Saturday, December 3, 2011

Ode to the Gazette: Ownership makes a difference

Posted By on Sat, Dec 3, 2011 at 8:01 PM


On Wednesday, Nov. 30, everyone’s favorite billionaire, Warren Buffett, purchased his hometown newspaper, the Omaha World-Herald, for approximately $200 million. The employee-owned newspaper is, unlike most of its peers, still profitable, financially healthy, and has long dominated its market.

On Thursday, Dec. 1, our city's Gazette announced yet another round of layoffs. Editor Jeff Thomas was among them, leaving the newspaper without an editor or a permanent publisher. Mike Burns, an ad sales guy who works for the G’s parent, Freedom Communications Inc., has been ‘interim publisher’ since Steve Pope resigned. Online content manager Carmen Boles has taken the title of “Director of Content” which is apparently gazettespeak for sorta, kinda editor.

That evening, the Independent hosted its annual “Best Of” bash at Briarhurst Manor. Hundreds were in attendance at the event, which honors the winners of the annual competition. It has always been a great party, but this was a particularly good one. Most of the attendees looked to be in their 20s and 30s, folks who might have been entering middle school when the Indy was launched in 1993.

For those of us who remember that feisty, undercapitalized little rag, it was a heady moment. Few observers, even those of us who wished the paper well, thought that the weekly and its eccentrically liberal publisher could last for more than a few months — and even fewer would have dared dream of a time when the Independent could legitimately claim to be the city’s dominant local news and information provider.

But on Thursday night, as the champagne flowed, the band(s!) played, and those of us lucky enough to score tickets partied on, it was hard not to conclude that, to misquote JFK, the torch had been passed to a different paper.

So what happened? Forget the Indy’s surprising success (and no, it’s not all due to marijuana ads!). Why has the World-Herald flourished, and why has the Gazette declined? Why are the employee-owners of the World-Herald about to get fat checks from Berkshire Hathaway and keep their jobs, while the equally diligent and professional employees of the Gazette are being shown the door?

Readers who posted on the Indy’s site when we broke the story Thursday afternoon seemed to be of two minds. Some pointed out that newspapers are in decline nationally, while others blamed the layoffs on intraoffice treachery, accusing employees who didn’t get the ax of throwing their co-workers under the bus.

They’re both right. Many dailies are struggling, and corporate politics often will determine who gets fired. In failing companies, only the cunning and ruthless survive.

But well-managed, adequately capitalized companies can get through bad times without mass firings. The Gazette has been not so much an actor in its own fate, but a victim of the folly, greed, and incompetence of its corporate owners.

Freedom Communications was not an owner, but a predator. In common with other media conglomerates that snapped up family-owned newspapers as they became available, Freedom used the Gazette’s once-massive profits to build and/or shore up its own empire. With EBITDA (earnings before interest, taxes, depreciation and amortization) from the Gazette over 30 percent of sales annually, the Gazette was an amazing cash cow. New presses? More reporters? A new building? Forget it, corporate needed every nickel.

The dough went to support massive borrowings which, among other things, financed the multi-hundred million dollar buyout of Freedom’s owners, the descendants of company founder Raymond Hoiles.

And then came Craigslist, the internet, the migration of advertisers to other platforms, the recession, and the continual demands by corporate to maintain profitability at any cost. Uneasy lenders wanted their money, and they wanted it right now.

The newsroom was gutted, the paper shrank, popular sections were simply dropped (remember Metro?), and publishers came and went every 18 months. The bleeding never stopped, even after Freedom’s bankruptcy.

Today, Freedom is owned by consortium of private equity sharks, who bought it out of bankruptcy. They’re not concerned about the Gazette and the community that the paper has long served. They want to sell, and they want to wring whatever cash they can out of the hundred-odd papers in Freedom’s portfolio. Cut a few more employees, make the paper look profitable, and clear the decks for the next ownership group.

It’s probably futile to hope that one of our homegrown Warren Buffetts will step up, buy the Gazette, and revive it. What is there to buy? The presses are old enough to be valueless, the building is an ancient wreck, readers are either dying or deserting the publication, and the valiant, overworked folks who manage to turn out a paper every day are running out of time.

The World-Herald’s employee ownership structure had its faults, but it gave the paper continuity, deep links to the community, and the ability to reinvest in itself. It has had five publishers in the last 100 years; fewer than the Gazette has had in the last seven years. Its presses are new, its building splendid, its staff professional, its market dominance still unchallenged.

And most of all, its leaders have long understood what traditional corporate ownership means. Twelve years ago, then publisher (and now board chair) John Gottschalk said, "…newspaper after newspaper has been sold into slavery, mediocrity and decline ... by owners who look at them as properties."

As Janis Joplin once sang “Freedom’s just another word/For nothin’ left to lose.”

Alas, poor Gazette; ave atque vale.

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