April 10, 2018

"Unprecedented" is always a dangerous claim — but I cannot think of a parallel case to the Denver Post editorial and eight accompanying articles denouncing its hedge fund owner, Alden Global Capital, for profiteering and making crippling newsroom cuts.

I started reporting on the rebellion Friday afternoon as the jaw-dropping pieces were posted digitally, and I am still trying to nail down angles. But here is a partial guide to watching the story unfold:

Will Alden sell to an owner with more commitment to local news, as the editorial urges?

Alden has shown a readiness to sell if the price is right.  Last June, Hearst acquired its Connecticut papers and Gannett bought several in Texas, New Mexico and Pennsylvania in 2015. Plus it sold the Salt Lake Tribune, once a big profit-maker, to the Huntsman family, having previously taken millions from the Mormon-owned Deseret News to change the terms of a joint operating agreement.  They also sold the Berkshire Eagle to a local investment group.

And don't forget that all of Digital First Media, as the group of 90-plus papers is called, was on the block for more than a year without fetching an acceptable offer.

So, yes.

Finding a buyer in these tough times could be trickier. Gannett and other big chains have slowed or stopped such acquisitions as deepening advertising losses outpace the savings and other advantages of scale.  GateHouse and its parent New Media Investment are still buying, but favor smaller and mid-sized metro markets.

A wealthy individual, family or group might come forward, but that is no sure thing for the same set of business reasons.

Are repercussions coming for editorial page editor Chuck Plunkett and others?

Plunkett had not been fired as of the start of the week. That could happen anytime, but I would bet on later not sooner. Vengeful isn't a good look for owners who already have established a horrible reputation in Denver. When editors and reporters published exposes on the impending purchase of the Las Vegas Review-Journal by Sheldon Adelson's family in late 2015, most stayed for awhile but were gone within several months.

What's Alden's game? Why are they in a business whose journalistic purpose they appear not to support?

In a word, profits. Cutting expenses drastically can yield a healthy flow of cash, even as newspaper properties suffer revenue declines. That's especially true if you are not investing in the future of the franchise or the technology to support a digital-print hybrid. Digital First, despite the name, has long been notorious for not buying new operating systems or integrating those of their many properties. I am sure that is still the case.  

I spoke Friday evening with William Dean Singleton, who built the chain over decades and stayed on as executive chairman and as publisher of the Post for several years after the hedge fund took control.  Singleton said that he remains on the Post's editorial board and that Plunkett had alerted him to the publishing plan (Singleton had not yet seen the pieces).

"I agree that the cuts that have been made are not necessary," he said. The Post, Singleton added, "is plenty profitable already." 

Ironically, Singleton was know back in the day as "Lean Dean," a reference to the tight hand on expenses he kept. But in conversations I always had the impression that Singleton loved news as well as making money in the news business. He stayed active in the company and the industry even with serious health challenges while coping with multiple sclerosis.

Related training: What every journalist needs to know about the news business

Is the Denver community rallying to support the Post?

It seems so. One of the opinion pieces was by conservative activist Jon Caldara, who celebrated  the "liberal" newspaper's role in civic life. “Denver is so proud of our flagship newspaper for speaking out,” Mayor Michael B. Hancock said in a statement. Colorado Gov. John Hickenlooper was quoted to the same effect in an interview published Monday in Rolling Stone.

Plunkett's voice cracked twice as we spoke Friday afternoon. Once when he described coming to work for the Post in 2003 as "the proudest moment of my professional life." And again, saying that he was putting his job on the line out of concern for "what's being lost here" for the Denver community.

Who are these guys at Alden?

Don't ask them because they don't say anything to anybody in the media. I tackled the question seven years ago in a profile of principal investor Randall Smith, as Alden was becoming very active in newspaper investments. For decades before, Smith had not been photographed, let alone quoted. A year later an account seeped out of a talk he had given to an investment club, providing some insight into what Smith liked about newspaper investments, including taking a large position in Gannett.  Alden President Heath Freeman also won't come to the phone.

By whatever strategies, does Alden have a Midas touch in its newspaper investments?

Yes and no. The fund is in it to make money, for sure, first while they own and then again when they sell.  But they also have booked losses. They were one of a succession of owners of the Philadelphia newspapers, buying for roughly $165 million and selling for $55 million three years later.

Funds specializing in distressed assets typically buy low and often make use of bankruptcy maneuvers on the way in or out. They don't stand to win on every investment, but a big payoff covers for those that don't work.

What's the deal with the lawsuit that accuses Alden of looting Digital First/Media News properties to prop up other failing investments?

Since Digital First is a private company, I was initially confused how the plaintiff, Sola Ltd., had  standing to sue. An analyst explained that Sola had bought Media News bonds as the company emerged from bankruptcy in 2010.

I don't know enough to have an opinion on the merits of the case.  Singleton told me that "the allegations appear to be right" to him.

What is the Newspaper Guild's role in the fight?

Substantial. Investigative reporter Julie Reynolds (whose credentials include work for the International Consortium of Journalists) has published several pieces on the situation and the suit in the Guild's newsletter. The Guild has used deep newsroom cuts to organize at several papers and flag the issue of adequate news staff at others like the Post where its representation was already established.

Is it possible that the turmoil itself prompts a sale?

That is the hope of the insurrectionists. At the Los Angeles Times, where staff was up in arms about a series of awful management blunders, owner Tronc is exiting by selling to local billionaire Dr. Patrick Soon-Shiong — albeit at the extremely attractive price of $500 million.

How did the package dinging owners get past the Post's publisher?

The Post doesn't exactly have a publisher. Digital First CEO Steve Rossi left last year; Post publisher Mac Tully resigned in January. Guy Gilmore, previously the publisher of Digital First's St. Paul paper became COO of the parent company. Since Digital First is based in Denver, he has been, de facto, the top business executive at the flagship paper. Plunkett told me that Gilmore had shown no interest in joining the editorial board, which reserves a spot for the publisher.

Editor Lee Ann Colacioppo revealed to me and other reporters that Gilmore first learned of the pieces Friday afternoon soon after they were posted. She declined to say what the upshot of an ensuing conversation was.

Where can I read the editorial and the other stories?

The American Press Institute's Need to Know morning news summary had a fairly complete list. Like me, though, you may bump into a paywall after calling up a couple. Along with the many other papers trying to build digital subscriptions, the Post is on a meter — belatedly installed at the start of this year. 

After I asked if the wall might be dropped to promote wider readership, Colaciappo emailed me back, "We don't give our product away for free, even to you. I assure you the work you find is well worth (the introductory rate of) 99 cents."

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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