April 6, 2021

Tribune Takeover Drama & What Comes Next

The saga of Alden Global Capital acquiring Tribune Publishing looked to be headed toward the same destination as many other papers over the years. In the 11th hour, though, two billionaires have stepped up to make a bigger offer for Tribune.

According to a report by The Wall Street Journal:

A special committee of Tribune’s board has determined that a roughly $680 million, $18.50-a-share bid submitted late last week by Choice Hotels International Inc. Chairman Stewart Bainum and Hansjörg Wyss is reasonably likely to lead to a proposal that is superior to Alden’s $635 million deal, people familiar with the matter said. That is legal deal-speak indicating Alden may need to raise its bid or risk losing the deal.

Alden struck a deal in February to pay $17.25 per share for the rest of the company. It had agreed to separately sell Mr. Bainum the Baltimore Sun for $65 million once the Tribune deal was finalized. That side deal fell apart over disagreements about the cost of continuing services the Sun would have received from Tribune after the sale.

As you can probably imagine, many in media are incredibly excited about the prospect of this happening. Alden has not exactly been a fan favorite of local newsrooms, primarily because it has acquired papers and then proceeded to cut costs quite significantly. According to The Hedge Clippers:

In the news publications represented by The NewsGuild-CWA, employment has been cut by more than 75% – twice the industry rate – in the last eight years since Alden assumed control of the various papers.

Therefore, this must be a big win for everyone and we should celebrate, right? Not just yet.

Let’s not forget these aren’t the first billionaires that have wanted to acquire Tribune over the years. In an April 2007 piece, CNNMoney reported:

Real estate mogul Sam Zell has succeeded in his bid to take control of newspaper publisher Tribune Co.

Zell agreed to take Tribune (Charts) private in a $8.2 billion deal that values the entire company at $13 billion including debt.

The deal closed in late 2007/early 2008. Fast forward to 2009 and the company went into bankruptcy with $7.6 billion in assets against $13 billion in debt.

Just because a billionaire buys your newspaper doesn’t mean that it’s going to suddenly make the business better. It’s one thing to acquire newspapers. It’s something entirely different to then operate and invest in them.

Not every acquisition is like The Washington Post and Amazon’s Jeff Bezos. When Bezos acquired it, the company wasn’t in the best of places. According to a piece by The Washington Post (how meta):

But for much of the past decade, The Post has been unable to escape the financial turmoil that has engulfed newspapers and other “legacy” media organizations. The rise of the Internet and the epochal change from print to digital technology have created a massive wave of competition for traditional news companies, scattering readers and advertisers across a radically altered news and information landscape and triggering mergers, bankruptcies and consolidation among the owners of print and broadcasting properties.

Since taking over, Bezos has given the company the resources it needs to do great things. It has a strong technology product—Arc and Zeus—and a thriving subscription business. The Washington Post is profitable, it’s growing its newsroom, and is putting out some of the best reporting ever (putting aside that little era of Nixon).

But that is The Washington Post, a brand that is anything but a local newspaper. Local papers are going to be harder to turn around and these billionaires are going to be in for a rude awakening if they think it’s going to come easily.

Additionally, the deal could just fall apart. Alden Capital could turn around, offer even more money, and then it’s a bidding war. The big difference? These billionaires are using their own money. Alden is using other people’s money that has specifically been given to them for this investment thesis. The question is who has the deeper war chest.

So, before we get excited and think that the resurgence of these newspapers is ahead of them, let’s try and temper our expectations. We’re dealing with a lot of money and a hedge fund that is uniquely focused on this industry for extracting its earnings. A lot could go wrong before it finally goes right.

But let’s assume that the deal does go through and maybe, just maybe, Tribune is saved from the clutches of Alden Capital and is nestled in the arms of benevolent billionaires. What comes next?

Here is what I would suggest to the new owners…

On the content side, there needs to be a deep dive into the content strategy for these publications. Too many newspapers spend too much of their time creating national-level content rather than diving in and reporting on local issues.

If you visit Tribune properties, though, that’s not the case. At least on the homepage, it appears that a decent number of the stories are related to their local geographies. This is critical because national news isn’t what will get people paying for a local newspaper. According to the Shorenstein Center and Lenfest Institute’s whitepaper “Digital Pay-Meter Playbook” published in 2019:

According to publishers surveyed, users who view local news appear to be 2-5 times more likely to subscribe than those who view national and wire-sourced stories. Of news organizations studied, publishers that produce more local (and non-wire-sourced) stories tended to generate greater subscription sales.

We implicitly know that this is true, but it’s important to double down on this. The national news and the wire-sourced stories are just not interesting. We all know what’s going on in Washington D.C. What we don’t know is what’s going on in City Hall or our state legislations.

But it’s not just doing local news. It has to be news that is relevant to the individual. That means, news that actually has an impact on them. Take, for example, the Seattle Times. In a piece by PressGazette:

“People just love to read about bridges and tunnels,” Blethen tells Press Gazette in a phone interview, explaining that the title’s Traffic Lab – an editorial project launched in 2017 to investigate the city’s transport infrastructure – is “the one that gets the most traffic, and influences most subscriptions”.

“Traffic is the one thing that affects everybody,” he says. “And some of it becomes highly technical. We’ve got another bridge failure – the West Seattle Bridge – which is just egregious and affecting a lot of people.

“People really want to know about what the public agencies are doing, why is traffic so bad, why [authorities are] raising the gas tax.

And that makes a lot of sense. No one wants to wait in traffic while also seeing their taxes go up. We’re happy to pay for services if they work. But when they don’t, we want to know why. The content strategy needs to be tied to news that impacts local populations. It’s not just any news, but news that helps people.

If I look at my local paper, The New York Daily News, I’m left with a bunch of useless information. Not a single article above the fold helps me. Why would I pay?

These new owners are going to need to demand that there be a focus on providing news that is helpful.

There’s also work that can be done on the product side. Compared to other local publications, Tribune’s sites are actually quite nice. The fans on my computer don’t speed up too much and they’re fast. Additionally, they all look pretty much the same, which makes sense since they’re powered by Arc Publishing (oh, hey Bezos).

However, there is a big gap between the people who pay for the print product and the younger generation that is still resistant to signing up for a digital subscription. In my interview with Mike Orren, CPO at the Dallas Morning News, he explained how local media had lost the current 40-50-year-old generation because they were the hybrids and “we didn’t give them a great experience in print or digital.”

One of the reasons we’ve seen resistance to cutting print is because those subscribers still generate a ton of money. And they are unlikely to make the transition to digital. They don’t like it. In their minds, a newspaper is like a journey. Clicking from article to article is not the same experience.

I bring up Orren again because he had an interesting idea in the interview. He’d like to see ePapers return. For that generation that likes to read a newspaper, give them an ePaper where they can flip through it for 20 minutes per day. You reduce your print costs considerably but still have these people (who likely own tablets anyway) subscribing. Honestly, I’d just listen to the entire episode with Orren. I learned an absolute ton about products in local media during that episode.

I’m intrigued by the notion of these billionaires coming along and acquiring the papers. I am hopeful that they mean what they say about trying to save them. That said, saving them is going to require continued investment. This won’t be a quick endeavor.