Continuation of Newspaper Monopoly
By Jack Bass
Jack Bass is a former Nieman Fellow who published his own weekly newspaper, covered politics for 10 years and taught journalism for 11 more.
Aggressive as MediaNews has been in the Bay Area, it has been just as determined in the rough-and-tumble Southern California market. Here again the industry is studying the innovative ways in which Singleton, starting from scratch, has cobbled together a major presence--in just three years. But even allowing for growing pains, the cluster-building down south has been rockier than one might have expected, given how much experience MediaNews has gained up in Alameda.
MediaNews emerged on the SoCal scene in 1996 by acquiring from Thomson three papers already functioning as a cluster--Pasadena's Star-News, the San Gabriel Valley Tribune and the Whittier Daily News. The price was $110 million.
A year later it picked up Los Angeles' Daily News, a paper with a 200,000 circulation in the San Fernando Valley, from the estate of the late Washington Redskins owner Jack Kent Cooke. The announced price was $130 million. Cooke had paid $176 million for the paper a decade earlier. Beyond that, Cooke had spent another $76 million to move the paper from Van Nuys to a new plant in Woodland Hills and for a modern printing facility in nearby Valencia designed with extra press capacity.
About the same time, MediaNews added the Press-Telegram in Long Beach, a troubled paper that Knight Ridder was trying to unload. Although marginally profitable, the paper was printing on letterpress units nearly half a century old, and Knight Ridder was facing the prospect of having to lay out tens of millions of dollars to replace them. Singleton got the paper as an "asset sale"--a device for reducing taxes--for $38 million.
Thus, for a total of $278 million, MediaNews wound up with a cluster of five newspapers with roughly 425,000 total circulation in Los Angeles County, ringing the home turf of the formidable Los Angeles Times. Their combined operations function as the Los Angeles Newspaper Group, or LANG.
Then came the Donrey deal. Singleton originally approached Donrey's owners, the Stephens family of Little Rock, Arkansas, about buying the California papers outright; they weren't interested. "They didn't want cash," he says. "They didn't need cash. It would have meant substantial taxes for them. They liked California, its growth. We showed them how their newspapers and ours together created a lot more crucial mass. We arranged a partnership share with a lot of the newspapers we owned. It gives them a piece of a growing company instead of cash. We would have preferred to pay cash."
Under the deal, Singleton became a two-thirds owner of the partnership. His contribution included all five papers in his Bay Area cluster, plus the Pasadena, San Gabriel and Whittier papers from the L.A. cluster, plus 23 weeklies with a combined circulation of 125,000. Donrey brought the Vallejo Times-Herald, expanding the Bay Area cluster. And in Southern California, it contributed the 68,000-circulation Inland Valley Daily Bulletin in Ontario, extending LANG's reach into a demographically desirable area to the south, crossing into San Bernardino County.
Although most of the other Donrey papers lie farther out from Los Angeles, they still fit into Singleton's long-term thinking. That strategy came into sharper focus in March, when Singleton announced that Gannett had joined his Donrey partnership with its 77,000-circulation San Bernardino Sun. With the Daily Bulletin in Ontario controlling the western half of San Bernardino County and the Sun covering the rest, Singleton dominates a lucrative market that is expected to double in the next 20 years. "It was the icing on the cake for our Los Angeles strategy," he says.
The deal with Gannett pushes circulation in California to over 900,000 for dailies operated by Singleton. As a stand-alone newspaper, the Sun was getting competition from a San Bernardino edition of A.H. Belo's Riverside-based Press-Enterprise. It also faced growth plans there by the Los Angeles Times, one of whose executives saw the Sun as "struggling." As part of Singleton's domain, it stands to get a share of any national or regional advertising LANG sells.
Gannett received 12 percent ownership and a seat on the seven-member California Newspapers Partnership board, with MediaNews and Donrey sharing the remaining ownership on a two-thirds, one-third basis. One insider says the deal with Donrey was arranged so that Singleton may well wind up buying out that company's interests. Another said he wouldn't be surprised to see MediaNews eventually gain full ownership of the San Bernardino Sun. The Gannett deal also fueled speculation that Singleton may end up acquiring Gannett's 41,000-circulation Marin Independent Journal, another stand-alone paper just north of San Francisco, now that he has a North Bay foothold in Vallejo. He declines comment on such speculation. And as for Southern California, he says, "The next year will be one of digesting, of weaving them all together."
But in digestion there is sometimes heartburn. In Southern California, the biggest dose has been at the Press-Telegram.
An asset sale means the purchase is treated as if the buyer were purchasing the hard assets and starting the business all over again. In a $100 million deal, for example, the buyer may acquire $10 million in fixed assets, such as buildings, land and equipment. The other $90 million may be in intangible assets, mostly goodwill, which can be amortized over 40 years.
Furthermore, in an asset sale the existing labor contracts aren't binding on the new owner unless they contain "successor" language. If a union is already in place and 51 percent of its members are rehired, the union has to be recognized, but negotiation of a new contract starts from scratch. That's what happened in Long Beach with the local unit of the Newspaper Guild.
Singleton cut the salaries of most editorial employees by more than 20 percent, to roughly the level of the Guild contract at the larger Daily News. A typical reporter with five or more years of experience saw a drop in pay from $851 a week to $673--or from $44,252 to $34,996 a year. Senior editors and top local columnists were retained with no cut in pay.
Singleton argues that the new pay levels are fair. "If you've got a newspaper over here with a wage scale that is X and one next door that is Y, and you cluster, you've got problems. So when you're buying assets in a cluster you make changes you don't make if you're buying somewhere else.... The salary level at Long Beach was way, way high for a 100,000 daily, just way overpaid for a paper their size."
To add to the bitterness at Long Beach, MediaNews laid off a large number of noneditorial employees--the first coming just eight days before Christmas of 1997. According to the Newspaper Guild, some 200 jobs were eventually lost among mailers, pressmen, truck drivers, janitors, customer-service workers and distributors. "None in the newsroom were dismissed," Singleton says, "but Long Beach was dramatically overstaffed in other areas. It was a very fat operation under Knight Ridder. Too many people in the composing room, accounting and the pressroom."
Just over a year later, half the existing newsroom staff--57 out of 110, according to one journalist who actually counted the noses--had left the paper.
Russ Parsons, a food columnist for the L.A. Times and a Long Beach resident who has long depended on the Press-Telegram for local news, says, "When Singleton took over, the theory was that it was going to become a local paper. But in reality the Press-Telegram provided fine local coverage before. Many things now remain uncovered, often because of green young reporters who don't know the community and don't have the memory or the contacts. They have a reduced staff."
"That's hogwash," counters Press-Telegram Executive Editor Rich Archbold. "I've been here for 20 years. Our managing editor has been there for 30. Our local columnists all stayed. The institutional memory--I've got it and other editors have it." As for the size of the staff, Archbold says, "We haven't lost any positions, but we've been prudent in not filling all positions when they became open--to help us with expense budgeting. We have 104 positions."
No matter the ill will, the Press-Telegram did achieve a modest gain in daily circulation for the year ending March 31, from 103,249 to 103,929. And recently it was honored by the Greater Los Angeles Press Club for overall excellence for a newspaper of more than 100,000 circulation, beating out the L.A. Times for the organization's highest award.
It was Singleton himself who met the Long Beach workforce to deliver that Yuletide news about pay cuts and layoffs. He also invited any employee who wanted to talk to him personally about it to do so. Several took him up.
"I went to his office," one reporter recalls. "I said, 'Dean, I need more money.' He said, 'Maybe we can cut the difference. It's up to the managers; we give them a budget.'
"The managing editor told me he didn't have any money. That's what negotiating one-on-one got me. I went back to talk to Dean in a few months. He said he would get back to me, and he never did.
"Singleton was amiable. He was approachable. He gets some points from me on that." The reporter laughs. "I talked to the Big Cheese, and all I got was holes."
Singleton says it's part of an editor's job "to take the budget he has and use it to get the job done. Salaries should be based on local supply and demand. A reporter in a small town will get less than a reporter in a city because it costs less to live. We set profit goals based on what we had to pay to buy the newspaper."
While the idea of lower cost of living in small towns may be true generally, editors at some of Singleton's Bay Area papers acknowledge that most of their reporters can't afford to live in the suburban communities where their papers operate. Cost of living in the Bay Area is among the highest in the country. "What I see," one editor warns, "is that the pool of people coming in as reporters is shallower and smaller than it's ever been, and it's getting more so."
Singleton says the editorial payroll at his papers averages "between 10 and 10.5 percent of revenue"--slightly higher, he says, than the industry as a whole. But he adds, "We as an industry have underpaid. Raising pay scales is part of our long-term strategy. We recognize that when you pay for quality, you get quality."
In Los Angeles, Singleton retained the top editors at all the papers in his LANG group. Dorothy Reinhold is vice president and executive editor for the three-paper San Gabriel Valley group, which has a combined circulation of about 120,000 and operates as a subcluster within the larger group. "It's much better to be bought by somebody who wants you than to sit on a shelf waiting for someone to buy you," she says. "Dean bought us on purpose. He had a plan for us. He stitched us together and made a quilt of us. And the quilt will get larger. It's working."
The LANG editors seem happy with the freedom they have under Singleton--and with improved resources. These include a $5.5 million upgrade of newsroom computer systems. For the Press-Telegram, now printed in the Daily News plant, the new offset presses have vastly improved its use of color.
Although they operate primarily within Los Angeles County, the LANG papers serve different markets. The San Gabriel group--with separate papers for Whittier, Pasadena and the rest of the San Gabriel Valley--has 31 municipalities within its circulation area. Long Beach covers 20 municipalities, and Archbold says that where they compete head-on the Press-Telegram outsells the L.A. Times by more than 2-to-1. The Daily News concentrates on the San Fernando Valley. Besides its main edition and a Los Angeles version for street sales, there are four-page local wraps for zoned editions for Santa Clarita, Simi Valley, Conejo Valley and Antelope Valley, as well as a combined Glendale and Burbank edition. LANG also publishes a free, 70,000-circulation Spanish-language weekly.
The Daily News' one-person state capital bureau in Sacramento has been expanded to a two-person bureau for LANG. It now produces a Sunday column, with briefs tailored to each of LANG's three circulation areas. A third person, the Alameda group's Sacramento reporter, shares office space and information. And MediaNews recently announced it will open a six-person Washington bureau that will include two California reporters, one from the north and one from the south.
Another addition is a Sunday travel section for all the LANG papers. Reinhold recalls that when she went to work for her paper five years ago there was talk of adding a travel section. Staffers got excited about it and developed a prototype, "but it never went anywhere because we were told they couldn't get the numbers. Working with a larger group, we're giving our readers a freestanding travel section."
Unlike his Alameda Group counterpart, who accepted the vote of his editors on major political endorsements, LANG President Ike Massey made the decision to endorse the Republican candidates for governor and senator.
Asked about Guild issues, LANG editors agree that it is a question for Massey to answer. He doesn't equivocate. "Certainly we would rather not have the Guild," he says. Neither the San Gabriel nor the Donrey papers have Guild units.
The Guild unit at the Daily News signed a three-year contract this spring, which included a 3 percent raise for the first year and 2 percent for the next two, created a merit pay pool, increased mileage reimbursement and improved other benefits. Negotiations are continuing at Long Beach, where editorial workers are being denied sick days until an agreement is reached. The sick leave issue added to the rancor in the newsroom. One reporter tells me, "I was sick for a week, with fever and a terrible cough, but I went to work every day because I didn't want to deprive my family of vacation time."
When I visited, reporters at the Daily News were less happy than the editors. They complained that expenses for news coverage were being picked at as never before. The spacious newsroom is housed in a building converted from a manufacturing facility for electronic parts. It has long corridors, solid walls and not a single window. Editor Dave Butler has been working on a design to break out an exterior wall and add a long window. It would cost $7,500.
In the Daily News building's executive offices, Massey occupies an airy space with windows that open onto the sunny Southern California landscape. He has worked as a manager for Singleton much of his career. Asked about the newsroom window, Massey says, "It's not a high priority."
Last year, however, he contributed $60,000 in company funds to a San Fernando Valley organization seeking to have the valley secede from Los Angeles County. It was the largest single donation to that group and a gesture that drew widespread criticism and upset many of his own reporters. The Daily News Guild unit sent Massey a letter contending that the paper's contribution "has jeopardized its credibility."
Revisiting the issue months later, Massey is unrepentant. "We make editorial endorsements all the time," he says. "Does that mean we can't cover elections?" And the Guild's rebuke? "Self-serving bullshit," he says.
Unsurprisingly, the L.A. Times was one of those that kicked Massey around for his largess. MediaNews' consolidated ring around Los Angeles has given the West's preeminent paper plenty to think about, and it's clear the LANG editors relish this newly stoked sense of competition. Even so, that didn't keep Singleton from consorting with the opposition when he saw the opportunity for mutual benefit. Last year MediaNews and the Times entered a joint venture to provide total market coverage for preprint advertisers. The 50-50 joint venture, called the California Independent Postal System, is a door-to-door delivery system. The way it works, Massey explains, is that LANG and the Times provide computer tapes of their subscribers to a third party for merging and purging. The preprints then are distributed as inserts to all subscribers of both papers, and CIPS makes deliveries to the nonsubscribers. Massey says the joint effort shows that the two companies, despite being fiercely competitive, still "can do things together that our customers want."
Adds Singleton, "Every preprint advertiser will tell you this is what they've been wanting for years. What we're doing allows advertisers to print fewer copies because they don't have overlap. I've never seen it done before."
He professes to be unconcerned about reports in trade publications of a Justice Department investigation. "If somebody complains, the Justice Department is required to look at it," he says. "We have very savvy lawyers, as does Times Mirror. We both have been in this business long enough to know what you can and can't do."
To him, the joint venture reflects his belief that newspapers get stronger if they can work with each other to increase profits without compromising areas of competition. It's no different, he believes, than a Knight Ridder paper printing a national edition of the New York Times. It's just business.
Lest you get the impression that clustering is only a high-stakes game played in sunny metro markets, consider the case of the Oshkosh Northwestern in east central Wisconsin.
In June 1998, the staff of the 24,000-circulation daily was stunned to learn that the paper had just been acquired by Thomson Newspapers. They were stunned not only because it was Thomson, but because the paper had been sold only two months before.
That April, the paper's family owners had sold the Northwestern to West Virginia-based Ogden Newspapers. Now Ogden was flipping it again. In the fog of the announcement, one reporter recalls hearing Thomson executive Paul Seveska tell the staff, "I know you've heard a lot of bad things about Thomson, but things have changed. Have an open mind."
To get the Northwestern, Thomson traded away four papers in Ohio and Pennsylvania, whose combined circulation was more than triple that of Oshkosh. It was willing to give so much because the Northwestern completed Thomson's cluster of dailies around Lake Winnebago. In a three-hour drive you can hit all five towns in this cluster--up the Fox River Valley from Oshkosh to Appleton, and then around the lake to Manitowoc, Sheboygan and Fond du Lac.
By joining what Thomson calls its Winnebago Strategic Marketing Group, the Northwestern got access to a reporter in Madison, the state capital, and another in Washington. Business reporters no longer had to limit quotes in news stories to those who advertised in the paper, as had been the case under the previous publisher. On the other hand, Thomson cut the reporting staff, and those who remained soon understood that they were expected to stretch out their reporting without the expectation of a raise or overtime pay.
Thomson's five papers around Lake Winnebago have a combined daily circulation of 143,000, and three smaller Thomson papers 70 miles away--in Marshfield, Stevens Point and Wisconsin Rapids--add another 43,000. The close proximity allows savings from shared overhead, pressrooms and other operations. Advertisers can purchase the papers in any combination. Furthermore, these central Wisconsin papers don't have the competitive pressures that MediaNews faces in California.
The small cities here are not like California communities, where people are likely as not to be from somewhere else. ANG's Scott McKibben, who has worked in Oshkosh, says the Wisconsin cities differ from one another more than those in the Bay Area do. "There's a world of difference between Appleton and Manitowoc," he says.
One thing these cities do have in common is a strong allegiance to the Green Bay Packers. The Thomson group capitalizes on this with tabloid specials before and after every Packers game--16 weekends during football season. Last year's package included a column by the team's head coach. The Packer specials, produced by a sportswriting team, are a big hit with fans and a good revenue source, with each paper selling local ads and deciding how much of the copy to use. The tab may run 16 pages in one paper and only eight in another.
Thomson CEO Stuart Garner contends that his company has the most sophisticated clustering operation of them all. Unlike Singleton--who has enhanced competition in parts of California, mostly by clustering properties that had dim prospects on their own--Garner has developed a strategy of unite-and-conquer. Primarily, he concentrates his resources by seeking to dominate smaller markets where Thomson already had a presence and where competition is minimal.
The advertising operation for Thomson's Wisconsin groups goes a step beyond what Singleton does in California. One sales unit functions as an in-house ad agency that seeks out regional advertisers. For a Broadway play like "Showboat" coming to Milwaukee's Performing Arts Center, for example, prospecting can begin more than a year ahead of time. A buy for the central Wisconsin market might even include papers outside the chain, such as Gannett's Wausau Daily Herald. Thomson charges a 15 percent agency commission to non-Thomson participants.
As it has elsewhere, Thomson has introduced advertisements on the front pages of the Wisconsin papers. Putting ads on the front page is a practice that many American journalists and critics deplore, but the taboo is clearly eroding (see "Out Front," page 34). USA Today, for instance, will introduce small page-one ads in the fall. Certainly the practice doesn't bother Garner; the papers in his native England run front-page ads all the time. He says they produce a significant amount of revenue, and he turns away the suggestion that they might undercut a paper's credibility.
The smallest of the Thomson papers in the Lake Winnebago area is the Herald Times Reporter in Manitowoc, with a circulation of 17,000. Editor Gerald Guy told me the paper also publishes a 37,000-circulation shopper for Manitowoc County that gives advertisers total market coverage and publishes features and "whatever anybody sends in." The shopper, which has a full-time editor, is sufficiently popular that the distributors call on patrons once a year for voluntary $10 subscription payments--and more than a quarter of them pay it.
While waiting for a new printing plant to be completed this year in nearby Appleton, Guy faced a midnight deadline for his afternoon paper, which temporarily was being printed before dawn in Oshkosh, an hour and a half away. The presses there run full-time during the day on large contract printing operations.
A tall, large-boned man who used to be a college football player, Guy says he likes to train young reporters and copy editors and have them move on after a couple of years. "With new people, you get new ideas," he says.
While I sat in his office, a cohort in Appleton called about a young copy editor working for Guy. Guy explained that she learned quickly, had mastered the editing software and was ready to move up to the 80,000-circulation Post Crescent. The phone call sealed the transfer, which included a significant pay raise. Another call to Sheboygan involved talk about a higher-paying job for a reporter who had done well.
But as with MediaNews' Southern California experience, among the thorniest issues for the Wisconsin cluster have been newsroom pay and labor relations generally. The 1997 merger of the Guild and the much larger Communications Workers of America indirectly linked the unions representing editorial employees in Sheboygan, a Guild shop, and Appleton, which had been affiliated with CWA since the mid-1980s.
The pay and benefits at these two papers outstrip those at Thomson's other Wisconsin papers, where the newsrooms have no union. A reporter at Sheboygan with five or more years' experience earns a Guild contract minimum of $717 a week, or $37,284 a year. But at the Oshkosh Northwestern, whose circulation is almost identical to that of Sheboygan, an editorial staffer told me that no reporter earns as much as $28,000, which is the nine-month salary for that city's first-year public school teachers.
The head of Sheboygan's unit, Dave Gallianetti, says contract negotiations are much more difficult since Thomson took over. He believes the company's "ultimate goal is to get rid of the union."
But, Gallianetti adds, the company has kept its "hands off the editorial product."
And in Appleton, I found a staff proud of its statewide reputation for quality. "We have a good working relationship with our editor and publisher," says John Lee of the Guild/CWA local. "I think there's a relationship between quality and the union. It adds stability, with staff continuity committed to this newspaper and this community."
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