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A group of wealthy local citizens has approached the Union-Tribune about buying the newspaper, I have confirmed. Michael McKinnon, who along with two sons owns 82.5 percent of the station and its parent, McKinnon Broadcasting, is a major member of the group, I have learned, although he has not confirmed that. One idea would be to combine the news operations of KUSI and the U-T and perhaps have a 24-hour news operation. The U-T would be made more youth-oriented, with more pictures and graphics and less of a gray look. The management willl have to learn that deadlines don't work in the 21st century; news comes out around the clock. The U-T and KUSI could also combine advertising forces, giving advertisers a package of both print and TV, although that hasn't worked well in some other cases in the U.S. Apparently, raising the money for the purchase is not the question; the market has to set the price low enough to make it pay off for the local investors. Since there is virtually no market for metropolitan daily newspapers, the price could come down to their desired level. Much depends on the state of the U-T's profit and loss statement. Is the U-T running a negative cash flow? Or is it only mildly profitable? There is also the question of the La Jolla assets. Would local investors want them, and do they include the late Helen Copley's former home, Foxhill, and her art works? I could not get guidance on these questions. I still do not know if the company is cash flow positive or what a reasonable price might be. Bottom line: David Copley wants to get out of the business and the local nabobs want to keep the paper locally-owned. It is questionable at this point if there will be other serious out-of-town bidders, except at rock-bottom prices, at which point the locals would probably bid. It is my understanding that the group exploring this does not believe there have to be more layoffs, although some in management would be considered.

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Comments

Fred Williams Aug. 5, 2008 @ 3:32 p.m.

Don, who are the other members of the group?

Combining video, web, and print would be tricky. Cultural conflicts could wipe out the endeavor. But if all knew how to work together (a good content management system would be a start) it could be an interesting attempt to occupy important mind-space in San Diego.

Thanks for keeping us informed. I'm wondering if anyone other than locals will even bid...

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Fred Williams Aug. 5, 2008 @ 3:35 p.m.

Re: #1

Ponzi, that's the kind of stuff the web and video combined with print could do very well, but it would be even better if the new entity concentrated on what's happening inside our civic institutions.

The guy in your video seems like a real nice guy. Very friendly and personable. Stunning vocabulary too. I'm sure his business is booming now.

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JohnnyVegas Aug. 5, 2008 @ 6:03 p.m.

The U-T would be made more youth-oriented, with more pictures and graphics and less of a gray look.

A local "USA Today"!! I like it. I remember when USA Today came out in the early 80's it was a laughing stock-not it is the largest daily in the US.

I actually think the synergy beween the KUSI TV station and UT could produce a powerful media.

NO ONE from out of town is going to bid-even with a positive cash flow. Any first year MBA student would know the cap rates for newpapers are only going one way-and it is not up.

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JohnnyVegas Aug. 5, 2008 @ 6:06 p.m.

There is also the question of the La Jolla assets. Would local investors want them, and do they include the late Helen Copley's former home, Foxhill, and her art works?

Question = Why would any of Helen Copley's estate be a part of the UT-like Foxhill? Did she not devise her property upon her death??

Also, I am not familiar with Foxhill, assume it is in La Jolla or RSF-FR, can you provide an address??

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Don Bauder Aug. 5, 2008 @ 6:32 p.m.

  1. Yes, I don't think you would see that kind of video on a U-T/KUSI site. Then again, it will be aimed at youth.....Best, Don Bauder
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Don Bauder Aug. 5, 2008 @ 6:37 p.m.

Response to post #2: I may know a member of the group (other than McKinnon), but I am sworn to secrecy. I know some possibilities, such as Doug Manchester, but have not heard solid information. I have doubts that other non-locals will bid, except under one condition: if the price got very low, bottom fishers might come in, pare it down drastically, run it for a few years, then liquidate it. If the price got that low, the locals would probably snap it up. Best, Don Bauder

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Don Bauder Aug. 5, 2008 @ 6:39 p.m.

Response to post #3: That guy seems to know only one word. That word describes an entrepreneurial venture that you have planned for San Diego, according to an earlier post. Best, Don Bauder

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Don Bauder Aug. 5, 2008 @ 6:43 p.m.

Response to post #4: 1. These so-called synergies usually don't work. LA is a classic example. But maybe KUSI could make it work. Remember, the U-T has had a terrible time trying to get SignOnSanDiego and the U-T staff to work together. What would it be like with a TV station? Best, Don Bauder

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Don Bauder Aug. 5, 2008 @ 6:47 p.m.

Response to post #5: She owned the U-T 100 percent and Foxhill 100 percent. Now David does. The money could be in the same pot, presumably. But would Foxhill be part of the deal? It has been rumored, but I have no idea. Certainly, the corporate headquarters in La Jolla would be up for sale (maybe not to the buyer of the paper). I don't know if U-T could sell the library, which may belong to the James S. Copley Foundation. Best, Don Bauder

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Don Bauder Aug. 5, 2008 @ 6:50 p.m.

Response to post #6: I was only there once, as I recall. She had an original Corot and an original Gainsborough (or Constable) on the wall. Best, Don Bauder

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SDNative1958 Aug. 6, 2008 @ 10:11 a.m.

Perhaps this will give the much-maligned Rod Luck a new lease on life. Column, anyone?

I have a love-hate relationship with KUSI - it seems at times quaintly ameteurish, yet has real cred for its famed weatherman and troubleshooter Turko.

But it does have a real, "local" look and feel to it, and it might make a good marriage - Lord knows the UT has needed a shift in reality for many years. If this happens, I'll toss my hat in the ring to be the live-in caretaker of Foxhill as I assume David would just as soon travel on Happy Days until the money runs out, if ever.

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Don Bauder Aug. 6, 2008 @ 10:23 a.m.

Response to post #13: KUSI has a local look and a feel for the entire community, not just the establishment. The U-T's critical weakness is that it is simply an establishment propaganda organ. KUSI regularly has Mike Aguirre on its show. The newspaper will only hammer him through inaccurate editorials and slanted news stories. KUSI could give the paper some balance that is impossible to achieve with the current management in place. McKinnon and others in his group began talking with the U-T before the announcement that it is fishing for a buyer. The group has talked with David Copley, but has spent most of its time talking with Gene Bell, president of the U-T. I don't know if it is talking with Hal Fuson, de facto CEO or with other board members. Best, Don Bauder

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HellcatCopley Aug. 6, 2008 @ 12:40 p.m.

Remember back in the late 90s when the UT had Rich Peterson? He sat at Gene's right hand and was responsible for New Ventures. Peterson wanted to stick a TV newsroom in the UT as well.

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Don Bauder Aug. 6, 2008 @ 12:55 p.m.

Response to post #15: I think it was about that time that the Orange County Register tried having its reporters talk on TV about their stories. The equipment was set up at the Register's headquarters. I don't know what happened to that one. But your point is well taken: those with good ideas haven't tended to last within the Copley organization. That is why what's going on now is so critical: David will be waiting around for a bid from the outside. Others with big egos surrounding David will be certain that the bids will roll in. But serious ones won't come in. Egos will be deflated. The locals will come in and buy it at a low price. But will combining TV and print work at the U-T? As you know, the U-T's online operation and the newspaper staff couldn't get along because of ego abrasions -- possibly still can't. Could the U-T brass and staff salute KUSI, a parvenu (with sales $30 million to $35 million -- far less than the U-T's $300 million-minus)? Yes, but only after the bids don't come in and the egos come down to earth. Best, Don Bauder

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HellcatCopley Aug. 6, 2008 @ 12:59 p.m.

I wonder too if having a local TV station own the paper might raise anti-trust questions ... Helen Copley somehow skated past anti-trust issues when she merged the Union and the Trib. The Hearst Corp had to divest some San Francisco holdings. For 35 years starting in 1965 the San Francisco Chronicle and Examiner operated under a Joint Operating Agreement whereby the Chronicle published a morning paper and the Examiner published in the afternoon. When Chronicle Publishing Company divested its interests, the Hearst Corporation purchased the Chronicle. To satisfy antitrust concerns, Hearst transferred ownership of the Examiner to ExIn, LLC, a corporation owned by the Fang family.

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Don Bauder Aug. 6, 2008 @ 1:45 p.m.

Response to post #17: The government has loosened up antitrust restrictions concerning media in the same market, and it's being argued today that with newspapers in dire shape, the government will look the other way on mergers of any kind. Best, Don Bauder

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Burwell Aug. 6, 2008 @ 8:34 p.m.

If Michal McKinnon wants to make a small fortune in the newspaper publishing business he better start with a large fortune.

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Don Bauder Aug. 7, 2008 @ 7:40 a.m.

Response to post #19: Your argument is the one Wall St. is buying these days: the newspaper industry has little future. The Wall St. consensus is often wrong, though. Newspapers can make it if they adapt to electronics reality. That's what McKinnon has in mind. Best, Don Bauder

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JohnnyVegas Aug. 7, 2008 @ 4:28 p.m.

I wonder too if having a local TV station own the paper might raise anti-trust questions ...

Los Angeles Powerhouse news team KTLA (ch. 5) and the LA Times have had the same owners for years.......

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Don Bauder Aug. 7, 2008 @ 5:21 p.m.

Response to post #21: The antitrust restrictions of old have been largely lifted, and in today's miserable climate for newspapers, they would not be enforced in any case. Best, Don Bauder

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Burwell Aug. 7, 2008 @ 7:40 p.m.

Adapting to electronics reality is not going to save the U-T or the other newspapers. The newspaper industry needs to sue Craigslist and the other internet pirates to stop them from offering free classified advertising on the internet. Craigslist received a $2 billion equity investment from Google, and uses this largesse to offer free classifed advertising. Once Craigslist has destroyed the newspaper industry by robbing it of revenue, Google will step in, buy Craigslist, and start charging for classified ads. Craigslist and Google are using illegal means to put their competition, the newspaper industry, out of business.

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Don Bauder Aug. 7, 2008 @ 8:42 p.m.

Response to post #23: Remember that newspapers (including the U-T) are offering some free classifieds, too. Craigslist would probably use the "clean hands" defense or something like it. Google may intend to buy Craigslist, and this may have been plotted several years ago, but how do you prove it until the acquisition is made? Best, Don Bauder

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Burwell Aug. 7, 2008 @ 9:39 p.m.

I feel sorry for the ink stained wretches at the U-T. They must be going through hell right now.

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Don Bauder Aug. 8, 2008 @ 6:43 a.m.

Response to post #25: Yes, employees are understandably in a state of panic, and they sense this may last for a long time. Best, Don Bauder

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Fred Williams Aug. 8, 2008 @ 7:24 a.m.

Burwell, where did you hear that Craigslist got any money from Google, much less $2 Billion?

So far as I know, the situation is the same as when this article was written:

http://www.wired.com/wired/archive/12.09/craigslist.html

I searched for a Craigs List - Google matchup, but all I've come up with is Google maps being incorporated into the rental ads, which I'm pretty sure was a good will thing rather than for money...

Burwell, please correct me if I'm wrong and you've got a source for this rumor. Otherwise, I think your information is mistaken.

Best,

Fred

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Burwell Aug. 8, 2008 @ 8:33 a.m.

I was wrong. EBAY is actually paying the bills at Craigslist and allowing it to undercut the newspapers, not Google. It makes little difference who finances Craigslist. The point is Craigslist is killing the newspapers by providing free classified advertising that's being underwritten by a monopolist corporation. Once the newspapers are killed off the consumer will pay through the nose for classified ads that are now free. I again repeat the cost of internet access is going to skyrocket within the next 5 years as large corporations attempt to recoup the money they've lost providing free internet services to consumers.

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Fred Williams Aug. 8, 2008 @ 9 a.m.

Burwell,

In 2004 Ebay bought a former Craigslist employee's 25% share. It was explained they would share technolgies.

http://www.clickz.com/showPage.html?page=3394631

Apparently, that didn't work out. In 2007, Ebay launched a competitor to Craigslist:

http://www.businessweek.com/technology/content/jul2007/tc2007075_395980.htm

So I don't think Ebay controls Craigslist.

I also must respectfully disagree with you about the future costs of online activities.

I work in both telecoms and IT. If anything, I believe the trend is going the opposite direction, with bandwidth commoditized and dropping in price just about everywhere. This includes not just your standard connections, but also 3G mobile networks using IP routing to provide rich data.

Entities like VPNs even buy up discounted exess bandwidth on existing infrastructure, re-brand and resell it to consumers. I believe Virgin Mobile does this.

I was in SE Asia doing volunteer work five years ago, installing wifi antennas to connect a remote village to the internet as a proof of concept for low-cost access. It's amazing how much you can do with how little if you're motivated.

If the owners of the pipes were to somehow get together in a cartel and attempt what you describe, you'd be amazed how cheap and simple it could be for clever techies to route around them.

I don't mean to be disagreeable, my friend. I just want to know where you are seeing this prediction about soaring prices. If you could provide some links, I would be very interested to learn how it could be possible.

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Don Bauder Aug. 8, 2008 @ 9:12 a.m.

Response to posts #27 and #28: And again I repeat that if there are going to be big charges for using the Internet in five years, newspaper stocks are a screaming buy today. But your thesis can easily be challenged. Best, Don Bauder

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Don Bauder Aug. 8, 2008 @ 9:16 a.m.

Response to post #29: Buy stocks of Gannett, NY Times, McClatchy, even Gatehouse -- then do your homework. That's how it's done on Wall St.: buy on the rumor, sell on the news. For conservative folks like me, however, Burwell has to back up his thesis first. Best, Don Bauder

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Fred Williams Aug. 8, 2008 @ 11:05 a.m.

Don, I've never in my life owned a share of stock, and don't intend to start now.

I've been reading about finance and economics since I was in my early twenties, and never felt that the information available was good justification for buying. Instead, in my lifetime at least, the markets have seemed more like a confidence game.

At any rate, I'm sure you know I'm not endorsing Burwell's theory, but questioning it. I still wouldn't buy telecoms stock because their corporate structures and various partnerships under multiple jurisdictions makes their operations opaque.

What ought to be more interesting to investors is the intrepid businessmen who go to hostile 3rd world countries and set up communications infrastructure that is finally affordable to the masses, transforming their lives.

Imagine the difference between walking five miles to get market information, versus just making a call to find today's prices. The productivity gains that could be set loose in the developing world are huge. Whole economies can resettle on a better informational foundation. That's value investing, in my mind.

Again, the key point you and I agree on is that newspapers and other physically distributed methods of information delivery, like other technologies before them (read any stone runes lately?) are being replaced with cheap ubiquitous bandwidth.

Some printed media have thrived...see www.reason.com and Reason Magazine. How broadcasting KUSI, online signonsandiego, and the folded newsprint of the UT could collaborate effectively remains to be seen.

We'll all be watching, but I'm sure not putting any of my money on anything. I'm too prone to mistakes...

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Burwell Aug. 8, 2008 @ 11:36 a.m.

Where is the money coming from to fund Craigslist's operations? How can Craigslist permit landlords to post rentals on the internet for free? How can Craigslist allow every prostitute in the US to post images of themselves on the internet for free? Hundreds of hookers in San Diego currently have ads on Craigslist. Where does Craigslist obtain the cash to maintain the hundreds, if not thousands, of servers it requires to operate its systems? Craigslist is clearly running up operating losses in the hundreds of millions because it refuses to charge users reasonable fees for ads. At some point, after the newspapers are run out of business, these operating losses will be recouped. The U-T and other newspapers should sue Craigslist to halt unfair trade practices that are running them out of business, and force Craigslist to charge users for ads. It's illegal for businesses to give services away for free in order to run competitors out of business.

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Don Bauder Aug. 8, 2008 @ 12:44 p.m.

Response to post #32: About one-fourth of my portfolio is in stocks. A good percentage of that is in utilities, because I buy for yield. I figure that with dividend taxes so low, it pays to buy high-yielding stocks with well-covered dividends and then hold them. However, that strategy has backfired, for the most part, with the bank stocks I own. Best, Don Bauder

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JohnnyVegas Aug. 9, 2008 @ 10:48 a.m.

33.

How can Craigslist allow every prostitute in the US to post images of themselves on the internet for free?

That must be one hell of a lot of prostitutes.

It is my understanding that Craigslist makes their profit from their "Help Wanted" ads, which are not free.

So if they are getting top dollar for those ads, that may underwrite the other ads, depending on how much revenue is coming in.

At least that is how they painted it in a documentary about the website.

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sablewing Aug. 9, 2008 @ 11:22 a.m.

Response to #33 Based on information from Craiglist and interviews with the founder, Craigslist was never started to be a big business it was initially started to provide help to some friends during the dot com bust of the late 90's/early 2000.

http://www.craigslist.org/about/factsheet.html http://en.wikipedia.org/wiki/Craigs_list

For a site that is kept as simple as Craiglist, with a focus on text only with no fancy graphic eye candy, flash movies and a large staff to run the operation, the company would not require great amounts of money for staff or servers.

http://www.craigslist.org/about/pages.and.peeps.html

Craigslist does charge for some ads, mainly in job ads in large markets where there is a tendency for scam ads to be posted. The primary stated goal is to provide a place for people to post ads and have them as trusted as possible for as cheaply as possible. With a staff of 23 people and perhaps some tens of servers, then yes, it is possible for them to run a business without an infusion of $2 billion from Google, eBay or some other entity trying to take newspapers down.

And there is an interesting bit of information in the wikipedia article about Craigslist,

"In April 2008, eBay announced it was suing Craigslist to "safeguard its four-year financial investment". eBay claimed that in January 2008, Craigslist executives took actions that "unfairly diluted eBay's economic interest by more than 10%". [17] In response, Craigslist filed a countersuit against eBay in May 2008 "to remedy the substantial and ongoing harm to fair competition" that Craigslist claims is constituted by eBay's actions as Craigslist shareholders."

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Burwell Aug. 9, 2008 @ 8:25 p.m.

Craigslist only charges for help wanted ads in Washington DC and New York City, for reasons which are not entirely clear. When Craigslist puts the newspapers out of business, it will go through an IPO and start charging what the market will bear for ads. Craigslist's owners will become billionnaires. The scenario that "Craig" started the list to help out his friends and just stumbled by accident into a billion dollar business is drivel likely created by a PR firm. The newspapers should sue Craigslist for unfair business practices before it is too late.

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Don Bauder Aug. 10, 2008 @ 8:02 a.m.

Response to post #35: Newspapers never saw Craigslist coming. And they still haven't come up with intelligent competitive strategies to get the market back. Best, Don Bauder

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Don Bauder Aug. 10, 2008 @ 8:04 a.m.

Response to post #36: This is solid information. We are becoming a clearinghouse on some of these very important matters. Best, Don Bauder

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Don Bauder Aug. 10, 2008 @ 8:06 a.m.

Response to post #37: Even if Craig's strategy is as you described, would newspapers have a case? There are prrecedents suggesting they might, and precedents suggesting they might not. Good question. Best, Don Bauder

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Fred Williams Aug. 10, 2008 @ 8:21 a.m.

Re: #37 and #39, sorry to disagree. That's not "solid" information, Don, but pure speculation.

I guess you have to be in the IT industry to understand how some of our minds work. Craig could have made hundreds of millions years ago, and every time he turned them down.

He stepped away from managing the lists, and became one of the customer support guys, answering the phone and emails, and scanning ads like anyone else. He's happier that way.

Burwell, I don't understand your thoughts on Craigslist, or where you are getting your allegations. The facts about how Craigslist works and is administered are open for anyone to read about, and previous posters have provided links to reliable sources. Please post some kind of back up for your theory, because it contradicts everything I know about the subject.

Yes, you are correct that Craigslist is killing the newspapers, but it's not making a killing. Quite the opposite.

I don't understand how you get from that to a wild scenario where they greedily corner the market after consumating their evil plot against the newspapers.

Please, Burwell, do you have any sources you can cite? If not I'm going to assume this is just a bee in your bonnet, because there are so many sources that contradict you.

As best I can find out, Craigslist is NOT an evil plot.

Best,

Fred

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Burwell Aug. 10, 2008 @ 9:40 a.m.

Craig is like the guy who has the winning $30 million lottery ticket, but doesn't come forward right away. He knows he has the money because he has the winning ticket, and he is in no rush to cash in. At this point he's content to bleed the newspapers white financially because he believes in the end he will own the entire US classified advertising market. He even has designs on the world advertising market and is expanding agressively overseas. EBAY is likely suing Craigslist for equity dilution because Craigslist is likely raising more cash to underwrite operating losses by selling more stock. EBAY would probably prefer to maintain its ownership percentage and have Craigslist pay its expenses with user fees instead of equity. This puts newspapers under enormous stress because they have to generate advertising revenue to pay reporters to write news stories. Craigslist has no reporters to pay and creates no intellectual content. Craigslist should be sued for monopolistic practices and should be required to charge a realistic and fair fee for ads.

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Don Bauder Aug. 10, 2008 @ 10:40 a.m.

Response to post #41: The scenario that Burwell sketches is a road that has been traveled before by some sharks. Best, Don Bauder

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Don Bauder Aug. 10, 2008 @ 10:45 a.m.

Response to post #42: Back in the Great Depression, a period of deflation, the public could grasp a lawsuit charging that a company should charge a realistic and fair fee. However, this is a period of inflation. A judge would have to be thumbing his or her nose at public opinion to give Craigslist a break on such a suit. Juries wouldn't be too sympathetic, either. Best, Don Bauder

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JohnnyVegas Aug. 11, 2008 @ 11:31 a.m.

Response to post #42: Back in the Great Depression, a period of deflation, the public could grasp a lawsuit charging that a company should charge a realistic and fair fee.

Speaking of the Depression, did anyone catch this article in the LA Times today (This guy has been on 60 minutes and knows his stuff inside and out-very bright guy);

'I.O.U.S.A.,' a documentary film about the U.S. budget deficit

A private equity billionaire, a former federal government official and a Baltimore newsletter editor have made a documentary film that they hope can do what an endless parade of policy papers has not: Persuade Americans that debt has created a looming economic crisis that would make the Great Depression look like a market correction. The movie, "I.O.U.S.A.," premiering Aug. 21, is an 87-minute alarm on what it calls the tsunami of debt bearing down on the United States' future, caused by the rising national debt, the trade imbalance and the pending costs of baby boomers cashing in on entitlements.

http://www.latimes.com/business/la-fi-iousa11-2008aug11,0,210248.story

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Don Bauder Aug. 11, 2008 @ 12:09 p.m.

Response to post #45: I didn't see the LA Times story until you sent it, but I have written on Walker before. A couple of months ago, in a column that quoted Mike and Gary Aguirre (and featured their pictures), I discussed Walker and his important mission. What is really important is that the government is feeding us phony numbers on the deficit, then claiming that as a percentage of GDP the deficit is not out of line. If the books were straight, they would be grossly out of line. In any case, they are out of line considering how high the current account deficit is. Best, Don Bauder

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JohnnyVegas Aug. 11, 2008 @ 4:17 p.m.

Yes, trade and budget deficits are the twin sprials of death.

And now the state of CA is basically in the same boat.

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Don Bauder Aug. 11, 2008 @ 8:14 p.m.

Response to post #47: California's problems are obviously different from the nation's, as you know -- a state can't print money, for example -- but there are real similarities. The pain seems to be afflicted in similar places. Best, Don Bauder

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JohnnyVegas Aug. 12, 2008 @ 8:24 a.m.

Response to post #47: California's problems are obviously different from the nation's, as you know -- a state can't print money, for example -- but there are real similarities.

But passing Pension Obligation Bonds, selling off the future of the state lottery today for tomorrows 20 cents on the dollar return, selling off highways and brigdes (not yet in CA, but other states have), selling off community taxpayer assets in general- it all adds up to the same thing-making tomorrows kids pay for the excessives of todays state workers.

We simply cannot allow the high government pay and SUPER high pensions to continue. An increase in the sales tax or any other tax while those scams are still on the books is simply a tax on the poor and middle class many to fund the few, upper class government workers.

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Don Bauder Aug. 12, 2008 @ 12:06 p.m.

Response to post #49: Good points: how long will it be before we start selling off naming rights to roads, bridges, schools, government buildings? Jack in the Box Bay Bridge. LEAP Wirelesss Grade School, for example. Best, Don Bauder

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