Photo by Mark Brewer
Watching today’s newspapers, we get a sense of how the blacksmith must have felt when he saw the increasing flow of Model Ts drive past his shop: “What am I going to do with all these tools?”
Today’s blacksmith is the newspaper industry, and the Internet is the Model T threatening obsolescence for newspapers. Locally, the most prominent victim of this upheaval is The San Diego Union-Tribune, a newspaper that served (and was served by) San Diego for more than 80 years under Copley family ownership until its sale this spring.
The Internet, catalyzed by changing lifestyles and a deep recession, has caused the venerable Union-Tribune to wither like a flower in a drought. San Diego’s daily newspaper has acknowledged an advertising revenue decline of more than 40 percent since 2006, with a daily circulation drop of almost 10 percent for the 12 months ending in April—undeniable free-fall.
As with any newspaper, the U-T has had its critics, but this problem is not tied primarily to quality. It isn’t a matter of having failed to build a better mousetrap, because—to stretch the metaphor—advertisers, the mice in this case, are no longer very hungry for the cheese.
No less a financial whiz than Warren Buffett, himself a newspaper owner, warns against newspapers as an investment. “We would not buy them at any price,” he said in May. “They have the possibility of unending losses.”
Faced with this depressing reality, U-T owner David Copley sold to Platinum Equity of Beverly Hills in a deal completed May 4. Because the paper was privately owned, no sales figure is known for certain, but The Wall Street Journal reported the “fire sale” price was less than $50 million—and that only because of the paper’s valuable real estate assets. The Journal says the U-T could have been worth $1 billion in 2004, just before the Internet tornado slammed into newspapers. That represents a drop to a nickel on the dollar in the space of five years.
Although Platinum has no history in the newspaper business, it does boast of “rescuing” troubled companies and rebuilding lost profits. The U-T’s own story of the sale said, “Platinum specializes in acquiring businesses facing complex operational challenges in declining or transitioning markets.”
But if there are no prospects for revenue growth, as with the Union-Tribune, how does Platinum do a profit “turnaround”? The most expeditious route is cutting costs and staff, and Platinum is not shy about that. The company greeted its new U-T staff by cutting 192 of them on May 7, just three days after the takeover. On that date, Rob Davis of the Web site Voice of San Diego wrote, “The company, which once employed 1,422, has now shed 572 jobs—about 40 percent of its workforce—since late 2007 through a series of buyouts and layoffs.” On top of that, the U-T said it would impose salary cuts, healthcare contribution cuts and involuntary unpaid furloughs.
Ed Moss, Platinum’s new publisher, who comes from a group that owns the Los Angeles Daily News, was followed out of that town by this Internet screed from Ron Kaye, the editor he fired there: “Sending Moss to fix a struggling paper is like sending a mortician to treat an ailing patient. He will do the only thing he knows how to do: Cut, and cut, and cut some more. When he’s done with his handiwork, the U-T will be ready for embalming and burial.”
All of this leaves a lot of San Diego journalists out on the street. Their pain is exemplified by this plea from one of them on, tellingly, an Internet blog: “I will entertain any and all job offers. I currently live in San Diego, but as of today I’m willing to move anywhere.”
Many casual readers and news junkies, also left pensive, are wondering from whence will come the news as their local papers slip into decline.
Can the Internet, which generated this implosion, also fill the void? Certainly, there are several Web sites and blogs in San Diego that push forward opinions and ideas on the Net. But it’s common for such bloggers to have axes to grind or baloney to sell. And even if they know what they’re talking about, professional news coverage requires extensive resources, and operating from the family-room couch with a laptop doesn’t cut it.
A sustainable and successful news Web site requires three basics. One: money, and lots of it. Two: finding a way to induce advertisers to buy ads on your pages—a goal that is the golden fleece of Web site owners, and almost as elusive. Three: a professional news team to do the pick-and-shovel reporting, covering subjects and events that are important to the public yet often lack sex appeal, such as city hall budgets and school board contracts. The heavy cost of number three circles right back to number one: money.
Presently, three competitors vie to fill the role: SignOnSanDiego, Voice of San Diego and the San Diego News Network. San Diego CityBeat and the San Diego Weekly Reader also have Web sites and are feisty pursuers of “alternative” news. Both love to pinch fat civic posteriors, but they make no pretense of covering the news comprehensively.
SignOnSanDiego.com, the Internet stepchild of the Union-Tribune, is the senior candidate among the three vying to be our major online “newspaper.” It has a huge staff because it draws from the work of U-T reporters, and it generates revenues far greater than all other local-news Web sites combined. As of mid-July, it was drawing 1.1 million visitors per month.
U-T resources are SignOn’s obvious strength—but also its biggest problem. The cost of those stories is currently running the company’s profit-and-loss statement heavily into the red. And as the new owner cuts more staff and reduces news coverage, the pinch will hurt SignOnSanDiego.
If newspapers are in a death spiral—as many experts claim—SignOnSanDiego can eventually be pulled down or greatly weakened along with its parent. It won’t happen today or tomorrow, but it may on a day not too distant, which is the sense of those who study the industry. An orphaned SignOnSanDiego would be left without a support structure but with heavy operational costs.
Both The San Diego Union-Tribune and its SignOnSan Diego declined interview requests for this story.
The nonprofit Voice of San Diego (voiceofsandiego.org) has earned considerable respect since its founding, but not so many visitors—now about 40,000 per month. VOSD’s creation was made possible by San Diego businessman Buzz Woolley, who became the primary underwriter with a large cash infusion. His total investment, so far, is $1.3 million. Woolley’s involvement followed the inglorious firing of columnist Neil Morgan by the Union-Tribune. After years of extraordinarily friendly relations between reporter and corporate boss, Morgan, a local press icon for half a century, reportedly offended the Copley family by telling tales out of school. He’s also said to have butted heads with editors over his contrary positions on issues championed on the editorial page. In 2004, he was ushered out the door with the proverbial cardboard box.
Then Morgan and Woolley got together, and the Internet news site was born. Both remain on the board of VOSD, although neither is active day-to-day.
CEO Scott Lewis says Woolley’s cash infusions have been proportionately reduced to approximately one-fifth of current revenue. VOSD has recruited about 900 members, he says, whose financial support, along with foundation grants and modest advertising sales, brought in revenues of $880,000 in 2008. Lewis says the business plan is modeled after the Public Broadcasting System, although VOSD has no taxpayer support. The site has a staff of 11, nine of whom are journalists. There is a development person on staff, but the sole advertising salesperson is an outside contractor. There is no sales team.
The thrust of VOSD’s coverage is politics and public affairs. Sports are covered rarely, and lifestyle stories are generally back-burnered. In that sense, VOSD is a limited-scope Web site, as are most successful ones, such as Real Clear Politics, Huffington Post, Politico and ESPN.
VOSD has won kudos for its intrepid approach to investigative journalism—and for using real journalists to do it. The biggest trophy on VOSD’s shelf involved the uncovering of scandal in the Southeastern Economic Development Corporation last year, which led to firings—including SEDC president Carolyn Smith—and a seismic shakeup of the firm’s board.
VOSD’s strength is that it has cash coming in from donations, but the history of nonprofits competing with commercial enterprises is that successful companies grow by plowing profits and investments back into the company. Nonprofits are always trying to hustle more donations to sustain themselves. Regardless of merit, growth for them involves perpetually seeking a handout. Even PBS can’t make it on donations without government aid.
The riskiest undertaking, but also potentially the most rewarding, is the newest entry, San Diego News Network. What’s different about sdnn.com is that its founders actually believe they can make a profit. That belief is countered by the opinion of media analyst John Morton of Washington, D.C. He reflects a consensus among many of his peers that advertisers’ initial reluctance to spend on Web sites makes it unlikely a profit can be turned in the foreseeable future.
The leaders of SDNN are not deterred by Morton et al. Neil Senturia and Barbara Bry, a husband-and-wife entrepreneurial team, each have chops in real estate, technology and other fields where profits seemed to chase them. Bry also has an extensive background in newspaper journalism. He is CEO; she is associate publisher and opinion editor. They have recruited two key executives with Internet experience: Chris Jennewien as president, Kevin Cox as COO. Jennewien was head of SignOnSanDiego until last year, and he’s been a pioneer in developing newspaper Web sites.
Entering the offices of La Jolla’s Blackbird Ventures, SDNN’s holding company, one surmises Senturia is the boss. Who else would tread that plush carpet in baseball cap and T-shirt? Bry, on the other hand, appears quite business-proper, as her Harvard MBA might suggest.
SDNN was launched in late March, following a management-team dustup that eliminated one of the principals. The venture was started by Ron James, onetime editorial chief of SignOnSanDiego, along with Senturia and Bry. Just as the network was being launched, the principals parted ways, and Senturia and Bry were left in control. At last report, lawyers were sorting things out, and neither side is commenting.
In SDNN, Bry sees a full-spectrum vehicle that will cover the range of news and features in the manner of a daily newspaper. That includes offering the Associated Press, although the emphasis remains on local news. Obviously, with their resources and moneyed contacts, the SDNN leaders understand how to raise funds, and the effort is a work in progress. They are issuing stock and acknowledge having raised more than $1 million thus far.
Eight full-time journalists are covering hard news, including government, politics and breaking stories, as well as features. Additionally, SDNN relies on part-time stringers to cover sports and lifestyle. Well-known contributors are ex-U-T writers Valerie Scher, David Elliott and Arthur Salm, radio sports commentator Lee “Hacksaw” Hamilton and San Diego Magazine editor Tom Blair, who writes a thrice-weekly city column (which also appears on this magazine’s Web site) and contributes twice a week to the SDNN radio station, AM1700. Bry will also invite experts in technology, science and other areas to contribute in a program of “user-generated content.”
The network hopes well-known personalities and coverage breadth will help attract visitors. To buttress the effort, SDNN has made tie-ins with more than 20 local media partners—including magazines (San Diego Magazine among them), community newspapers, radio and TV stations—to pool reportorial resources. In fact, the SDNN offices are located at Channel 6 on Kearny Mesa. Three full-time sales executives are out hunting advertisers.
SDNN has purchased a database of 105,000 area businesses and organizations as a service for site visitors, which they also hope will provide entrée to advertisers. Meanwhile, Bry is heartened by the reader visits sdnn.com was averaging by the beginning of June—about 192,000 a month—after only about 10 weeks of operation.
In coming years, the primary thrust of the news business will certainly involve the Internet, and it will take many forms—nonprofit and for-profit, narrow-focus sites and full-service sites. Electronic media in San Diego and elsewhere is about where Ford was 100 years ago with its Model T. No one was sure what was going to happen, who would be doing it and who would win or lose. One bet seems safe: The evolution of media will not just continue but continue to accelerate. And the human factor will always play a part.
Voice of San Diego editor Andrew Donohue welcomes the emergent San Diego News Network and all other comers, saying, “San Diego needs as many voices as possible. Anyone who gives journalists jobs these days deserves kudos.”