most of the money that the Guardian has made over the years was re-invested in the paper.
But year after year, the figure show that the Guardian was in the black. The Weekly was losing money, millions, trying to drag down ad rates.
Kerr also tried to nitpick Kupperberg's figures, looking for a dollar here or a dollar there that didn't quite ad up. But no matter which of Kupperberg's models you look at, the bottom line is pretty clear: The Weekly's predatory pricing cost the Guardian a lot of money, millions of dollars.
Kupperberg will be back on the stand tomorrow morning.
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Comments (2)
Your practice of writing incredibly facile articles damaged mebadly – and I put the financial toll at between $5 million and $11 million.
Posted by handout | February 21, 2008 06:21 AM
tim, from a purely logical perspective i'm wondering why you think this accountant should be trusted more than the weekly's. after all, both deal in "assumptions" which you claim is a bogus grounds for argument. based on the weekly's blog, your numbers-cruncher uses a lot more assumptions to reach his conclusions. also, if the bodega bay paper is immaterial to the weekly's argument based on its marin county location, why is the pacific sun somehow relevant to the guardian's argument?
i'm quizzing you because i'm deeply interested in this notion of predatory pricing. i'm trying to follow the guardian's logic here but, must confess, it's getting difficult to do.
Posted by student | February 21, 2008 09:27 PM