The Web site newspaperdeathwatch.com — no further introduction necessary — is buzzing with astonishing news: not that the venerable Copley Press chain has decided to sell its last daily newspaper, San Diego’s Union
Post-Tribune, but that a private equity firm has decided to buy it.
“For starters,” says the site, Beverly Hills-based Platinum Equity “probably got a great price. Private equity firms look to unlock asset value and Platinum Equity must believe that it can quickly make changes that will substantially increase the value of the paper.”
What can those changes possibly be? Newspaperdeathwatch.com has no idea, but it’s excited anyway. “Platinum Equity would not have bought the Union-Tribune,” it exclaims, “unless the partners believed that the business was undervalued. That’s another indication that perhaps the market has hit bottom. The big question is what changes the partners believe they have to make to increase the value of the asset. That’s going to be the really interesting question.”
On the Platinum Equity Web site, the principal responsible for doing the deal, Louis Samson, is quoted as boasting, “We have a long history of creating value by helping established companies navigate difficult market transitions.” He goes on, “The Union-Tribune is more than a business, it’s an institution in San Diego. But it faces enormous challenge in a period of tremendous upheaval for the newspaper industry.”
In other words, it’s in the same boat as every other big city daily. The Union-Tribune reports that its ad revenues have dropped by 40 percent since 2006, and Canadian publisher David Black, who teamed up with Platinum Equity in buying the paper, says “restructuring and severances” will be necessary. Yet Samson promises, “We will bring a strong operational focus that helps ensure the Union-Tribune not only survives in this market, but thrives.”
UPDATE: Here’s an interview a Wall Street Journal blogger conducted with Jonathan Knee, an investment banker and media specialist who was consulted in the Union
Post-Tribune deal. See how upbeat he is: “Unfortunately people confuse dysfunctional capital structures with dysfunctional business models. The reason why most newspaper companies have gone bankrupt or appear perilously close to it is that they have too much debt, not that they have stopped being profitable.”
Knee’s advice to newspaper managers: “You have to focus on your competitive advantage, which is local.” And he offers, “I think many managers would rather have avoided a fight with journalists than actually force them to think harder about what their readers want, rather than what they want their readers to want. In the economic environment we’re in, newspapers can’t afford to do every six-part investigative series they could have done before.”
Knee’s formulation strikes me as not quite on the money. Editors don’t bother wanting their readers to want those six-part series — that’s wishful thinking. They run them because they believe there are stories that deserve to be told. Some of that journalism is for show and prizes. A lot of it is out of a sense of duty.