McClatchy

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Capital flows like water to media companies (of a certain kind)

December has started with a bang-up ten days financially for some leading American media companies.

Vox announced it has raised another $46.5 million in a new round of venture capital bringing its total valuation to $385 million. CEO Jim Bankoff, in a internal memo he made public, announced ambitious expansion plans for 2015.

Outbrain, a content recommendation/native advertising company, indicated it is tentatively planing an initial public offering early next year, with a target valuation of $1 billion.  (Outbrain, like its biggest competitor Taboola, is Israeli in origin but has moved headquarters to New York and plans to be listed on NASDAQ).

Meanwhile expanding Buzzfeed’s growth continues and its investor valuation stands at $850 million.  Editor Ben Smith was lecturing in Australia late last week as the site announced it has hired a star from Wired to be its Silicon Valley bureau chief and is forming a health and science desk.

Shane Smith, founder and CEO of VICE. (John Minchillo/AP Images for PromaxBDA)

Shane Smith, founder and CEO of VICE. (John Minchillo/AP Images for PromaxBDA)

And in case you missed it, Vice attracted nearly $500 million in new venture capital funding in September and now is valued at $2.5 billion. Founder and CEO Shane Smith confirmed that he  wants to try again to buy and repurpose the broken-down HLN franchise from CNN/Time Warner. (CNN chief Jeff Zucker said HLN was not for sale — especially to Smith.

Vice also got a kiss of legitimacy December 1 when the Knight Foundation awarded it an Innovation Prize and partnered with the site and CUNY to create a $500,000 initiative to foster innovative story-telling internationally.

I could go on, but you get the drift.

None of these companies have the asset — or is it a liability — of a legacy operation.  Likewise Outbrain has come from nowhere to being a major player in the sponsored content boom in part because it has no need to modernize a traditional ad agency structure.

The capital markets’ infatuation with these newcomers takes place as tough times for legacy companies just keep on coming. The New York Times did a buyout deal  last week with 60-plus news staffers and will add some layoffs to reach a staff reduction goal of 100.  The same has been happening over the last few months at Poynter’s Tampa Bay Times.

A reporter for the Sacramento Business Journal called me recently asking whether McClatchy can survive as a family-controlled public company.  I think so — but it’s not an unreasonable question.

Venture capital valuations are somewhat different than the market capitalization of an existing public company.  When and if a VC-backed company goes public, it may or may not be worth as much as its investors hope.

With that qualifier, check out how the market capitalizations of some familiar legacy companies (as calculated by Yahoo Finance) compare to the figures mentioned at the top of this post:

*McClatchy — $337 million (considerably less than Vox).

*Tribune Publishing — $584 million (more than Vox, less than Buzzfeed).

*New York Times Co. — $1.93 billion (roughly twice Outbrain but not as big as Vice).

*Time Inc. — $2.55 billion (for now still a little more than Vice).

These numbers speak for themselves in terms of what investors favor in the media space. They also confirm the truism that short term revenue growth prospects matter much more to those placing bets with their capital than longevity or even profitability.

I would add two more short bits of commentary:

*Capitalism’s “creative destruction” dynamic works in part by accelerating the growth of promising new ventures while pulling investments out of fading older ones.  So you could say the money folks, as 2014 rolls to 2015, need no persuading that media transformation is in full gear.

*A small saving grace for newspaper companies as an investment is that a balanced portfolio (appealing also to many individual investors) includes profitable companies that pay a good dividend, even if share price may not move up quickly.  That’s the premise for the relaunch of GateHouse Media as New Media Investment Group, paying out about 5 percent on its current share price, and a likely strategy for other spinoff companies being formed like Gannett Publishing and Scripps’s Journal Media Group.

Unfortunately, as anyone from the boardroom to the back corner of the newsroom knows, it is not so easy to earn enough profits to pay a dividend while also making the needed big investments in new digital news products.  And the industry still has on its to-do list for next year (pardon if I’m repeating myself) achieving net revenue growth. Read more

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A look at 5 successful news partnerships

The Pew Research Center is out today with a new report seeking to define what differentiates effective and sustainable news partnerships from the many that launch with a splash and later quietly fizzle.

At Poynter Online, we regularly report on Pew’s prolific series of studies on digital behavior and news industry trends. There is a twist concerning this particular report, however. In collaboration with Pew Research editors, I wrote it.

So this post is mainly to say, if you are intrigued by the topic, take a look.

partner-site-300Our particular focus was to look at five case studies of collaborations that worked and had staying power. Each was, one way or another, many years in the making.

We were searching for business models and an X factor or two that can be of use as experiments in news partnering enjoy a resurgence. That’s a little different from the nitty-gritty of a single successful joint investigative project like the Dallas Morning News/KXAS-TV expose of poor treatment of wounded veterans, my colleague Al Tompkins ably dissected a week ago.

The reporting, writing and editing of the Pew Research report spread over nearly a year.  So I ended up talking at regular intervals with Steve Beatty, editor of The Lens in New Orleans, at a particularly challenging time for the plucky non-profit, which turns five this month..

The Lens went into 2014 faced with a budget shortfall and the need to cut staff. It explored a partnership with local WWNO public radio that was only a partial success. Now it is ending the year on a bright note with two collaborators agreeing to pay for its coverage and good prospects for a major operational grant from a national foundation.

I also became reacquainted with Laura Frank, who quixotically decided she would try to launch an independent, multimedia investigative unit when her employer, the Rocky Mountain News closed in February 2009.  Frank passed through Poynter early on as she planned the venture and has since built I-News from a one-person shop to a unit with a staff of 12.  In  early 2013, I-News became the news department for the PBS station in Denver and its statewide (Rocky Mountain PBS) network.

Quality, high-impact investigative work is the base for growth and win-win partnerships, but I learned from Beatty and Frank what’s even better:  choosing a big investigative topic that triggers community dialogue, sponsored forums and eventual action.

Each has done a showcase data-driven project with the title “Losing Ground” that fits those specs — though on two entirely different topics.  The I-News report was on how Colorado’s economic boom in recent years passed the state’s poorer, minority residents by. The Lens was more literal about “ground,” using mapping and aerial photos from collaborator ProPublica to show dramatic continuing erosion of Louisiana delta lands over decades.

A phrase I heard from nearly every principal in the collaborations was
“win-win.”  Legacy media outlets have come to recognize that they need more quality stories as business pressures have forced newsroom cuts. The old bragging rights standard of “we do it all ourselves” fades by the day — even at bastions like The New York Times and Washington Post.

New non-profits, for their part, (and some forward-looking legacy operations too) critically need wider exposure of their work to build a news brand.

That said, several of the successful collaborations are simple and informal.  Often no money changes hands; nor are there detailed contracts specifying who contributes exactly what.

The slow part is cultivating mutual trust, sometimes starting with small or partly flawed first tries that eventually blossom into bigger collaborations.

In picking cases, we avoided extremely well-chronicled successes like ProPublica, the Texas Tribune, MinnPost and Voice of San Diego, but four of the five have received attention from outlets like Nieman Labs or CJR or in several earlier Knight Foundation and Pew reports.

The one exception:  McClatchy news chief Anders Gyllenhaal (an incoming member of Poynter’s National Advisory Board) pointed me to an unusual transnational investigative collaboration between the Toronto Star and the Spanish-language El Nuevo Herald of Miami.

What common interest could those two news organizations possibly have?  I could tell you, but I would rather again invite you to click to the full report and see. Read more

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N.Y. tabs met in secret lovenest

mediawiremorningGood morning. Here are 10 media stories, then let’s get to the weekend.

  1. A New York Post/New York Daily News collaboration? Joe Pompeo reports the rival papers had unsuccessful discussions about “a number of potential business deals that would have made unlikely bedfellows of enemy combatants.” “Many deal points were on the table,” a source tells him. Another source tells Pompeo talks about a digital-only Daily News are “not about if, they’re about when.” (Capital)
  2. Earnings: Broadcast ad revenues way up, print ad revenues down nearly 8 percent at Meredith. (MediaPost) | McClatchy had “a rocky third quarter,” plus what it called “important events that have sealed our financial flexibility” — some substantial assets sales. “An unfriendly commentator might describe those ‘events’ as a yard sale,” Rick Edmonds writes. (Poynter)
  3. Some less-than-worshipful takes on the Dave McKinney affair: His now-former Sun-Times colleague Neil Steinberg writes: “I sincerely believe that had McKinney managed to just step around this mess and gone back to doing his job, an important life skill in journalism, instead of pouring gasoline over himself, and the paper, and striking a match, the whole thing would be over by now and he’d be back to kicking [Illinois gubernatorial candidate Bruce] Rauner’s ass, which is what this is supposedly all about.” (Every goddamn day) | Erik Wemple on the “monster ethical issue” underneath all this: “Either the Sun-Times should have bumped McKinney from the race early on, or it should have run disclaimers on his stories.” (WP)
  4. AMC buys half of BBC America: The deal may help the BBC World News channel get on U.S. cable and satellite systems, Brian Stelter reports. (CNN)
  5. Guardian’s lawyer honored: The National LGBT Bar Association will honor Gill Phillips, who runs editorial legal services at Guardian News & Media Limited. The Guardian’s Edward Snowden stories were “one of many challenges the openly lesbian Phillips has faced during her tenure at the paper, which has also included breaking the phone-hacking story, The Trafigura Super Injunction Saga and the Leveson Inquiry.” (PinkNews)
  6. The Queen sent a tweet: “It is a pleasure to open the Information Age exhibition today at the @ScienceMuseum and I hope people will enjoy visiting. Elizabeth R.” (@BritishMonarchy) | Other tweets by royals. (Twitter UK) | One used an iPad: “Here’s a photo of the man who actually typed the tweet and prepared the iPad for the Queen.” (Business Insider)
  7. National Report defends bogus news reports: “We like to think we are doing a public service by introducing readers to misinformation,” National Report publisher Allen Montgomery (whose name is also fake, but let’s move on) says. Craig Silverman: “They may say this is an educational effort, but all the education has come from the other people debunking their stuff.” (Digiday)
  8. “Sometimes the size is so overwhelming, it’s hard to find a picture”: NYT photographer Ozier Muhammad takes Deborah Acosta with him on assignment as he tries to get (and transmit) photos from last month’s People’s Climate March. He finally gets an image through by hitting a Starbucks and using its WiFi. (NYT)
  9. Front page of the day, not curated by Kristen Hare: A great photo of yesterday’s solar eclipse from The Plain Dealer’s John Kuntz, with a solid headline: “Moon takes a spectacular bite out of the sun.” (Courtesy the Newseum.)

    plain-dealer-10242014  

  10. Job moves, edited by Benjamin Mullin: Callie Schweitzer has been named editorial director of audience strategy for Time Magazine and Time Inc. Previously, she was director of digital innovation at Time magazine. (Poynter) | Peter Lattman will be deputy business editor at The New York Times. Previously, he was media editor there. (The New York Times) | Paul Greenberg is chief executive officer at Nylon Media. Previously, he was CEO of CollegeHumor.com. (prnewswire.com) | Stefano Fusaro is now a sports anchor for WTVJ in Miami. Previously, he was sports director at KXLN in Houston. (TV Spy) | Roxane Gay is a columnist at Guardian U.S. She is the author of “An Untamed State” and “Bad Feminist”. Jeb Lund is a columnist at Guardian U.S. He has written for Rolling Stone, GQ and The New Republic. Trevor Timm is a columnist at Guardian U.S. He is executive director of the Freedom of the Press Foundation. Steven Thrasher is a columnist at Guardian U.S. He is a contributing editor at BuzzFeed. Jess Zimmerman is a columnist at Guardian U.S. She is a technology essayist. (Email) | Job of the day: Euclid Media Group is looking for an editor-in-chief for the San Antonio Current. Get your résumés in! (Journalism Jobs) | Send Ben your job moves: bmullin@poynter.org

Suggestions? Criticisms? Would like me to send you this roundup each morning? Please email me: abeaujon@poynter.org. Read more

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Tough times at McClatchy — A quarterly loss and four assets sold

McClatchy closed the books today on a rocky third quarter with an earnings report yesterday showing a small loss of $2.6 million (1 percent on revenues of $277.6 million).

But CEO Pat Talimantes instead opened the conference call with analysts offering commentary on a much bigger issue, what he described as “important events that have sealed our financial flexibility.”

An unfriendly commentator might describe those “events” as a yard sale. So far in 2014, McClatchy has sold four separate and substantial assets. The largest of them, in a deal with Gannett closed the first week in October, was a 25.6 percent stake in Classified Ventures’ Cars.com, which will bring in $631.8 million before taxes, $406 million after.

Earlier this year McClatchy sold its stake in Apartments.com (another part of Classified Ventures)  It also sold its half of McClatchy/Tribune Information Services to Tribune and the Alaska Daily News to wealthy investor Alice Rogoff.  Those transactions generated another $181 million.

Talamantes said the cash infusion will go to investments in “digital transformation” and to pay down some high-interest (9 percent) debt.

On the operating side McClatchy had a year-to-year third quarter decline in advertising of 8.2 percent. Print advertising was down 11 percent. Though national advertising makes up only a small part of the total (about 7 percent), it was off 23.2 percent for the quarter compared to 2013, which was not a good year for national either.

Trends were better in audience revenues and remaining digital businesses, Talamantes said. With continuing diversification the company now gets 64 percent of revenue from categories other than print advertising.

Under questioning from analysts, Talamantes said McClatchy was unlikely to acquire any of the 76 Digital First papers or others up for sale. “We would rather invest n opportunities in our markets … (with) greater digital resources.”

McClatchy continues an affiliation agreement with Cars.com and Apartments.com., but going forward it will need to split some the proceeds of sales with the new owners, thus reducing the revenue it realizes.

Also, while McClatchy will continue to look for savings, he declined to predict that expenses will fall in t he fourth quarter or in early 2015. Digital transformation is essential, Talamantes said, “and that requires some investment.”

For the day, McClatchy shares were up slightly in mid-afternoon trading. However they have now lost roughly half their value from a 2014 high April 2 of $6.81. Other newspaper-only stocks including the New York Times Company (which has sold many non-core assets in recent years)  and Lee Communications have declined in value since the spring but not nearly so much. Read more

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Tim Cook; iPhone 6; iPhone 6 Plus

Apple’s iPhone Plus doesn’t spell doom for tablet design

Critics have long groused about the death of the tablet’s use in news design. Jon Lund pronounced tablet magazines “a failure” in a 2013 GigaOM article, declaring that the “app-based tablet approach to magazines leads straight to oblivion.”

When News Corp’s iPad newspaper, The Daily, was discontinued in 2012, Tech Crunch ran an article titled “Why magazine apps suck” that rattled off a list of problems plaguing tablet publications: large file sizes, lack of imagination from developers and a failure to reach the sizable audience of iPad readers.

In recent weeks, rumors of a new iPhone with a larger screen began circulating in advance of today’s Apple event, prompting industry watchers to forecast dark days ahead for the tablet. Marketwatch’s Quentin Fottrell called the new phone “a big risk for Apple,” quoting an analyst who said the larger screen might cannibalize the iPad market. The Motley Fool’s Tim Brugger agreed, writing that large-screen phones might eat into the sales of tablets and mini-tablets. Read more

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Ad revenue down at McClatchy

The McClatchy Co.

Advertising revenue was down 7 percent in the second quarter of 2014 at the McClatchy Co., which released earnings Thursday. “Audience” revenue, which is what McClatchy now calls circulation revenue, was up about 5 percent. Excluding revenue from McClatchy’s change to fee-for-service circulation delivery contracts at some newspapers, circulation revenue was down about 3 percent.

“Still, we continued to see growth in direct marketing and digital advertising revenues and together these two sources accounted for 43% of our total advertising revenue in the quarter,” McClatchy CEO Pat Talamantes said in a statement.

McClatchy’s results include $146 million it made by selling its share of Apartments.com and, “to a lesser extent,” its share in in McClatchy‑Tribune Information Services. Tribune bought out McClatchy’s share in MCT in May. McClatchy also completed the sale of the Anchorage Daily News, which recently changed its name.

For the first six months of the year, advertising revenue was down about 7 percent over last year. Audience revenue was down about 1 percent. Read more

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White House criticizes Washington Post’s use of anonymous sources

In a briefing Monday, White House press secretary Josh Earnest criticized a Washington Post story for relying on anonymous sources. According to a transcript of the briefing, McClatchy reporter Anita Kumar pushed back at Earnest, noting that the Post didn’t have anyone at the briefing to defend the story.

“I noticed that, too,” Earnest said.

Earnest later allowed that there were people on the record in the story, which says White House aides knew a year ago that a crisis was developing on the U.S.-Mexico border, but they instead “focused much of their attention on political battles, such as Obama’s 2012 reelection campaign and the push to win congressional support for a broad immigration overhaul, that would have been made more difficult with the addition of a high-profile border crisis.”

“[Y]ou criticize anonymous sources, but we have anonymous sources from you all every day,” Kumar said.

“I’m not suggesting that they shouldn’t run their story,” Earnest said of the Post. “It’s not my place to suggest that the people who represent that empty seat right there can make their own decisions about what stories to run. They’re entirely entitled to doing that.” He continued:

What I think is important is that greater weight should be granted to those who are willing to put a face and a name with specific claims. Cecilia Munoz, who’s the president’s top immigration adviser, is in that story, conveying exactly the White House position. And I’ve spent the last hour in here talking to all of you because of putting my face and my name with this administration’s positions.

And in the course of reporting, I think it’s important, based on my own personal view, for those kinds of quotes and those kinds of stories to be given greater weight than just anonymous sources.

AP reporter Julie Pace asked: “So, Josh, would you guys commit then, when you have situations like today’s call, which is people specifically picked by the White House to roll out a policy of the White House, would you commit to have those people speak on the record?”

“Well,” Earnest replied, “I — what I will commit to is a case by case evaluation of — of the background or the ground rules of each of these kinds of calls and a commitment to an open dialogue with you about the ground rules that will serve your interests and the White House interests the best.”

Cameron Barr, national editor at the Post, responded to Earnest’s criticism in an email to Poynter:

Josh Earnest says that that we gave greater weight in our story to “anonymous outside voices,” as opposed to “on the record sources from the White House,” but the criticism doesn’t make sense. The lead anecdote is on the record; the first quote comes from a named former Border Patrol official. His quote is closely followed by lengthy quotes from domestic policy adviser Cecilia Munoz. One of the most prominent outside voices in the piece is that of Michelle Brané, director of migrant rights at the Women’s Refugee Commission, and she is of course quoted by name.

We are sometimes compelled to rely on background sources with knowledge of internal deliberations – that is one of the best means available to hold the administration and other powerful institutions to account. We press sources to speak for the record whenever possible, but they are often unwilling to risk their livelihoods in order to make their views known.

As to our chair being empty today – we staff the briefing very consistently. On the rare occasion when we are not there, as was the case today, we cover the briefing remotely.

New York Times reporter Peter Baker noted on Twitter that the exchange came at an awkward time:

Read more

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Tribune buys out McClatchy’s stake in MCT newswire

Tribune Publishing “will take full ownership” of McClatchy Tribune Information Services” and its operations will move to Chicago, McClatchy vice president for news and Washington editor Anders Gyllenhaal tells staffers in a memo. “MCT will consolidate editorial and business staffs in Chicago and merge with the Tribune Content Agency, creating a single business out of the two related operations,” he writes.

“A portion of the jobs based in Washington will be part of the ongoing wire service or remain with the bureau. But a majority of the Washington positions will be phased out over the course of the summer as the move to Chicago is complete,” Gyllenhaal writes.

In a press release, Tribune said “MCT products and services will become part of the offerings of Tribune Content Agency.”

McClatchy’s D.C. staff was due to meet at 11:45 today. “The MCT changes don’t have any impact on the bureau,” Gyllenhaal writes in an email to Poynter. “Also, McClatchy’s connections the wire service remain much the same: we’re contributors, we work closely with the service and we’re the largest client. We’re no longer an owner, and instead become a preferred customer.”

McClatchy has shed several assets in recent months. It sold its stake in Classified Ventures’ Apartments.com for $147 million on April 1 and agreed to sell the Anchorage Daily News on April 8. Meanwhile, Tribune’s publishing arm has been on an acquisition spree of late — its Baltimore Sun Media Group recently agreed to purchase papers in Maryland, and the Hartford Courant agreed in March to purchase a publisher of weekly papers in Connecticut.

Tribune Co. plans to split its newspaper and broadcasting properties. It “expects acquisitions to be ‘an important component of our business strategy,’” Dean Starkman reported Wednesday.

Memo follows: Read more

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McClatchy explains change in circulation revenue

The McClatchy Company

Circulation revenue was up nearly 6 percent in McClatchy’s first quarter, the company said in a report Wednesday. But, the report said, that revenue was up less than 1 percent “excluding the $4.3 million in revenue related to the transition to fee-for-service circulation delivery contracts at certain newspapers.”

Reached by email, McClatchy Director of Investors Relations Ryan Kimball said some of the company’s newspapers “transitioned to a different circulation contract” during the first quarter. The contracts are fee for service, which for accountants means their “delivery expenses are no longer netted against circulation revenues and thus makes the reported circulation revenue higher.” So some of the papers had higher revenues and higher delivery expenses, he said. The change “has no impact on operating income or cash flow but we do point it out so investors can get a sense of what circulation revenues did in a given period ignoring the impact of the transition.”

Advertising reveue was down nearly 7 percent compared with the same period in 2013, McClatchy said in its report. The company said nearly half of its advertising revenue now comes from “nontraditional sources.”

The company got $147 million from its stake in Classified Ventures, which recently sold. It expects to receive $34 million from the pending sale of its Anchorage Daily News. Taxes should shrink that nut to $24 million.

Disclosure: Poynter has a training partnership with McClatchy. Read more

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Online publication buys McClatchy’s Anchorage paper

Alaska Dispatch | Anchorage Daily News

The online news publication Alaska Dispatch has reached an agreement to purchase the Anchorage Daily News from McClatchy, the companies announced Tuesday.

The purchase price was $34 million, Alex DeMarban reports for Alaska Dispatch, calling the deal a “stunning media shakeup in the 49th state.”

Alaska Dispatch “plans no changes to the Anchorage Daily News’ staff, content or distribution,” DeMarban reports.

The purchase “includes the newspaper, ADN.com and the Daily News’ building on Northway Drive in East Anchorage,” the Daily News reports. “After the purchase is finalized, the building will be sold to a private local buyer, according to a statement from Alaska Dispatch, and the Daily News will continue operations as a tenant.”

According to figures filed with the Audit Bureau of Circulations, the Anchorage Daily News’ average Sunday circulation was 45,783 in September 2013, and its average Monday through Saturday circulation was 51,539.

Here’s the press release: Read more

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