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Bad News for Copley, Good for KUSI: Cox Selling Austin, Other Papers Amid Gloomier Newspaper Environment

Cox Enterprises has put the Austin American-Statesman up for sale, along with ten papers in smaller cities such as Waco. That will leave Cox with only three papers, including the Atlanta Journal-Constitution. Austin is generally considered a market quite similar to San Diego, where Copley Press, owner of the Union-Tribune, last month put itself up for sale. There is almost no market for metro dailies. A group of wealthy local citizens led by Mike McKinnon, who controls KUSI-TV, talked with Copley about a purchase even before the company went publicly fishing for bids in late July. McKinnon, who would combine the paper's news and advertising functions with those of the TV station, is likely to wait Copley out, hoping for the price to fall. Cox's move will help. Meanwhile, there is more grim news for newspapers. In the second quarter, three chains reported that online revenues fell: Lee Enterprises down 9.1 percent, AH Belo down 12, and EW Scripps down 8. Newspapers hope their online operations will save them. This year, for the first time, broadcast TV is expected to chalk up larger revenues than newspapers -- $51 billion to $47 billion. Newspapers are expected by Veronis Suhler Stevenson to be down $1 billion from 2007 while TV rises $3 billion.

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Cox Enterprises has put the Austin American-Statesman up for sale, along with ten papers in smaller cities such as Waco. That will leave Cox with only three papers, including the Atlanta Journal-Constitution. Austin is generally considered a market quite similar to San Diego, where Copley Press, owner of the Union-Tribune, last month put itself up for sale. There is almost no market for metro dailies. A group of wealthy local citizens led by Mike McKinnon, who controls KUSI-TV, talked with Copley about a purchase even before the company went publicly fishing for bids in late July. McKinnon, who would combine the paper's news and advertising functions with those of the TV station, is likely to wait Copley out, hoping for the price to fall. Cox's move will help. Meanwhile, there is more grim news for newspapers. In the second quarter, three chains reported that online revenues fell: Lee Enterprises down 9.1 percent, AH Belo down 12, and EW Scripps down 8. Newspapers hope their online operations will save them. This year, for the first time, broadcast TV is expected to chalk up larger revenues than newspapers -- $51 billion to $47 billion. Newspapers are expected by Veronis Suhler Stevenson to be down $1 billion from 2007 while TV rises $3 billion.

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Comments
12

Good anlaysis Don. It sounds like it will be a race to the bottom. But if the price follows the revenues, McKinnon may have some competition when it bottoms out. What about an ESOP? It seems to me that the biggest stakeholders in this meltdown (apart from us, the long-suffering readers) are the U-T employees. Would an ESOP work Don?

Aug. 14, 2008

David Copley is stuck between a rock and hard place. Much of it his own doing.

His paper is declining in value, and if he sells it will be for peanuts. And there is really nothing he can do about it, or very little.

If Copley was a hands on manager, a competent manager, he could work his tail off and try to turn things around-with strong leadership from the top. Unfortunately he has incompetents running the paper and he could never run it himself with any degree of success.

At a time when daily papers should be trying to increase circulation, the UT is alienating readership with partisan yellow journalism. That simply will not work today because the UT is NO LONGER the big gun in town. There are just too many options for readers. The internet has changed that. In spades.

So, I see David Copley losing control by a low ball sale of the paper, or outright losing it for lack of positive cash flow. It is a sinking ship with no captain to right it.

Time will tell.

Aug. 14, 2008

Response to post #1: One of the key points in Copley Press history came many years ago. David had been in training, working for short periods in every area of the company. It was clear to the executives in La Jolla that he had little interest and wasn't qualified. It is my understanding that several execs were willing to go together to tell Helen this. But, I have been told, Dick Capen said he would do it. Helen erupted. Shortly, Capen was out. After a few years, David was named publisher and CEO. The people immediately under him ran the company, but they made some serious mistakes, such as buying the Illinois and Ohio papers when the money should have gone into capital investment in preparation for an electronic future that these executives did not foresee. The handwriting was on the wall for the print newspaper in the 1980s and the Copley brass didn't read it. The execs ignored those in the company who saw trouble with print journalism. Yes, today's yellow journalism is hurting the company, but that's not the major cause of the cancer. The big short term question is one I have oft repeated: is cash flow negative? If it is, the price will be low indeed. Best, Don Bauder

Aug. 14, 2008

Response to post #3: An ESOP (a form of employee ownership) might work, Pat. Other readers of this blog have suggested employee ownership. However, newspaper employees aren't paid that well. To have them carrying the obligation of so-called ownership of a collapsing paper could be a burden. Employees supposedly are the basic owners of Tribune Co. in Chicago. That is a kinky deal, however, pulled off by Sam Zell, a slick operator whose main interest is real estate. Zell plunked in little of his own money. I am concerned that those Tribune employees could be taken in this one. Your ESOP question raises an interesting point: Copley has always had bad relationships with its employees. In fact, particularly when there was a guild, it reveled in bullying them. Now the company's major asset -- the one thing making the paper salable -- is its editorial employees. Ironic, isn't it? Best, Don Bauder

Aug. 15, 2008

I am wondering if the ill-health of the Reader's daily competitor puts just that much more responsibility for good timely journalism on the Reader staff...

Aug. 15, 2008

Response to post #5: No doubt you are right on that observation. Best, Don Bauder

Aug. 15, 2008

The U-T is caught in a downward spiral. To contain costs they cut content (such as the zoned editions or weekly TV schedule) AND raise the single issue price, which makes the paper even less appealing to readers, which cuts circulation, which makes it less desirable as an advertising vehicle and reduces ads, which means less reveune, which means they need to contain costs ...

Aug. 15, 2008

Response to post #7: Very perceptive. Raising prices and slashing quality is a one-way ticket to perdition for most businesses -- restaurants being a classic example. Ditto for newspapers and other kinds of media. When the personnel pogroms began a couple of years ago, Copley may have been plotting to put the papers up for sale. Slashing expenses and raising prices may fatten up the profit & loss statement on the short run and make the company more salable. Best, Don Bauder

Aug. 15, 2008

Back in '03 the UT began to hack away at the Circulation Department. Other departments (including News) really took no notice ... I suspect those people were too far beneath them. The Circulation Customer Service people were outsourced to Iowa. The Big Lie being told was that the Iowa call center would help build circulation because it had multiple and varied clients. So if someone called Iowa, say, for a new VISA card, they would be invited to use it to purchase the UT at a discount. This went nowhere fast. And guess what? Those Customer Service people are now no longer in Iowa but in India!!

Aug. 17, 2008

Response to post #9: Yes, the company outsourced circulation customer service. I didn't know it got to India. Some companies are giving up India. Incidentally, there is news in the newspaper marketplace. Hearst has purchased the Bridgeport, Conn. daily and seven weeklies in the state, including some in super upscale markets such as Darien. The price was supposedly $155 million. What's important is the seller: William Dean Singleton's MediaNews Group. Singleton is said to covet the San Diego market. But his group is vastly overleveraged. Maybe he is selling papers to reduce debt so that he can buy the U-T. In any case, the sale of Bridgeport would appear to be good news for Copley. Best, Don Bauder

Aug. 17, 2008

Hey Donny boy, I wonder if anyone besides current or former Union Tribune employees would read your stories or participate in these stupid blogs of yours if they didn't work for the paper. Do you think anyone really cares??? Let me guess...you worked for the paper and they forced you out.

Aug. 20, 2008

Response to post #11: The crumbling of the Copley empire is big news. Many people besides employees and ex-employees are interested in this topic. I was financial columnist for 30 years, and financial editor for most of those years, of the Union and later the U-T. I was neither fired nor forced out. But they were delighted to see me go. Best, Don Bauder

Aug. 21, 2008

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