The SF Weekly's war of attritionAnother fascinating day in court in the Guardian’s predatory-pricing lawsuit against the SF Weekly and its corporate owner. The Weekly is now well into its defense case, and the lawyers for the 16-paper chain that owns the paper are making the same arguments they’ve made all along. And they aren’t holding up very well.
The Guardian, as readers of this blog know by now, is claiming that the Weekly and Village Voice Media, the chain formerly known as New Times, sold ads below cost in an effort to harm the local competitor.
Today’s main witness was Jed Brunst, the company’s Phoenix-based CFO. H. Sinclair Kerr, the Weekly’s lead attorney, asked Brunst why New Times decided to buy the Weekly in 1995. “We saw San Francisco as a very vibrant market,” Brunst testified. “We saw it as an opportunity to make money and to practice good journalism.”
It was clear that Brunst was well prepared – much of his testimony seemed pre-rehearsed, which is not terribly surprising. Lawyers in a case like this typically make sure their own witnesses aren’t going to surprise them.
But Brunst got out of the box with a big problem: He said the chain saw San Francisco as a good opportunity to make money. And it became clear as the day went on that the Weekly had never made any money at all. Neither had the East Bay Express, which New Times bought in 2001. Both lost huge amounts of cash.
In fact, under cross-examination later, Brunst would admit that the chain had shipped more than $13 million from Phoenix to San Francisco over the years to prop the Weekly up and cover its losses.
But that’s getting ahead of the story.
First Brunst said that when the chain bought the Weekly, it was profitable. But New Times intended to pour a lot of money into the operation, he said, so the boys in Phoenix figured it would lose money “for three to five years.”
The first few years New Times operated the Weekly, the economy was booming; it was dot-com bubble time in San Francisco. But even with rapidly growing revenue, the Weekly didn’t make a profit.
(Actually, in 2000 and 2001, Brunst said, the paper actually did show a tiny operating profit – but that, it would turn out later, was a shaky claim at best.)
In March, 2001, the chain bought the East Bay Express, which, Brunst said, turned out to be “poor timing.” That was, of course, right after the local market started to tank.
As the years passed, and the economy dipped, and the losses mounted, Brust said the papers cut some costs and tried to get higher ad rates. But, he lamented, the clients just wouldn’t pay higher rates.
Did anyone at New Times ever discuss trying to harm the Guardian? Sinclair asked. “Categorically no,” Brunst declared.
But on cross-examination, a few problems with that story emerged.
For starters, Guardian lawyer Ralph Alldredge pressed Brunst on the claim that he and his New Times cohorts have made over and over – that the Weekly was a better paper because the chain spent more money on editorial.
During this entire period, the Guardian’s ad rates were higher than the Weekly’s. “If you had a better product, you should have been able to get a better price,” Alldredge said.
Brunst ducked like a champ. “Quality is a subjective term,” said the CFO of a company that has spent more than a decade insisting that its San Francisco paper was far and away the superior publication in every possible area.
Alldredge then asked Brunst if he knew that the Guardian’s ad rates had been higher than the Weekly’s for the entire period of 1996 to 2007. “I don’t have that information,” said the top financial officer of a company that has obsessively tracked every aspect of the Guardian’s performance.
Alldredge showed Brunst a chart that showed exactly how the rates have compared, reminded him that the Weekly consistently sold ads for less money and asked: Wasn’t this part of a plan to build market share at the expense of the Guardian?
Brunst ducked again.
Alldredge and Brunst went through a detailed discussion about how the Weekly defines profits; it’s complicated accounting stuff, but although he had at first insisted that the Weekly earned a profit, he eventually admitted that, under standard rules of accounting, the Weekly had lost money every single year.
Brunst tried to argue, as all of the VVM/New Times executives have, that the company never particularly singled out the Guardian as a competitor; the market was crowded with papers and broadcast outlets, and the Weekly considered all of them to be competition.
But Alldredge presented Brunst with a series of emails that showed the Weekly publishers reporting monthly to headquarters on the Guardian’s ad count and page count. There was never any other competitor that got anywhere near that kind of attention.
In fact, Alldredge offered as evidence a 1998 memo from Jim Rizzi, then the publisher of the Weekly, to Brunst and others that discussed the Guardian’s dismissal of a general manager. “We are taking this as a sign that they are beginning to crack and are showing increased signs of disarray due to our continued growth and progress,” the memo stated.
Alldredge used New Times financial statements to get Brunst to acknowledge what had been going on in San Francisco: The chain was making plenty of money in some of its other markets, like Denver (where there is no direct competition). And some of that spare cash was getting re-allocated to San Francisco. All told, the figures showed, $16 million had flowed from Phoenix to San Francisco. Since $3 million of that was the money the chain had put up to buy the paper, the total cash outlay to cover the Weekly’s losses was $13 million.
Then Alldredge honed in on the central point of the case: The Weekly, he suggested, was engaged in a war of attrition, knowing that the chain could pour in all the money necessary, for as long as it took, to cripple the competition.
By selling ads below cost, the Weekly was depressing the entire market for alternative weekly ads, making it hard for the Guardian to compete. “If both papers were going to lose money for some period of time, the one that would run out of money first would be the Bay Guardian, right?” he asked Brunst.
“I don’t know that,” the chief financial officer insisted.
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Comments (17)
Your own tortured writing belies any claim about SFBG being of high quality editorially. "Ducked like a champ?" And then "ducked again?" (This after the "ducks the big one" headline). Don't you know any other metaphors--boxing or otherwise?
Posted by bob a. weave | February 12, 2008 06:12 AM
Oh Bruce... your true colors are showing. If I were the jury, I would give you a buck fity, and let your paper die the slow death in peace.
Posted by Dennis Wilenchick | February 12, 2008 08:51 AM
Waaaah! Tell me, Tim: Is it tough to type while sucking on your thumb? If you guys invested as much time (and a whole lot more money) into your editorial product as you do whining about the Weekly, you might not be teetering on the edge of irrelevance. The worst thing is, you and Bruce are such transparent frauds. Both of you make huge money (at least $180,000 for B3), yet you pay your staff and freelance writers the kind of wages that would embarrass the average Chinese sweatshop foreman. You tilt at PG&E, Singleton, et al, and yet you run your business like any other fiefdom. For shame, Team Candy Ass.
Posted by Team Candy Ass | February 12, 2008 01:18 PM
Sorry, Bob a. weave, sometimes if it walks like a duck and it quacks like a duck, it's a damn duck. How's that for a metaphor?
Mr. Candy Ass: The trial (and the journalistic record) shows that the Weekly has spent a lot more time obsessing about us than we have about them. We're too busy going after PG&E.
"Huge salaries?" Pay attention, Candy: What the trial record actually shows is that Bruce Brugmann and Jean Dibble, husband and wife and co-publishers of the paper, earn a combined salary of less than $200K, which means they each earn less than $100K, which almost certainly makes them the lowest-paid publishers of any major-market alternative paper in America. They aren't taking money out of the paper; they put money INTO it.
The disparity between the lowest and the highest paid workers at the Guardian is far less than it is at almost any other business of its size. Get a clue.
Posted by tim redmond | February 12, 2008 01:38 PM
Uh, Tim? Which paper filed the lawsuit? You're disingenuousness becomes you. Anyone who knows the Bay Area's journalism world knows that you guys -- and especially B3 -- has had Lacey/Weekly on the brain since New Times came to town. It's practically your raison d'etre at this point.
Your financial losses over the last several years reveal three things about your paper: a) Editorial content that has failed to reflect the city's changing population demographic and dynamic; b) An abject inability to adapt to the new media revolution; and c) A preoccupation with making sure the SFBG's top people -- that would be B3, his wife and you -- continue to rake in disproportionately more than your lowest-paid workers.
At root, this lawsuit isn't about predatory pricing. It's about your failure to adjust to an evolving market and your unwillingness to sacrifice your own comfortable existence. (And, no, I don't work for the Weekly. I'm just tired of watching you guys promote yourself one way to readers while conducting business like ordinary, money-grubbing capitalists. Capitalists who don't know how to make money, but still.) You really think anyone buys B3's word about how much he pays himself? C'mon, Capt. Candy Ass. Even you know better than that. I'm sure a routine investigation into B3's finances would show he's taking a bigger cut than what he's claimed publicly. (You do remember how to investigate, don't you, Tim? Or can you only pontificate?)
In fact, I'd bet your next paycheck that the disparity between the highest- and lowest-salaried workers at the Weekly is far smaller than it is at the BG, which is constantly -- constantly! -- touting itself as fighting on the side of the little guy. (Word has it -- very reliable word, it should be noted -- that you guys often can't cut freelancer checks within six months of publishing an article!) You and B3 know full well you're not the little guy, but you'll play that part till you're in the grave. So go ahead, spout all the we-are-the-world, woe-is-us rhetoric you want. Those who travel in Bay Area journalism circles see you for what you are: transparent frauds.
(But I will say I'm impressed with your ability to type with your thumb in your mouth. Maybe you just need to be burped and you'll feel better.)
Posted by Team Candy Ass | February 12, 2008 02:20 PM
Mr. Candy Ass (Mr Ass?), why don't you tell me your real name and who your work for so I'm not dealing with an anonymous hit. Thanks.
Posted by tim redmond | February 12, 2008 03:24 PM
What? Tell you my name and ruin the suspense? I don't think so, thumbsucker. Clever attempt at misdirection on your part, though. Sort of like suing the Weekly rather than addressing how badly you've botched your job of running the BG.
Besides, my identity isn't important. What's important is calling you on your false piety (and poverty). Tell you what: You come clean about being a hollow liberal -- a guy who espouses the little-guy ethos but earns big money while paying BG staffers substantially less than a living wage -- and I'll reveal my identity.
What, you don't want to take me up on that? Shocking. I guess confronting your own hypocrisy (and improving your paper) is harder than taking the competition to court. You're a poseur, Tim. You talk it but don't walk it. And sadly, you appear to be the last one to realize it. As B3 might say, alas.
See you later, thumbsucker.
Posted by Team Candy Ass | February 12, 2008 06:41 PM
Misdirection? Huh? You're the one who is calling me names and refusing to say who you are.
What are you afraid of?
You can accuse me of anything you want, but I stand behind what I write, with my name, and I'm easy to reach at work, and my home phone number is listed, and I don't hide from anyone.
Who's the poseur here, chump?
Posted by tim redmond | February 12, 2008 09:09 PM
Come on Tim,
Give up when you know you are in the wrong. For at least four years during the dot.com boom it was regular policy at the Guardian to pay it's sales staff at the rate of $200 per week, but a meager 7.5% commission, only after the check cleared B3's account. In San Francisco, this constitutes a poverty wage. In all fairness, the first three months of employment, the salespeople were guaranteed at least $400 per week.
Come on, $400 a week, pre-tax, in San Francisco???
I'd say the disparity between what you, Bruce and Jean made is a lot greater than what you admit and surely the HUNDREDS of salespeople who've traveled in and out of the Guardian (usually because they could not survive on the pages paid to them)would agree.
And I do not now nor have I ever, worked for the Weekly, or New Times (or VVM)
Posted by Former SFBG Employee | February 13, 2008 08:30 AM
this is pretty funny.
over at the sf weekly blog, it's the critics who use their full names, and the defenders of the weekly are smug anonymous namecallers. here, it's the opposite.
funny, that.
and last i checked, this lawsuit is about the weekly's ad sales practices, not the guardian's payroll policies. if the former sfbg employee wants to file a lawsuit about that ... ... then there'll be a lawsuit about that. but until then, 'team candy ass' looks eerily like the weekly's other multiple attempts to muddy the waters and distract readers from the actual case.
Posted by uhhhh what? | February 13, 2008 10:48 AM
Tim, Tim, Tim. You just don't get it. There's nothing to be gained from revealing my identity because of your and B3's proclivity for distorting the motives of those who expose your shared hypocrisy. Once I tell you who I am, you'll turn this into a discussion about me, and who I am is beside the point.
These postings -- and this lawsuit -- are about you and B3, and how the two of you have failed utterly in recasting the Bay Guardian in response to the shifting media landscape. You're getting left behind, you resent that the Weekly ever came to "your" town and rather than commit to the hard work of reimagining your paper, you sue the other guys. Worse, while your paper is struggling, you and B3 continue to cut yourselves nice, fat checks.
And if you care to disagree, please check out the posting from "Former SFBG employee." I rest my case... thumbsucker.
Posted by Team Candy Ass | February 13, 2008 11:12 AM
Funny that uuhhhhh what sounds like a current BG lackey. And for the record, the Former BG employee does not wish to sue the Guardian, but rather to correct Tim's statement that the disparity between his and bruces paychecks and that of the grunts who do the work is far, far greater than either Tim will admit or that found at "any other company of its size.
B3 and his lackeys love to sue. Just ask Gherarda Castillo.
Posted by Former BG | February 13, 2008 03:31 PM
Team Candy Ass and some of the other scatalogical monikers that have been used by cowards in this debate on both web sites are obviously Lacey editors--De Vorde, or Walsh, maybe Lacey himself through a cut-out. Although, judging from the shrill tone and low-brow content of Team Candy Ass's unpleasant voice, I might wager on former SF Weekly Editor John Mecklin, who disappeared into obscurity a while back, but may yet be haunting Bay Area cyberspace, hoping to get rehired by Lacey.
Posted by Peter Byrne | February 13, 2008 04:05 PM
Congrats, Uhhhh What? You're almost as willfully ignorant and self-delusional as Tim.
You get four stars for recognizing that the lawsuit -- as spun by the Guardian in court, in print and on this site -- concerns the Weekly's ad prices. But here's what your simple mind fails to grasp: The BG brought this suit in large part because it hasn't been able to adapt to a fast-changing media world, nor has it ever figured out how to cope with losing its alt-weekly monopoly in SF.
Rather than do the hard work of making their paper better -- and more representative of the city it purports to cover -- Tim and B3 cry "Wolf!" (Or, in this case, "Weekly!") Essentially, they point to a bogieman -- in this case, the Weekly and its ad rates -- because it's too painful for them to admit that the BG's declining fortunes are a self-inflicted wound.
Tim and B3 have been slow (nay, downright resistant) to making changes in the paper that would reflect how the city has changed over the past 10 years. Instead of evolving as a newspaper -- trying to do something more than sling the ol' lefty dogma -- the BG has kept doing the same thing they've always done. And as fewer readers found it interesting, and ergo fewer advertisers wanted to do business with the BG, Tim and B3 didn't say, "Gosh, we suck! Let's figure out how to put out a smarter paper!" They said, "Sue the Weekly! It's *their* fault we suck!" And so B3 trotted out the same ol' squeeze play he pulled on the Chronicle and the Ex all those years ago.
And to tie it all together for you, my simple-minded Uhhhh, What? friend, the payroll discrepancies matter because the BG is crying poor mouth in court. But amid shedding staff and slashing freelancer pay -- which the paper was "forced" to do because of the Weekly's "predatory" pricing, if you believe Tim and Bruce -- those two weren't making sacrifices of their own. They never have. They live like kings yet badmouth anyone who dares turn a profit, all while cloaking themselves in working man's rags. If Tim and B3 took less money for themselves and invested in more editorial and ad staff, they wouldn't need to sue the Weekly over imagined misdeeds. They would be able to produce a stronger paper (so long as they stopped being so obtuse) that just might prove itself superior to the Weekly. Then they would find themselves with more readers and advertisers, and they wouldn't have to jettison staff and gut freelancer pay.
Instead, Tim and B3 have continued to fatten their own bank accounts, and over time, they've grown lazy. And here's the thing about lazy men: They hate competition, and they never try to work harder.
They sue.
Posted by Team Candy Ass | February 13, 2008 05:56 PM
Wrong again, my "investigative" friend! It's not Lacey, Walsh or Mecklin posting, just interested observers shedding light on the BG's sanctimony. Just because you're a bitter ex-Weeklier with a freelance "career" as embarrassing as the hats you wear is no reason to make ill-informed guesses about anyone's identity. Run along, Douchebag.
Posted by Peter Byrne's a Douchebag | February 13, 2008 06:42 PM
"...trying to do something more than sling the ol' lefty dogma"
And sling that new, cool, and hip Libertarian Ideology?
So, why does New Times hate Sheriff Joe Arapio so much? What's up with that?
Tim,
Do you know what they did down here in Phoenix in their attempts to demonize ol' Joe? You'll love it! They published a Grand Jury Subpoena! Gads, let me dig it up:
http://www.azcentral.com/news/articles/0211French0208.html
Lacey and Jim Larkin ended up arrested!
Posted by Maurice Searcy | February 13, 2008 10:56 PM
Here is a picture of two editors at a typical New Times Monday morning staff meeting:
http://www.theartgallery.com.au/ArtEducation/greatartists/Degas/Absinthe/
Posted by Peter Byrne | February 14, 2008 03:24 PM