Saturday, May 06, 2006

Purcell Sells, Liberty Buys

Pat Purcell likes to say that his mentor Rupert Murdoch taught him that "You grow or you die." In today's troubled media marketplace, Purcell is now operating on the principle that you need to shrink to survive.

The news that the Herald Media boss has agreed to sell off his Community Newspaper Co. chain of more than 100 publications -- including four dailies -- to the Illinois-based Liberty Group chain comes as no surprise -- in fact it's a little overdue. It's been known for months that Purcell was shopping the Herald and/or CNC, and recently, the story line emerged that the profitable suburban CNC chain was more attractive to potential buyers than the money-losing urban tabloid. (See "High noon at the Herald" in the March 31 Phoenix.)

Today's front page Globe story has more details on the deal, which also includes the sale of the Patriot Ledger in Quincy and Enterprise in Brockton (which are part of the Enterprise NewsMedia operation) to the Liberty Group folks. The Globe puts a $225 million dollar price tag on the CNC sale, while the Herald's page 2 story, which I couldn't find online today, put the Enterprise purchase at about $165 million. Give credit to the Globe's Steve Bailey who sketched out this scenario more than a month ago.

So, as the smoke finally clears, we have a seriously changed local media marketplace and a few intriguing questions -- including the basic one of how many currently employed journalists will keep their jobs.

1) What is the Liberty Group and how does it operate? (P.S. The Herald story says the company will now change its name to GateHouse Media.)
These guys instantly become major Boston-area players with scores of important weeklies as well as the Patriot Ledger, Enterprise, and MetroWest Daily News. And obviously, they have a track record -- even if we don't know it yet. The rule of thumb these days seems to be that nobody who buys a media property makes it better -- i.e. by investing more resources in the journalism and being a little less concerned about the bottom line. But for now, suffice it to say, there's a new media power in these parts. We'll find out soon enough whether that's good or bad news.

2) How about the Herald? Purcell told the Globe ''We're going to continue to build the Herald. It's my first love." It's good news that Purcell is holding on to the paper he bought from Murdoch in 1994, because there's no doubt it's a labor of love. And no one in his right mind wants to see Boston as a one-and-a-half newspaper city. (The Globe and the Boston Metro that it half owns.) But the question remains -- what kind of Herald will we have going forward? It's clear the business model hasn't been working, which is why the Herald editorially reoriented itself toward a splashier tabloid style in the past few years and why Purcell went looking for a painful $7 million in cuts last year.

Today's Herald story says the tabloid will emerge from the sale of CNC "essentially debt free," but that doesn't mean it's an economically viable operation. There's been continuing speculation that Purcell could employ a number of options -- from going to a free distribution model to streamlining editorial staff and narrowing the editorial mission. I don't know at this point whether the CNC sale takes all that off the table. The fact that the Herald will continue to share editorial content with the CNC papers doesn't suggest Purcell is planning to restock the paper's newsroom

3) How will the Globe react? These aren't exactly happy days on Morrissey Boulevard. Gloomy ad revenue numbers and declining circulation aren't doing anything to ease Times Co. chairman Arthur Sulzberger's throbbing Excedrin headache and there's been plenty of recent churn on the business side of the Globe. Now, the paper faces a changed local newspaper landscape that could affect its strategy and direction.

Finally, a word about Purcell, a blue-collar kid from Queens who got interested in the media business when -- while working at a summer ad sales job at the New York Daily News -- he came to realize you could make a living wearing a suit instead of a hard hat. I've covered Pat for years and still find him hard to read. At times he is gracious, warm guy, and at times he is as cool and distant as an Arctic chill. He's inspired tremendous loyalty in his employees, but often they're disconcertingly in the dark about his plans for their future.

What can be said is that at one point, Purcell had visions of being a huge media magnate in this region. There was a time, as he was mapping out his 2001 purchase of CNC, that he also had a strategy for buying the Patriot Ledger and Brockton Enterprise too. And in 2002, he was a player, albeit unsuccessful, in the bidding to buy a group of North Shore dailies.

Now times are hard and Purcell's ambitions have been scaled back considerably. He is back where he started a dozen years ago with his beloved Herald -- and one hopes he has the smarts and resources to keep it afloat and essential.

5/6/2006 12:13:27 PM by Mark Jurkowitz | Comments [10] |
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Saturday, May 06, 2006 2:39:48 PM (Eastern Standard Time, UTC-05:00)

If people are willing to write for those who (indirectly) pay their salaries, both papers will be just fine, albeit different. If frustrated novelists/social engineers persist in writing for themselves or their portfolios, sayonara dead tree journalism.

Rick

Saturday, May 06, 2006 9:00:27 PM (Eastern Standard Time, UTC-05:00)

How much could they possibly cut from the former CNC papers? The Watertown paper has one, count them one, reporter.

The Enterprise group actually has a great online property called Wicked Local (www.wickedlocal.com) which I think is very promising. (And I'm a little jealous of the name. Who new that domain name was still available! Good catch on their part). I look at it and learn from it for my own local newsblog (h2otown.info).

PS. Is that you, Rick Heller?

Lisa Williams

Sunday, May 07, 2006 6:45:43 AM (Eastern Standard Time, UTC-05:00)

Lisa, one is actually a lot of reporters for some CNC papers -- many (dozens?) have a single editor/reporter combo as the entire "staff." Tough to trim from that.

Bob

Sunday, May 07, 2006 8:16:54 AM (Eastern Standard Time, UTC-05:00)

Don't think the cuts are going to come in the newsrooms at CNC -- omre likley to come in the union newsrooms at Enterprise and Ledger. Big job losses in production and business offices. New company has to cut costs rapidly to justify $225 million price for CNC (11.25 x ebitda). Has to be the highest price ever paid for what is in reality a weekly newspaper company. $185 mill for Ledger group not to bad either.

jay

Sunday, May 07, 2006 11:58:18 AM (Eastern Standard Time, UTC-05:00)

Jay,

That would really be too bad. I really admire what they're doing with WickedLocal. It reminds me a lot of what the Greensboro (NC) News & Record is doing over at their site -- encouraging community participation online. I think efforts like that get readers to feel a sense of (metaphorical) ownership of the paper, that it's "their" paper. That's a sense that's largely been lost, it seems to me.

Also, there's really nothing to replace these local papers.

Americans have this frustrating habit of wanting to live in places where there isn't any news. Yet where people move to when they're fleeing news is, of course, the suburbs, which are often poorly served by newspapers, whether by regional dailies or by investor-driven chain weeklies. (This says nothing, by the way, about their news judgement; given the column inches paid for by the ads I think they make a good use of that scarce resource).

But I'm coming to think that one of the reasons that newspapers aren't doing well is that they're not serving the customers where they are -- in the suburbs. Sections like West Weekly don't really cut it; you could go a month without seeing a story about your town. In order to have regular readers, a regular supply of news about the place where they live seems to be a prerequisite.

CJR has a great article about investor funding of newspapers. Private equity groups (like Heritage, who owned a majority stake in the Enterprise chain) aren't neccessarily any kinder and gentler than the public markets. They want to buy a company and make it look attractive to a potential buyer and sell it, much like someone who buys, fixes up, and flips houses.

For a company, that "attractiveness" comes in large part from cuts in spending. Usually layoffs.

Comments here don't allow embedded links, but here's the URL of the CJR article: http://www.cjr.org/issues/2006/1/mccollam.asp

Lisa Williams

Sunday, May 07, 2006 1:01:42 PM (Eastern Standard Time, UTC-05:00)

Lisa,

You're so very right. Newspapers (daily and weekly) are not going to survive as long as the owners are driven solely by the profit motive. For generations families owned the local papers and were not only well respected in their communities but they also made more than enough money to live well. Very few ever attempted to squeeze the last dollar out of the papers and most of them truly felt they were newspapermen and took seriously their community responsibilities. Big corporations soon saw that they could make 30 to 40% operating profit (and some times much more) from these papers and paid the family owners too much for these cash cows. Since these investors never want to put much of their own money into these deals, they borrowed heavily to pay for the papers. This meant that they had to throw great profits, in good times and bad, and when the bad times came they cut back. The good times never fully return and so the cuts became permanent and the cycle continued.

The majority of men and women in the newsrooms are dedicated to their papers and to their communities and it has broken them as they see the quality of coverage diminish each budget cycle.

I'm very discouraged and have (almost) lost hope.

Jay

jay

Monday, May 08, 2006 7:28:39 AM (Eastern Standard Time, UTC-05:00)

No Lisa, another Rick who loves Wicked Local. Plymouth area has the advantage of demographic growth, unusual in MA these days. I'm not sure what the template should be going forward but it sure isn't the Globe Zone editions. Reading week old stories available immediately elsewhere doesn't cut it. Sadly, Enterprise papers win by default on the South Shore. Mostly mediocre but at least I'm not preached to by arrogant practitioners of urban chic. World is changing but there are still a few families headed by straight white couples, (who feel abandoned). There are people out there who neither aspire to the vulgar excess of Boston Magazine nor plan on replicating SOHO in an overpriced inner industrial neighborhood.If enough of us vote with our feet, then (and only then) will papers like the Globe get the message. Telling people that every facet of their lives is deficient is a lousy way to get them to part with money.

Rick

Monday, May 08, 2006 12:55:20 PM (Eastern Standard Time, UTC-05:00)

Rick,

The week-oldness is particularly bad since it's unneccessary. Where I live, I almost never know about something faster than the reporter for the local paper does -- I just hit enter faster.

Newspapers insist that everything come out on dead tree first; understandable, since no one has really figured out how to make money on the web.

I think many publications went straight down the rabbit-hole following Google's per-click model for advertising. No one knows whether I'm really looking at that Lord & Taylor ad on A5. Why should online publications only get paid if people click? When I start taking advertising, it's going to be very old-fashioned: size x duration x rate = cost of ad. That's it.

Publications that are both general in topic and local in focus are at a terrible disadvantage selling ad space via ad networks. Look at a blog like engadget.com. It's global (at least for the english speaking world) and it's focused (just gadgets) This is the kind of stuff that does well with keyword advertising.

Local sites are also at a disadvantage because few people outside of their geographical area will point to them, which lowers their Google Page Rank. This is why it's a good idea to encourage a local blogosphere around your online presence even more, perhaps, than you want Jane Q. Public blogging on your site. If she blogs on your site, she can't point to you, and so she can't increase your page rank. Plus, you're now on the hook for what she says. Seeing as you don't control her paycheck, that could be interesting -- in a good way, or in a bad way. Ya takes yer choices.

Lisa Williams

Monday, May 08, 2006 1:52:19 PM (Eastern Standard Time, UTC-05:00)

I should note that when I say "disadvantage at selling through ad networks" I mean online ad networks.

Lisa Williams

Monday, May 08, 2006 1:58:12 PM (Eastern Standard Time, UTC-05:00)

Jay,

You're right about family-owned newspapers. I'm not sure if this is still true, but when I was in high school in the 80's, the Haggerty family owned the Woburn Daily Times and Chronicle (which also put out Winchester and Reading editions).

I don't know if they still do, but the last time I glanced at it, it was a very respectable looking 36 page daily

Woburn's population = 35,000
Daily paper 36pp approx

Watertown's population == 33,000
Weekly paper 16 pp approx

What are the Haggertys doing right that the chains can't replicate? They had plenty of ads in the Woburn Daily Times. This idea that rolling up 80+ papers will make more advertising magically appear looks good on paper. But so far I don't see it panning out. Rollups look good to private equity investors and acquirers, but does it really work? Or are the investors just continuing to double down on the bet that it will work -- that if, somehow, they glom enough papers together, they'll hit some magical threshold point?

Lisa Williams

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