When a new group of Chicago investors took Sun-Times Media off the hands of the old group last December for $20 million, one of the new owners drew me an exciting picture of the journalism Chicago could be in store for. The picture hinted at a communion between old media and new—to be specific, the legacy print daily and a young digital start-up with big
aspirations and an impressive pedigree. “There’s no deal between the Chicago News Coop and the Sun-Times at the moment,” said Bruce Sagan, who sits on the board of the group that runs Sun-Times Media—and sat on the board of the recently shuttered CNC. “They are indeed organizations with their own goals. But the goals are not far apart. It’s a question if they can make it work. The Sun-Times needs personality, viewpoint. That can’t come from somebody else. But is there a lot of news out there that can be shared? My god!”

“They’re gonna talk,” Sagan predicted, and, indeed, how could CNC and the Sun-Times not talk? They were, to an extent, the same people. In addition to Sagan’s dual role, John Canning Jr., chairman of CNC, is on the board of Wrapports LLC, which is what the new owners of Sun-Times Media are legally calling themselves. And CNC board member Michael Ferro is now chairman of Wrapports.

What I didn’t understand in December was the role James O’Shea, founder and general manager of CNC, had just played in making the sale of Sun-Times Media happen. O’Shea, a former managing editor of the Tribune, launched CNC in the fall of 2009 with seed money from the MacArthur Foundation and one significant contract—to provide four pages a week of Chicago news to the New York Times. O’Shea had plans, a first-rate staff, and a website—but two years on, CNC was spinning its wheels. O’Shea wanted to build out the website with deep, focused content he could offer for money—education was first on his list. But he didn’t have the money to do it.

About the same time that O’Shea was getting CNC up and running, the collection of daily and weekly papers that constitute Sun-Times Media had been bought out of bankruptcy by an investment group led by James Tyree, chairman and CEO of Mesirow Financial. The other day Canning called Tyree a “visionary,” in the sense that if buying Sun-Times Media made sense to Tyree it made much less sense to anyone else. “I had no idea why Tyree did it,” Canning told me. “I knew Jim. He was a very Chicago-centric guy. And maybe it was ‘I’m not going to let this iconic Chicago paper die.'”

At any rate, Tyree centralized and centralized some more, slashed his staffs, outsourced printing to the Tribune, sold off real estate, and nudged the operation into black ink. But last March Tyree, never in good health, suddenly died. A month later, O’Shea made a bold proposal to the CNC board.

We’re not going to get a lot more money from philanthropy, he reasoned. And it takes money we don’t have to build up the business to make it pay for itself. But if we can’t create a revenue stream, maybe we can buy one. If Sun-Times Media throws off just $2 million a year, or even one million, that’s a lot of money to CNC. Pay us to write stories for the Sun-Times and do small-scale R & D, and anything that works for us we’ll export to the company.

Canning was intrigued. “I doubt that I would have on my own looked at the Sun-Times if I hadn’t already been involved with the Chicago News Cooperative, but it was a logical thing to do,” Canning tells me. “I called up the Mesirow people and said, ‘Are you interested?’ It wasn’t for sale but they were glad to talk. Sagan, myself, and O’Shea went over and met with the Mesirow principals.”

“The relationship with the New York Times provided seed money, but it was for a product that cost a hell of a lot more to produce.”
—John Canning Jr., chairman of CNC

Like O’Shea, Canning wanted to get CNC off life support. CNC had been operating about a year when Canning came on board, invited by his friend Jim Kirk, CNC’s managing editor and a former business editor of the Tribune. “As a favor to Kirk, I put in $100,000, and I sure as hell wasn’t thinking of this at the top of my charitable giving,” says Canning. “Ferro put in $100,000. It was a worthwhile cause, with guys trying hard to put out a quality product. But I made no bones that this has got to get to revenue growth in some reasonable time.”

Maybe Sun-Times Media was the way to make this happen. Because the Sun-Times and other dailies had slashed so much coverage they could no longer afford, O’Shea saw lots of opportunities for CNC to leverage the relationship. For instance, “I thought it was a good idea to beef up Springfield coverage,” says O’Shea, “and take that coverage and see if we could use it to raise revenue from other papers that have closed their Springfield bureaus.” Another opportunity was the arts. “The Times wanted some cultural coverage. I was looking into, can I get Sun-Times cultural coverage and use it in the New York Times? I could save money by putting Sun-Times copy in the New York Times. There’s not a lot of cross-readership.”

Was the Times OK with that? I wonder.

“We didn’t get that far,” says O’Shea. “But they were more than willing to make this work.”

Mesirow was happy to discuss getting out from under Tyree’s labor of love. “I said, ‘I’m not going to be Jim Tyree here. The only way this gets done is if you find a Tyree,'” Canning tells me. “And I only knew of one person who might fill his shoes—Michael Ferro.”

Says O’Shea: “He called Ferro and Ferro was actually pretty excited about the idea. Michael’s a very creative guy. He’s got a thousand ideas.”

For purposes of discussing business opportunities with the Sun-Times, it was a good thing for O’Shea that Ferro, like Canning, was on the CNC board. For purposes of actually doing business with the Sun-Times, it turned out to be not so good.

O’Shea wanted to deliver news stories to the Sun-Times in the same way he’d been delivering them to the New York Times. But—and it was a big but—he wanted to charge the Sun-Times a lot more money. “The relationship with the New York Times provided significant seed money,” Canning says, “but it was only $15,000 a month for a product that cost a hell of a lot more to produce.”

O’Shea says Ferro was willing to pay more—but, not a lot more. And O’Shea didn’t have much of an argument for why Ferro should. As O’Shea puts it, if the Times kept paying CNC x dollars and the Sun-Times agreed to pay 3x dollars, the Sun-Times Media investors with no interest in CNC would surely say to the ones who do, “Wait a minute! What are you doing? Are you trying to take care of your favorite little nonprofit here?” Or as Canning puts it, “People would say, ‘If the New York Times isn’t paying what it’s worth why am I subsidizing the New York Times?’ That’s a legitimate question. Jim rightfully went back to the New York Times and gave them an ultimatum. He said, ‘You’ve got to pay more. You’ve got to pay what it’s worth.'”

But the Times was already paying what the CNC-produced pages were worth to the Times. They were one of those things in life that either get bought at a discount or don’t get bought at all. Conversations between O’Shea and the Times over compensation were always amicable, both sides tell me, but they went nowhere. On February 16 a call from Chicago to New York brought the relationship to an end, and the next day O’Shea told his staff that CNC was shutting down.

People in the nonprofit world tell me it’s necessary to wake each morning with one thought: “Today, I need to raise some money.” By various accounts, O’Shea was not adept at this, and when he concluded almost a year ago that the future of CNC was tied to the sale of Sun-Times Media, he stopped fund-raising entirely. Months passed. “I kind of knew in January if I couldn’t get an agreement with the Sun-Times I was going to have a tough time,” he says. By then he’d asked the MacArthur Foundation for a $200,000 “bridge grant” to tide him over. Unfortunately, questions that a MacArthur attorney raised about CNC’s nonprofit status held up the grant, and O’Shea couldn’t wait. He withdrew his application and shut down.

“They didn’t make clear to us how close to the brink they were,” says Elspeth Revere, the MacArthur vice president who dealt with O’Shea. “We knew they needed additional funding, but unless we are informed very clearly that an immediate grant is a matter of great importance, we assume that if it takes an extra month it won’t have great consequences.”

O’Shea’s hope and belief had been that Michael Ferro, the man of a thousand ideas, had put very near the top of his list the idea of bringing new resources to the emaciated flagship paper. If that was the case, CNC had a lot to offer: the core of O’Shea’s operation was a cluster of senior reporters and editors from the Tribune. But it wasn’t the case. Ferro’s mind was running in other directions.

A recent story in Crain’s Chicago Business described Ferro’s apparent plans for Sun-Times Media (Ferro didn’t talk to Crain’s, just as he didn’t talk to me): “Mr. Ferro wants to create a splashier tabloid—a New York Post of the Midwest—with more coverage of Chicago celebs, sports and even business, according to people familiar with his thinking. He’s also intent on an upgraded tablet application, they say. At the chain’s 40 suburban dailies and weeklies, Mr. Ferro is focusing on real estate, crime and high-school sports, these people say.”

Ferro made his name and fortune by founding Click Commerce, a software manufacturer, and selling it for $292 million before he turned 30. He brought on as CEO of Sun-Times Media Timothy Knight, a former publisher of Newsday fluent in the patois of the digital street. “We look forward to introducing cutting-edge technologies, new content portals and other tools that will expand and drive richer and more satisfying content to readers, while providing more targeted and measurable promotion options for our advertising partners,” said Knight when he took the job. (Knight didn’t return my call either.)

O’Shea still talks of doing business with Sun-Times Media as some sort of remnant organization risen from the ashes of CNC. He is not a New York Post sort of newsman, however, and he and Ferro and Knight may share only so many words of a common language. John Canning says his friend Ferro’s ideas for the company “are centered on the suburban papers and an Internet-based strategy, which is not something O’Shea or I had any views on or expertise in. They’re not really interested in the journalistic side of it, in the sense of making it the New York Times.”