McClatchy sells the Minneapolis Star-Tribune to a New York venture capital firm with no newspaper experience. It's sad for the staff, for the state of Minnesota, and for the newspaper business
Bu Bruce B. Brugmann
It's yet another WLSB, another wimpy little story in the business section of the Hearst/Singleton papers, except this time it was not even in the business section of the San Francisco Chronicle/Hearst.
And it was just a couple of paragraphs boiled out of an Associated Press story in the business digest of the Oakland Tribune, Contra Costa Times, and the San Jose Mercury News (all Singleton papers).
Why? This was probably because the latest McClatchy sale was the most embarrassing media monopoly story of them all: it showed yet again how the nation's big chains were tossing newspapers around like drunks toss cards in a monopoly game in a waterfront saloon. This time, in a most unexpected development, McClatchy announced that it was selling the Minneapolis Star-Tribune, one of the great newspapers of the country, for less than half of the original purchase price of $l.2 billion that McClatchy paid in l998 to buy the Star-Tribune and its local Cowles Media parent company.
And it sold its largest paper to a one year old NewYork venture capital firm named Avista Capital Partners with no newspaper holdings and no newspaper experience.
Word came as a shock to the newsroom in Minneapolis, reported the New York Times Thursday. Employees received an e-mail message aet 3:5l p.m. saying that there would be an important announcement at 4:00.
"You should have seen the look on our faces," said Nick Coleman, a metropolitan editor for the paper. "It was like, who? Everyone knows the whole industry is in play and that just about anything could happen, but nobody thought we could get sold. There's a real sense of betrayal."
Coleman said the paper was sold in a "fire sale." He continued, "At a fire sale, people get discounted so we're very concerned, worried and anxious." On the other hand, he said, "maybe it takes someone from outside the newspaper business to see the way forward."
Dean Singleton, the new owner of the competing St. Paul Pioneer Press, was astounded and was quoted in his own paper as saying he would never have expected McClatchy to sell the paper at such a large loss. "How often does a newspaper company sell its largest paper," he said. "It doesn't happen."
For those of us who grew up with the Minneapolis Star-Tribune and the Des Moines Register (both owned by the Cowles family), this is a terrible shock. It was bad enough when the Gannett Company took over the Register and turned a splendid statewide paper into a mediocre Des Moines metropolitan paper. I remember the precise moment when I knew that Gannett was ruining the Register. I was back visiting my parents in Rock Rapids, Iowa, and I stopped in to the Rexall store, as I always did when I was in town, to buy the Register from Jim Roeman, a high school classmate who ran the store. He didn't have any and explained why: the Register had hiked the price so that the more papers he sold, the more money he lost and so he (and many other outlets outstate) stopped carrying the Register. And that was the Gannett strategy, to gradually cut back circulation and coverage to outer Des Moines and ruin a proud state paper.
It was worrying when McClatchy, a California paper, bought the Minneapolis Star but at least it was strong editorially and had solid management. But now, McClatchy sold to an unknown venture capital firm with no credentials and no track record and it did so even though McClatchy's chainwide profit margin through September of this year was 25.2 per cent, according to Gary Pruitt, McClatchy CEO. Then Pruit coyly added without giving specifics, "Without Minneapolis, the profit margin would be higher." Higher? That's higher than most U.S. corporations are doing.
Even newspaper analyst John Morton, who rarely sees a newspaper sale or a merger he doesn't like, told the Sacramento Bee that the sale was "a disappointment." He said McClatchy is known as an operator of high quality newspapers and is giving up on a paper with a good reputation. "This is a shock," he said.
Colby Atwood, an analyst at Borrell Associates, a media research firm, gave a chilling financial analysis to the New York Times. "The turbulence of equity holders trying to rebalance their portfolios and newspapers are properties to be bought and sold," he said. "They're buying cash flow and tax benefits. It's not the sort of religious commitment that you hope to get from newspaper owners."
The Star Tribune laid out this new form of "religious commitment" in its Wednesday story by Matt McKinney and Susan Feyder, who were assigned that uneviable job in journalism of covering the transgressions of their own paper. Here is their snapshot lead of how the nation's second largest chain unloads its biggest newspaper:
"The Star Tribune's new chairman is a Wall Street investor who says he's driven by public service. Chis Harte is also a resident of Texas and Maine and a former newspaper executive who'll be advising an investment group that has never owned a daily newspaper.
"A day after McClatchy announced the sale of the Star Tribune to a New York private equity group, there are more questions than answers about how the deal will reshape the newspaper and its community, and whether it will serve as a template for an industry in transition.
"Harte says he's still trying to figure it all out himself.
"'This whole transaction came together so fast, really in just the last week or so,'" Harte said. "'At this point we just don't know about things like my schedule.'"
The heads on the story synopsize the point about reshaping the newspaper and the community: "Twin Cities will lose Star Tribune Foundation" and "Sale could reset the bar for newspaper deals--lower."
Well, we can get a little idea right here in the Bay Area about this kind of "reshaping" and "religious commitment."
Only by reading the New York Times, the Wall Street Journal, the LA Times, and the many stories on Chain Links, the online network of the Newspaper Guild, (some links below), can you find out much of anything about this sorry deal. Not by reading the WLSBs in the local Hearst/Singleton press. And so once again we urge you to sign up for Chain Links and get the stories the local monopoly papers won't print.
Full disclosure: we want to get the documents of collaboration of Hearst and Singleton and the other chains in the Bay Area monopoly deai (McClatchy, Gannertt, Stephens), and shed as much light as possible on the march of the Galloping Conglomerati. That's why the Guardian and the Media Alliance, represented by the First Amendment Project, went into federal court last week to try to unseal the documents in Reilly vs. Hearst et al, the only real impediment remaining to unraveling the Hearst/Singleton deal and the fallout from the Knight-Ridder sale to McClatchy. Wish us luck. B3
P.S. I sent an email over to Ken Howe, editor of the Chronicle business section, asking him why the Chronicle did not run a story on the McClatchy sale. He had not responded by blogtime. I am sending a copy of this story (and the Nick Coleman column) to Hearst corporate in New York via Chronicle publisher Frank Vega and Editor Phil Bronstein. Will they comment? Will Hearst ever allow a Nick Coleman-type column in its paper or website SF Gate or its blogs? Will they allow David Lazarus to get to the bottom of it all in his excellent business column? Or Phil Matier aand Andy Ross...Or?...Or?...
P.S. 2: Note to the newspaper unions: the stories you are running on Chain Links are owner oriented stories, with almost no quotes from people from the community or journalism or law professors or union spokespeople. Do the unions have any comment or stories of its own that it can pass along? Any more Nick Coleman type columns?