We converged in Denver in mid-October last year, between Covid scares. We planned to talk about the stuff that actually makes local journalism revival possible in our cities and across the country: reader revenue, our tech stacks, the difficulty of hiring and the satisfactions and the pains of building new news companies, brick by brick. We had each brought people from our own teams, who shared their victories and stumbles, in the larger group of a dozen or so.

We also decided to have a small meeting of the news organizations’ founders, which Larry Ryckman, CEO of The Colorado Sun, called our “3 a.m. session.” 3 a.m., as in: What keeps us up in the middle of the night. In that session, held under a sunlit fall Denver afternoon outside the Sun’s offices, we shared the truths that we had kept to ourselves: Insomnia, endless lists of to-dos, worries about getting our fledgling enterprises right. It was a little unexpected therapy session. Us news industry veterans, with long and diverse resumes, hadn’t known we were signing up for a high-wire act as we moved to rebuild local journalism in our communities. Sharing the angst, as well as the epiphanies, still sticks with each of us six months later.

Now, as we move back into the non-Zoom world of human interaction, our little group is planning more business and editorial work together, with the addition of at least one new key member. As The Baltimore Banner readies its launch, it joins up with the Daily Memphian, Colorado Sun, Long Beach Post, Block Club Chicago, and Lookout Santa Cruz to push ourselves and our models forward. We’ll be more outspoken about what is and isn’t working as we participate in industry gatherings. It’s not a formal group, just a working one, and we’ll go on to include other organizations dedicated to our twin missions: 1) becoming impactful replacements for dying chain dailies and 2) focusing on earned revenue to make it work.

Over the last couple of weeks, I’ve headed full-speed back into the industry conversation. Lenfest Institute and Aspen Institute brought together five dozen news industry players, doers, funders, academics, and association leaders for a local news summit outside San Diego A few days later in Austin, the International Symposium of Journalism (ISOJ) resumed its first in-person confab since 2019.

I’m still digesting both events. How much were these simply a resumption of the pre-Covid talk about local news reinvention? And how much has changed?

The breadth of new news organizations, overwhelmingly local ones, is astounding. Many are led by women and people of color. Their zeal to give their communities a fighting chance to better themselves is largely undaunted by funding woes or the difficulty of building anything new meant to last.

That old pre-Covid conference talk — “Where are we going to find $2 [or $3 or $4] billion to ‘rebuild’ or ‘save’ local journalism?” “Which ‘experiments’ in local will actually produce a new model?” — is still with us. But those of us doing it on the ground focus on much smaller numbers.

What’s the right monthly member price point — $9, $13, or $17 a month — to maximize reader revenue? Should we spend $500 or $2,000 on Facebook to generate new registrants? Is $65 a good entry price point for a new job board bundle? It’s the little numbers, not the billions, that make or break our ability to feed local democracies the news and information they need.

For hundreds of us now, this is all about execution. For an increasing number of us, it doesn’t feel like “experimentation” at all.

With one common mission — to pay more talented journalists to produce incisive, community-bettering journalism — we no longer need to debate what’s going to pay for it. The two main funding drivers are the ones that have driven journalism for centuries. First, advertising: Display, sponsorship, branded content, promoted content, new “classifieds,” or whatever. Second, circulation: Subscription, membership or underwriting. We can now add philanthropy to the mix too. (You could add “events” as well, but those are really member or ad support.)

The only debate is how the three form enough revenue for us to sustain and grow. I’m encouraged that some old debates seem to be ebbing. In the old days, too often, interviewers’ or panel moderators’ questions turned to philanthropy vs. earned revenue, or nonprofit vs. for-profit models. Now, in my public talks with new industry leaders like Sarabeth Berman, CEO of the American Journalism Project, we see far more alignment than divergence. The question before all of us is: What combination of those lines of funding gets us into the black? Onne size does not fit all. How and how much we earn in subscriptions and via advertising will vary by community.

So, how’s it going at Lookout?

We set out to create a model — not the model — for rapidly rebuilding strong, trustworthy, trusted news organizations, especially in sub-metro areas like Santa Cruz.

Our team of 13 serves a county of 276,000. Ten are in the newsroom, three are driving the business. We call that business side “Community and Commerce,” reflecting the fundamental relationship-building we’ve now done for 18 months.

We put a lot into our product, as we worked through it with our design firm, Charming Robot, and platform provider, the Los Angeles Times. Readers like the look: serious, but friendly and fun. Most important, of course, is the journalism. At our launch, an incumbent local publisher said, “We don’t need you, there’s enough journalism in Santa Cruz.” But we’ve demonstrated that’s not true. In our short life, we’ve published about 2,000 originally reported pieces — emphasis on original, not aggregated. I estimate that at least three-quarters of them covered people, controversies, or news that no one else had covered.

Do one fast-flagging Alden daily, an alt-weekly, and a small digital startup constitute a “news desert”? That term has been a shorthand, but the real problem here and elsewhere is that this region lacked the number of journalists it needed to thoroughly inform the public. The nomenclature isn’t important. The community impact is.

We’ve done big accountability stories and series on topics like school sexual assault and the difficulty of rebuilding for the 900 families who lost homes in 2020’s fires. We’re increasingly incorporating accountability work into our daily stories, pushing public officials who are unused to being questioned to respond.

Two weeks ago, I noticed something a little remarkable when I pulled up the Lookout homepage. Each of our top stories featured women, a diverse group of women doing noteworthy things in our community. Longtime women’s rights advocates Cynthia Mathews and Gail Michaelis-Ow. Esteemed cookbook author Andrea Nguyen. Local playwright Kate Hawley, who debuted her latest play at the Jewel Theatre. A succinct Q&A with Jewel artistic director Julie James (a new format readers have told us they like, in addition to the popular “Ask Lookout“). A story on Dientes CEO Laura Marcus and Santa Cruz Community Health CEO Leslie Conner, who launched a $28-million Live Oak medical and dental facility. A quick look at native Santa Cruzan Heather Rogers’ perspective on becoming the county’s first public defender. And our own Lily Belli giving a taste of the weekend with Eaters Digest. We didn’t plan to feature stories focusing only on women that week, but we want to recognize and make prominent the worthy and diverse people who make Santa Cruz County so endlessly interesting.

Our metrics are on track, despite the huge obstacle of Covid. We’re way ahead on some — branded content has proven to be a home run — and meeting expectations we set for others, including membership, student engagement, and overall audience-building via newsletters and text messages. We increasingly balance access and audience building with the ARPU (average revenue per user) that our high-priced ($17 per month) membership drives. With the help of our friends, we learn constantly and apply; the folks at Axios Charlotte (née Charlotte Agenda) have been instrumental in the success of a month-old revenue source, our job board. We have made our share of mistakes, and try to make them small ones. The goal: Keep moving.

Our revenue mix right now is about 60% advertising and 40% membership. Our promoted content — borrowed, as much of the Lookout model is, from The New York Times, in this case its “paid posts” — has now attracted almost 50 marketing partners. They love the branded storytelling, and the stories are often highly read as well. It’s community content — all local — with businesses and nonprofits largely pointing out what they are doing for the wider community. No one mistakes it for editorial content (we’ve made sure of that), and it’s produced, of course, outside the newsroom. It’s a huge win, and an essential part of the model for Lookout and for other outlets, like Canada’s Village Media. I am still amazed when I hear people advocate that only some combo of reader revenue and philanthropy will save the day. At ISOJ, Village’s Jeff Elgie joined me in exhorting the crowd to rebuild that traditional part of local news’ business model. I hope 2022 will be the year that changes.

We’re aiming for profitability next year, even as we begin planning where the next Lookout Local sites may be located. We won’t get ahead of ourselves, but we’re mindful of the increasing need for companies like Lookout. We have built out a company meant to get smarter and more efficient as we grow.

That’s the sunny part. But a few clouds still chase us.

This is as much a technology business as it is a journalism business. We made the (correct) decision to outsource our tech to the best-in-class providers we could find. Most of that has gone swimmingly, though the list of what needs at least a temporary workaround each month is never-ending. We understand that we are still early on in connecting the parts of the business model.

Then, there’s hiring.

My peers in the industry all point to hiring — finding talented journalists and business people — as their biggest challenge. More than a decade of decline of the journalism industry has hollowed out much of the talent base. Many of us have found that hiring younger people — the next generation of news — and training them is the most sensible strategy, both in the newsroom and on the business side.

We had lots of turnover in our first six months. Covid, social isolation, the strains and stresses of digital startup life, The Big Quit, and top-of-the-charts affordability issues proved almost overwhelming. But we got through it, and the community saw the service we offered in our public health reporting. We bonded with our audiences early, even as early company-building stumbled. Through it all, we kept our eye on our mission: Lookout aims to make Santa Cruz County a better place for all who live here.

We learned a lot from that experience and from the almost 12 months that have followed. Among our top lessons:

— It’s a physical, retail business. Last week, as essentially Lookout’s publisher, I met and greeted many locals at a Chamber of Commerce gala. In Santa Cruz — and in most every city across the country — the business and civic communities overlap much more than anyone would think from a distance. As a long-time editor who conceived the Lookout editorial and business model, I know we’re secure in our “without fear or favor” standing, even as I freely mix with those in power. That’s what the best local publishers always did. Being in the fray also allows us to push for more access to the people making decisions. We’ve found that in an environment like Santa Cruz, too often, a handful of public information officers decide what the public knows. We’re changing that, week by week. We believe in old-fashioned in-office collaboration. Our team enjoys a spacious workplace in downtown Santa Cruz. Our conference room has been used by community groups, and at the end of the month, we’re hosting an in-person open house for our members.

— It’s the locals who stay with it the most. This is tough work. People who have lived in the community have an additional reason to see through the hardest parts. Though we initially hired from across the country, our whole staff of 13 is now made up of Californians, nine of whom have strong Santa Cruz ties.

— You can’t make all the people happy all the time. We know that from the entire history of newspapering, and learn it anew in what I am test-driving as The Newspub Era. We make choices: More or less investment in accountability work, more or less investment in the culture and guides. It’s an imperfect art at best — and there are always critics, local and sometimes national.

You can’t build a local news business without doing lots of things for people. As Richard Gingras, Google’s vice-president of news, has emphasized at ISOJ and elsewhere: Focusing only on accountability journalism won’t serve enough of communities’ 2020s news needs — or provide a model for paying for them. Recently, we introduced the Santa Cruz Puzzle Center. Readers have taken to it immediately, and our arts, entertainment, and food coverage brings many readers to our civic reporting. We’re not trying to recreate the once-successful daily; we’re creating a new digital-native product to provide for what readers want today.

— The community wants agenda-setting. Later this month, we’re launching Community Voices, a center for opinion and commentary. Santa Cruz is paradise with lots of problems, and one key role of local media in the 2020s is bringing a key eye to the real issues and the best solutions.

— All-in commitment is a great tonic. I recently talked to an old friend about a project we were working on together. He could hardly engage, so troubled was he by the news from Ukraine. What’s going on in the broader world is bleak, more than enough to depress and deflate us. I’ve put all that in the back of my head because I have little time or room to address national or global issues on which I can have little impact. I’ve been working on Lookout now for more than three years, and it’s the hardest, most consuming thing I’ve done in a 47-year career. But as I, and my peers, focus fiercely on rebuilding our little parts of the planet, we focus on what we can change.

Altogether, it’s been a wild and still foundation-building experience, one I wouldn’t trade for anything, even as I see so many of my old colleagues enjoying some retirement. Journalism remains a noble and humbling way of life. And in our business, it’s always 3 a.m. somewhere.

Yet, Lookout Santa Cruz brought the county’s public health leaders and other experts together (via Zoom, of course), at a particularly dire and fearsome time. We got the word out through Lookout, through our nascent partner network, and on flyers distributed with Second Harvest Food Bank bags.

How many might sign on? Would anyone actually show up?

More than 500 people signed up for the free evening event, and more than half stayed the full 90 minutes, listening in either English and Spanish. More than 100 questions were submitted by attendees.

That’s when we first knew we were on to something. We’d seen the first coalescence of what’s becoming a profound, interconnected 3 C’s of Lookout’s strategy — content, community, and commerce.

We’re counting additional epiphanies as we gain market experience. We’ve identified “ad deserts” — proving so far that marketing partner branded content can produce ample early revenue. We’ve seen that the strong link between timely content and the convening of public forums can quickly build brand and awareness. We’ve seen that the web of civic betterment/local business community connection is bedrock to the revival of community-supported local news. We know that relatively high, but fair, value-based membership pricing can speed the business-rebuilding of local journalism.

Overall, we now believe that the digital local nexus of content, community, and commerce, powered by appropriately scaled smart tech and bright minds, forms the foundation of Lookout’s early success, and our planned expansion. What that nexus looks like evolves each week, but it all derives from our mission statement, an unusual one in the news business: “Lookout aims to make Santa Cruz County a better place for all who live here.”

Lookout’s been a wild ride since our pre-Thanksgiving, into-the-teeth-of-pandemic launch of what we believe will be only the first site as Lookout Local proves out our model over time. Seemingly an eon ago, Josh Benton and I talked about our pre-launch plans last August. While it’s still very early on, we’re now glad to share first learnings and some key metrics that tell us we’re on the right track.

The early signs all point to what we believed: If we built a modern product built for quick swipe mobile reading and filled with ever-deeper, lively content, the wider citizen, civic, and business communities would respond. Still a half year of even good metrics is only that; it’s too early to declare success.

We’re now looking for a new top editor, ready to build the next stage of Lookout Santa Cruz and then Lookout Local more widely with our great overall team of 14. We’ve just opened a new position for a community voices/opinion editor, aiming to bring in the widest set of spirited, solutions-oriented, text and video commentary. In addition, we’re recruiting for correspondent positions, storytellers who are enthused to work deeply in this community and with data.

Launching into Covid — and against Alden

Soon after we formally announced a late fall launch for Lookout Santa Cruz, Alden Global Capital — the operator of the Santa Cruz Sentinel — did something it’s rarely done: It added newsroom staff. Reports told us that its non-sports contingent of three was being doubled. Alden, here, was responding to competition, maybe “investing,” more likely moving full-time employees from less-competitive markets. I’d made a big deal about the Lookout model being a replacement for failing, or suicidal, dailies. We announced a newsroom of 10, intending to become, as quickly as we could, the primary news source for the 276,000 people in Santa Cruz County.

Are we competing with the Sentinel? That’s a curious question. On the ground, it seems like we’re two trains passing in broad daylight, one headed into a frontier future, the other Dopplering into history. Print vs. digital isn’t really a fair fight, as long as digital’s got the time and money to see it through.

Yes, we aim to replace the community glue function of financially leveraged dailies, but we’re building a new modern model.

There are the metaphors, and there are the numbers.

While still in our infancy, our weekday newsletter list of more than 10,000, with a good open rate, already exceeds the Sentinel’s daily print circulation by more than 3,000, with the gulf growing each week as we gain and they lose. Yes, the newsletters are free — a mid-funnel product patiently building a durable reader habit, acting as our biggest converter of readers to paying members — and the paper is “paid,” but the trendlines are stark.

Consider our pricing: $17 per month or $187 a year, what we like to call fair value pricing. With a limited free access system in place for fewer than four months, we’re approaching 1,000 members paying that price. Of those, 76% have opted for annual membership.

The tiny number we love the most: six. That’s the total of members who have quit us since November.

The Sentinel just made its Memorial Day offer: $2 for six months. Do the math — and dailies are back, literally, to the penny press days of the 1830s.

$17 a month compared to a penny a day? We’ll communicate the value of our product/service, then back it up, in both the journalism and the community betterment work.

It’s brick by digital brick.

We launched Lookout in Santa Cruz knowing Alden had decimated a paper that had once been a community leader, owned by a local family, then a quality chain (Ottaway), until it fell into the hands of financial engineers. What we didn’t know is that in our first year, we would be competing — using a polar-opposite model — with what is now becoming the second-largest newspaper company in the country.

Does that make us an anti-Alden? We now all know the Alden playbook, but the makeup of those who stand for polar opposite values — big city and little city independents, family-directed smaller chains and the nonprofit startup movement — is so diverse, and hard to see as of a piece.

As we look at the Alden strategy and Lookout’s, it’s like a funhouse mirror:

— Short-term profiteering vs. our built-to-last intention to invest in deep, long-term community connections and betterment.
— Getting by with as few journalists as possible, vs. us spending 70% of our budget on the newsroom, a long-term investment given our public be.
— A shrinking of the public face of the paper vs. us flooding the zone with our staff engaging every way we can with the public in forums, Lookout Listens sessions, Zoom intros, member events, and, soon, street fairs. Two key positions we’ve invested in early on: A director of community partnerships and a head of events.
— A social media strategy that has made us the most actively engaged social medium among local news providers, one that interacts with communities and their members wherever they are.
— A print-centric business vs. us being digital first and always, able to harness the full power and potential of a modern platform.

We don’t wake up each morning to compete with a print daily, but rather to run our own local news and community model. That’s the key.

Still, there is a kind of harmonic convergence in now “competing” with Alden, given my own role in exposing its outsized profits four years ago. When I first noticed the aggressiveness of Alden a decade ago, and wrote about it here, it had bought the small and woebegone Journal Register company and had already accumulated stakes in a half-dozen newspaper companies. Now, despite all the citizen protest, politician harrumphing, and journalist pleading, Alden’s gobbling of Tribune Publishing leaves no doubt that Alden and other financial buyers will consume more of the shriveling daily press, as long as the money is right, until there’s little left.

As early as January 2020, I’d focused attention on Alden’s impossible-to-refuse embrace of Tribune. As I’ve been consumed with building Lookout, I was left to watch the inevitable unfold — yet again, as short-term financially driven “newspaper companies” approach ownership of 50% of the country’s daily circulation.

We know how that story is ending.

The new story

A new story is being written.

Nieman Lab has chronicled many sprouts of local news revival, growing unevenly. As we return to in-person conferences, the big topic won’t change much: What can really make up for the end times of the daily print local press?

It is good news that low thousands of non-daily paper journalists are out there plowing new ground, but we need many thousands more journalists hired, trained, and deployed across America (and far wider in all the democracies, all of which suffer the same issues, to varying trajectories).

I’ve differed, philosophically and strategically, with some of my peers in the revival movement, in my writing at the Lab, in conferences and talks. Lookout is a mission-oriented, for-profit, public benefit company driven to prove that local news can still be a market good. We love philanthropy, and see it as great for seed and supplement. However, we believe that the combination of earned revenue from well-paying readers, community-centric businesses, and events will likely be the only way that thousands of journalists are able to be paid fair salaries, fully repopulating the news deserts. That makes us a bit contrarian these days.

Still, what unites us all — the American Journalism Project, LION, INN, Report for America, the National Trust for Local News (which just made its first investment, helping the Colorado Sun boldly snatch a group of weeklies from the grasp of Alden), and many more — is far more important than those differences. We must find robust ways forward, or we risk the further diminution and defiling of our democracy. The recent attention given to new local aggregation plays is at best a surface-level attempt to solve for a deeper, more acute problem — the need for much more well-reported, original local news. It’s a kind of faux local, when what America needs is simply well-reported, original local news.

A few early metrics

If our goal is earned revenue, how are we doing? With our big goal of earned revenue, we have paid rigorous attention to our metrics, building new processes to achieve them.

We love data. And after six months we now have enough of it to fully make use of a Lookout tech stack built for expansion through integrated partnerships with the Los Angeles Times, BlueLena, ActiveCampaign, Parse.ly, Pico, Second Street, and Subtext. These numbers are very early, but they’re moving in the right direction.

As I mentioned above, 76% of our members have opted for an annual subscription, and just six people canceled. Our net revenue per member is $164 per year, after our community giveback program costs. With that program, every new member picks one of five community nonprofits, and Lookout donates 10% of the membership fee to that group. The goal: community betterment is a universal Lookout membership benefit.

When it comes to advertising, we have 17 market partners, with an advertising renewal rate of 100%. Average revenue per advertiser is $2,000-plus per month. We ask for a three-month minimum contract, with the average range between three to six months and increasing.

Our net promoter score is 51 among members, and 22 among people who’ve registered for the site.

And half a year in, we’re more than 30% of the way there in matching our earned revenue to our monthly expenses. That’s ahead of where we’d hoped to be.

The three C’s

Let’s return briefly to Lookout’s 3 C’s: Content, Community, and Commerce.

For us, innovation is often about applying the best ideas of others, rebundling them in new ways. It’s more alchemic or recombinant than inventive.

In this exhilarating and exhausting adventure, we have borrowed from myriad models — from The New York Times and Financial Times to the Daily Memphian, Charlotte Agenda (now Axios Charlotte), Colorado Sun, Block Club Chicago, and the Long Beach Post, and from Morning Brew to Skift, Spirited Media, and Community Impact — we’ve tried to incorporate the best ideas that so many have built and generously shared, and put what we consider the best of them together in new ways.

Community. Take the great, outsized success of The New York Times and scale it way, way down to our relatively small market of 276,000 in Santa Cruz County. In reporting on The Times’ transformation over the last decade, I’ve emphasized that it’s the thinking — not just the level of resources applied — that’s made the difference. An intense reader-first focus. Product thinking. A tech-driven funnel that drives both revenue and quality. Branded content, smartly created and deployed. Making the major investment in journalists the core of the strategy.

All of that requires an appropriate level of resources, whether you are trying to serve a market of 331 million (plus the globe) or a county of 276,000.

We’ve added a new input to the Times’ formula: We’re putting money and labor into community engagement and community betterment. The Times represents the gold standard of a national and global news company, but it can’t serve, rally, and challenge the people of Santa Cruz County. We can, and we will. In one sense, that’s a special sauce, waiting to be applied across the country, I think.

Our stated mission — “Lookout aims to make Santa Cruz County a better place for all who live here” — drives us philosophically and strategically. How we do that is two-fold: the ever-better local news report and the deployment of a range of community betterment initiatives — solution-oriented (and other) events (in-person and Zoom), those community give-back programs associated with membership, the creation of more than 60 “civic group pages” and regular listening sessions with all segments of our communities. We’re now putting the finishing touches on a broad access program for the county’s students.

Such a mission doesn’t diminish us as a news company; it multiplies our ability to do more and better solutions-oriented journalism. Healthier communities nurture healthier journalism, and vice versa.

You have to like the spirit, and the naming, of startup The Oaklandside. We can — and should — be on the side of our communities. Properly done, that’s not boosterism, but quite the opposite, exposing what needs to be exposed and exhorting what needs to be exhorted to make local democracy and local civic life newly vibrant in this confusing and challenging national environment. That’s a key reason we embraced Lookout as our brand.

We are not anonymous in the community, operating out of a distant, faceless distribution center.

What we’re doing is real modern “newspapering.” We’re in the fray, as a part of the community. We’ve presented to most of the Rotary Clubs and Chambers of Commerce in the county. In a town without a real publisher, I’ve become one.

Our team will soon move into a real office — built for collaboration — downtown, with a sign. I hope that people will drive or walk by and say, “That’s our news company,” throwing any epithet they want our way. We’ve done Zooms with innumerable civic groups, local boards and schools. We take every opportunity to connect. And in email and now (!) in-person conversations, people tell us in many ways, “Lookout feels like Santa Cruz.”

Just one: “I love it. The newsletters are fantastic. The best way I can describe Lookout is that every time I read it I feel like my soul took a shower and then I get mad because I realize my soul wasn’t getting the shower it needed beforehand. We’ve needed this outlet for years. I can’t believe we limped along without it.”

Commerce. Commerce, we believed from the beginning, must be part of any comprehensive news, information, and entertainment site. Imagine a city landscape with only housing and no stores. I visited Prague and East Berlin soon after communism crumbled in Eastern Europe, and still recall the oddness of seeing main street upon main street without a store.

Shopping, buying, interacting with other humans is part of what we do in cities, and so we believe commerce must be part of a revived local news model.

Lookout had no intention of competing with Google and Facebook, or focusing on Amazon-beaten-down and Covid-hammered retail, so we aimed to test thoughtfully written, clearly labeled, branded content on a very local level, clearly delineating promoted content from editorial content.

In early pitches, we said, “Thanks for considering Lookout. We know we’re brand-new and that you have a lot of places you can spend your marketing dollars.” We often heard the reply, “Actually, we’re glad you are here. We really don’t have the right places or the right ways to reach our audiences.”

So, slowly, we’re surveying a kind of ad desert. Sure, there is plenty of competition for ad dollars — but a real hunger for meaningful ways, on the phone and on the desktop, to engage with would-be customers.

Today we count 17 marketing partners — among them, the leading financial, education and health players in the county. Not one that has signed up has failed to renew. These multi-month partners, with our help, both tout their wares and highlight their own community connections and social responsibility causes.

Businesses have bought (figuratively and literally) into our community-forward mission. They love the dynamic, multimedia storytelling, which has spurred robust reader engagement. Just as our deepening community involvement has deepened our coverage, so has our relationship-based selling — a get-to-know-you-and-strategize-with-you process to form business partnerships that should last — furthered our community engagement.

Content. If you had told us a year ago that six months in, Lookout’s business model might be more advanced than its editorial model, we would have been surprised. The challenge we’d set out, of course, is proving out that communities would financially support revived local news.

It seemed as if creating the news product, given my own and our staff’s experience, would be the easier work. Curiously, though, it’s been a challenge. Maybe that isn’t surprising considering that we were born into the sea of Covid and are just now aiming to find our land legs as terra becomes firmer. For the first time, as we enter summer, we can approach normal coverage of a community that’s active, engaged and physically connected.

We approach what I call our post-launch period having published almost 2,000 stories, and have now showcased the best of them. These have been mostly local, with some assists from our valued content partners, including the LA Times, CalMatters and Kaiser Health News. These are almost all stories that this community would not have seen otherwise.

Readers scan through our stories with our homepage, highly visual, rotating Instacards, and, of course, through every manner of side door, familiarized one-by-one by our varied outreaches, with uniquely voiced and diversifying newsletters, text alerts, budding Spanish-language content, forums and events, and more. As we do all of this, more readers begin to make Lookout their go-to destination. We set out to create a local news product that didn’t look like a newspaper, and we have succeeded with that foundation.

I think we excelled from day one with our Covid coverage. All 2020, as a reader, as a citizen, I decried how little we knew about the local hospitals, the local nursing homes, the local toll. “Knit masks for the nurses at Dominican Hospital,” we were exhorted in the spring, but we had no idea what it was like inside Dominican, our largest hospital.

We took the challenge and through the depth of winter and uncertain spring, we told the story well, and then dove headlong into the early confusion of all things vaccine as Covid fears turned to joyous tears at mass vaccination centers. We got correspondence that made us — all remote half of the time, of course — cry: “I never would have gotten the vaccine without your help,” read one of the many thankful notes.

Now, we’re embarking more fully on our original editorial mission. That’s to tell the full range of stories about this place and its people that I like to call “paradise with problems.” We get to stretch our full accountability muscles, having proven some early mettle in our coverage of school district sexual misconduct. We get to expand widely into culture, arts, and entertainment. We get to cover — in person — all of the communities in our increasingly diverse county.

For me, Lookout has been my sixth career in journalism, after alt-weeklies, city magazines, daily newspapers, corporate digital transformation and my Newsonomics analyst work. And it’s been the most consuming.

We have set ourselves a sometimes-daunting mission, but within the bounds of one market and a couple of million dollars in startup capital — assembled from mission-aligned backers, not financial players — we are doing our best to deploy it. Humbled by the pains of this startup, we remind ourselves that the Times, like Rome, wasn’t built in a day, or six months.

Many of these complaints are dumb ad hominem attacks that seek to delegitimize questions raised by outsiders. But some draw blood. The question is even more complicated for those of us who write about the media; our jobs and our beats intersect in all sorts of ways, of course, but plenty of journalists and news executives still downgrade any criticism coming from someone they think doesn’t “get it.”

So it’s noteworthy when a journalist moves from critic/analyst to builder/CEO. And in this case, the person stepping into the arena is Ken Doctor, who has been writing about the travails of the news business — most prominently the local newspaper business — here at Nieman Lab for more than a decade.

Like most of us in this strange meta-journalism world, Ken had a long career in the coal mines before becoming an analyst. He was, at various points, publisher of an Oregon alt-weekly, managing editor of the St. Paul Pioneer Press, a vice president at Knight Ridder corporate working on digital content and strategy, and an industry consultant. And now, in what he calls his “sixth career,” Ken is going back into the news business, as CEO of a new startup called Lookout Local. He announced the shift here back in October, and today the company moved out of stealth mode.

Lookout hopes to eventually expand across the country, but it’ll first prove out its model in Santa Cruz, California, where Ken lives; Lookout Santa Cruz will launch later this fall. (They’re hiring!)

What will make Lookout Local different from all the other local news sites out there — from the scale-hungry like Patch to the mom-and-pop neighborhood blogger? Here are a few things that stand out to me:

• Lookout doesn’t want to be a supplement, an adjunct, or an alternative to the local daily newspaper. Lookout sites expect to be the news source of record in their communities. Its Santa Cruz site expects to launch with more than twice as many local news reporters as the Santa Cruz Sentinel, the daily in town that’s been strip-mined by the hedge fund Alden Global Capital.
• Lookout is local, but not parochial — something Ken says he learned from his days at Knight Ridder, which wasn’t afraid to mix in ambitious original national reporting with local happenings. Lookout’s tech stack will come from the Los Angeles Times. It will add selected national content from partners like ProPublica, The Marshall Project, and Chalkbeat to contextualize its local reporting. And it aims to invest in product development at a level most local sites can’t match.
• Lookout is focused on taking a newspaper-like institutional position in its communities. That means partnerships with local nonprofits or universities, persistent outreach to civic groups and businesses, and the sort of focus on civic improvement a good editorial page used to offer.

It’s that first item that I think is most significant. There are many communities where vigorous digital news sites play important and positive roles in the information ecosystem. But there are many fewer where the largest newsroom is attached to anything other than the local daily newspaper. As private equity and hedge funds continue to bleed America’s newspapers — and as they inevitably start shutting them down altogether — there’s going to be a bigger hole to fill than most local news sites can, at least right now. Launching with more size and greater capacity makes the prospect of a future without local newspapers more tenable.

And Santa Cruz is, in many ways, an ideal market to test Ken’s ideas in. Most obviously — and least replicably — he lives there and already knows many of the key people a new news outlet would most want support from. Santa Cruz is also rich, a college town, and famously activist — all factors that can offer the social capital to help make an effort like this successful.

It’s also a city where the newspaper is in really sorry shape, thanks to Alden. In 2014, the Sentinel had a 20-person newsroom, with reporters dedicated to beats like agriculture, local arts, health care, housing, religion — even surfing. Today, that newsroom has been reduced to six people: a managing editor, a city editor, a sports editor, a photographer, and just two local news reporters. (The city does already have another interesting local news startup, Santa Cruz Local, started by Kara Meyberg Guzman, a former Sentinel managing editor. We wrote about it briefly in December.)

Having edited Ken for a decade, I know there aren’t many people with a deeper knowledge of the local digital news world. Does that mean he’ll be the one to figure out ~~~THE SOLUTION~~~? Maybe! He’s gathered up many of the best ideas of other local startups and tried to mash them into one epic package. He should have the resources to give it a solid go, and he’s adaptive enough to shift strategy as Lookout learns what works or doesn’t. How well his model will apply to other communities — those without Santa Cruz’s advantages, or those where the hedge fund pillaging of the local daily hasn’t been quite so severe — will take time to determine. But it’s got a shot, and that’s enough reason for optimism these days.

Ken and I talked about Lookout and his plans recently. Among the topics we cover below: the news sites he takes the most inspiration from, why nonprofits can’t solve the local news crisis, and how so-called “news deserts” are often “ad deserts” too. I started out asking him how it’s been balancing his writing for Nieman Lab — he broke some substantial news this summer — with launching a startup.

So access. In the AJP model, one of the principles is no paywalls. [The American Journalism Project, co-founded by Chalkbeat’s Elizabeth Green and Thornton, provides venture philanthropy to promising digital local news companies and says grantees’ core product “must be free to the public.” —Ed.]

And I’ve said to them: That’s great, in principle. Yeah, we want everybody to have access to it. I want everybody to have access. But tell me any model that’s going to actually sustain a news company and allow it to grow that isn’t heavily based on reader revenue. And show me any reader-revenue model that is strong enough to do that that doesn’t have a paywall as a foundation. And there is there isn’t one; public radio is its own thing and it’s 40 years old.

So the access model, to your point, is do a paywall, get those who can pay, and there are many of them, to pay — and then provide as wide access as possible to those who essentially can’t or, in some cases, won’t. So we have used, essentially The New York Times’ model there. We want students to have access to Lookout. We believe that’s key to their civics education and democracy. And so we are finding benefactors who will help us get access to students and schools. Students throughout the county is our goal — we’re about halfway there on that.

In terms of coverage, that’s where the mission orientation comes in. It’s got to be a strong business to sustain and grow the journalism we want to do — but we don’t evaluate coverage areas, coverage topics by how much money they’re gonna bring in. We will be very data-centric in following what readers are actually reading and in terms of membership funnel and all of that. But we are committed to covering this whole county, of having at least some of the staff being bilingual. And I’m already working with leaders in south county — for instance, there’ll be a whole series (made hard by the pandemic) of listening sessions. What does that mean, to cover an area that hasn’t been covered? Watsonville is the major city in the south part of the county — how do we get Watsonville and Santa Cruz to understand each other, actually putting together a project on that in addition to the way we assign beat reporters. So I think it’s both access and coverage, and it’ll evolve over time, but we have a very strong commitment to it.

Last week, the Times announced Levien as its new CEO, succeeding her boss and mentor Mark Thompson, who retires after one of the most transformative runs of any publishing executive in modern times. The appointment surprised no one who has watched the Times. Soon upon his 2012 appointment, Thompson shook up his own executive corps and hired Levien the next year to review and renew the Times’ traditional ad operation. She came to the Times immediately from Forbes, with crucial early experience gained at entrepreneur David Bradley’s shops, first the Advisory Board and then the Atlantic.

She quickly transformed the Times’ ad operation – in the process, “turning over” 75% of the staff — and pivoted to a branded advertising/high-end storytelling strategy, targeting fewer but larger accounts. That decision anticipated the deepening domination of the Google/Facebook ad duopoly, which has taken most of the old “newspaper” ad dollars. While the Times’ digital advertising strategy has seen self-acknowledged choppy results over the years, it now stands as a vital and sustainable secondary revenue stream to reader payment. In my interview with Levien last Wednesday, below, we talk about the unification theory newly connecting digital reader engagement and the Times’ newer ad business.

Levien became chief revenue officer in 2015. She inherited a model digital subscription business that was successful and still in its early stages. Since then, the Times has been optimizing that system, resulting in its greater turn-the-corner successes of the last few years.

Over that period, Levien and Thompson have seemed to work in lockstep. Her ascension to COO three years ago made her the clear heir apparent.

Over the seven-year run, the team of Thompson and Levien have brought the Times to an enviable business position, which I’ve chronicled in the equivalent of a couple of books at Nieman Lab. In short, let’s consider a few numbers that broadly tell the tale:

60%: Reader revenue now accounts for six of every 10 dollars of the Times’ revenue. That one number tells the story of a transition from a print-centric product that long depended on advertising for 70% of its revenue, and on readers for only 30%.

6 million: The Times can now claim six million subscribers, more than five million of them digital ones, and the remainder high-paying (as much or more than $1,000 a year) print habituées. Of the digital subscriptions, about four million are for news; the Times recently hit 1,104,000 in subscriptions for its Crosswords and Cooking products. The Times is on track to meet its 2025 goal of 10 million total subscriptions, with two million of them expected to be sold outside the U.S.

1,700: That’s the size of the Times newsroom, up 200 from 2013, a crucial change in force that has served the country well through the Trump Era; note all of those multiple-byline stories.

700: That’s the number of people in the product teams. In and itself, it’s an amazing number, one that speaks to the very notion of news product, how to present it, and how to convert readers into subscribers. The journalism is the foundation, but it’s the digital business infrastructure built atop that has propelled this success.

$45: That’s the share price of the New York Times Co. at Friday’s close.  That’s up from a low of $26 within the last year, $4.97 in the depth of the Great Recession, and $10.90 four years ago. Investors believe in the Times story — and future cash flow.

$687 million: That’s the Times’ report on its cash-on-hand, a comforting number in this chaotic moment.

3 million: That’s the audience of The Daily, the Times’ precedent-setting morning podcast, stewarded by Michael Barbaro. Audio was an experiment just three years ago, and one the Times has steadily invested — for both reasons of subscriber conversion and engagement and of advertising, which has remained more resilient even as Covid closures have tanked print placements. In fact, on the same day the Times elevated Levien, it announced the acquisition of Serial and a strategic partnership with the multiple award-winning This American Life. That, combined with its purchase of Audm just four ago, certifies this key strategic focus over the next several years.

All in all, it’s been a stunning comeback for an old American news institution burnished in the modern age by Watergate, but then threatened by possible insolvency in the Great Recession. When the Times announced its paywall in 2011, it was met mainly with guffaws and groans: People paying for news?! Implemented in 2012, that reader revenue system to-be now has shown the only path leading some news companies to a successful and sustainable future.

The Times is joined by more than a dozen transforming well news companies on several continents. Many have diversified, powering up on non-news operations to offset problematic news models. The Times, perhaps alone, has doubled down on the basic business of news delivery, perfecting the productization and monetization of it in better ways than others. The more unique content it produces, the more subscriptions it sells. The more subscriptions it sells, the more it invests in content. It’s a new, highly virtuous, circle, and one needing much broader implementation across the news landscape from the communities across North America to the wider reading globe.

We only know some of the issues that lie ahead for Meredith Levien and the Times. The ad recovery from the Covid nightmare. The possibility that readers will need a break from the intensity of chilling, round-the-clock news alerts. Worldwide economic recession. Protests that have shaken the larger world the Times serves, and its inner workings.

Last week, I talked with Levien about her new role. As CEO, a job she’ll begin in September, she’ll now be in charge of “the company” — finance, human resources, legal, and print production — as well as the business side that she’d led as COO.

Importantly, given the Times’ unusual structure, Levien’s responsibilities do not include the newsroom. At the Times, both the executive editor, Dean Baquet (who, like Thompson, will likely be headed to retirement sooner than later) and the CEO report to publisher A.G. Sulzberger. It’s a structure that has worked well for the Times lately, given a new level of collaboration in a company culture long known for its fierce territoriality.

My interview with Levien, lightly edited and condensed for clarity, is below.

Two people working at The New York Times in similar jobs could be having very different experiences, and that is something we have to fix. This should be a place for the most talented people in journalism and digital product and technology to work, a place they can come and do the best work of their careers. It will be my job as CEO to ensure that that can happen. We’ve got a couple of really big, important searching bodies of work on how we do this more effectively as an employer and how we make the reports more inclusive.

There were attempts at theatrics. Would thousands of retirees have their pensions saved? Would mustache-twirling Alden Global Capital tie McClatchy’s properties to the railroad tracks as its train rounded the corner? And, most intriguing of all, would the Knight Foundation bet $300 million-plus of its $2 billion-plus in assets on trying to revive an old newspaper company?

That last possibility came and went without public acknowledgment, but down the road it may look like a retrospective tipping point in the disappearance of the American daily press.

In the end, any drama was distilled down to a moment of awkward comedy: Passionate supporters of a vibrant free press rooting for what they hoped would be the less damaging hedge fund to come out on top.

Things turned out just as we and everyone else were predicting back in February, when McClatchy and CEO Craig Forman acknowledged their financial dead end and filed for bankruptcy. On Sunday, the board of the No. 2 newspaper chain in the United States picked the winner of its thinly attended auction: Chatham Asset Management should be the new owner of McClatchy.

It is just a recommendation; bankruptcy Judge Michael E. Wiles must still bless the deal, which he’s expected to do July 24. While we’re still waiting on some details of the deal, including how much Chatham will pay and how much McClatchy’s creditors will get, we can sum up this little chapter in daily descent in 10 points.

All lips are sealed, publicly, but numerous sources tell me that, as of today, there are three bidders for the 30-newspaper chain.

We know two of them, and they’re familiar names to those who’ve watched the news industry’s conquest by hedge funds and private equity. And the list doesn’t include the knight-in-shining-armor many had hoped would turn McClatchy into the country’s first nonprofit newspaper chain.

As we’ve known for months, Chatham Asset Management, both McClatchy’s leading investor and leading debtholder, is among them — and still the likeliest to become the company’s new operator by the end of July.

Also bidding is the now-ubiquitous [cue horror-movie intro music] Alden Global Capital, the Randy Smith/Heath Freeman-run hedge fund that operates MNG Enterprises and is in step-by-step pursuit of Tribune Publishing.

There’s also an offer from a third financial player, but insiders report that it’s a non-starter.

While Alden’s participation here isn’t particularly unexpected, it’s significant — and may help explain the tighter hug Alden wrapped around Tribune last week.

The biggest news, though, is who didn’t bid. Last week, I noted that a “leader in the field of nonprofit journalism” was considering making an offer. That leader, as many guessed in offline and online last week, was the Knight Foundation. And in the end, Knight chose to drop out of the process and not make a bid.

Miami-based Knight is the country’s leading funder of journalistic experimentation and innovation. (And its leading generator of disclosures for those who write about journalism.) But it’s in the business of grants and investments, not operating businesses. That it even considered a bid for McClatchy shows how desperate the situation is in the business of local news.

Led by CEO Alberto Ibargüen, Knight felt compelled to consider such a change of course by the twin forces of financialization and consolidation that have quickly consumed the country’s major newspaper chains. Since I began reporting 18 months ago on what I’ve called the Consolidation Games, financial players have come to dominate much of the daily readership across the country.

With Fortress Investment Group managing the new merged companies of Gannett and GateHouse, with Alden owning MNG Enterprises, and with the likely takeover of McClatchy by Chatham, about 40 percent of daily newspaper readership (as measured by print circulation) will have its fate in the spreadsheets of financial engineers. (And that’s before considering what will happen to Tribune, Lee, or whatever other dominos topple next.)

Knight’s month-long assessment

That’s why the Knight Foundation deeply considered a bid — before deciding that the risk it would take on was too great and that its role as an owner would be too problematic.

That Knight didn’t bid will be cheered by some in the widening local news revival community, even as they understood the foundation’s motivation. They wondered how Knight might balance its roles as a funder and as an owner. They wondered if Knight would retain current McClatchy CEO Craig Forman, which indeed was one of the possibilities discussed. They wondered why the foundation might put $300 million-plus into a still-transitioning dead-tree company, rather than investing more in digital-only enterprises. Knight could have mustered answers to all those questions and more, further fueling an existing debate among those in and around the news business.

The likelihood of hedge fund control for McClatchy struck a particular chord for the foundation. Knight is in Miami, where the McClatchy-owned Miami Herald is a key civic player. (Before becoming Knight’s CEO, Ibargüen was the Herald’s publisher.) Then there’s the Knight-Ridder legacy built into its very name. John S. and James L. Knight’s money built the foundation, and the idea of preserving that hometown paper, is a heartfelt one.

Then there’s that McClatchy–Knight Ridder link. In 2006, the smaller McClatchy bought Knight Ridder Newspapers, then the country’s second-largest chain, for $6.5 billion in cash, stock, and debt. The timing proved disastrous; 2006 was the top of the market for newspapers, and all that debt choked McClatchy financially. It staved off bankruptcy for more than a decade until finally succumbing in February. Still, though, in terms of its journalistic DNA, the new expanded McClatchy largely resembled Knight Ridder.

Knight engaged McKinsey for a month-long sprint. They talked to many in the news business about the pros and cons of buying and “transforming” McClatchy. In the end, amid both board and staff concerns, the foundation stepped away from a bid, numerous sources tell me.

The Knight Foundation declined to comment for this story.

It’s hard to overestimate the drama of Knight’s consideration, even if it stopped short. It’s another big reality check for how far American newspapering has been yanked from its civic mission roots, as well as the unorthodox lengths true believers may go to in trying to revive a vital local press.

How will the auction proceed?

With Knight out, this week’s bankruptcy drama may seem less interesting, but it’ll still go forward. (With the proviso that a bankruptcy court hearing today could delay things. Judge Michael E. Wiles will decide if and how the complaint of a “fraudulent transaction” in McClatchy’s 2018 refinancing can go forward. Based on the judge’s previous statements, observers say it’s likely that the threat of a lawsuit won’t much hold off sale decisions — but it could.)

Few know the numbers in the Alden bid, but most consider Chatham’s approximately $300 million stalking horse offer the odds-on favorite.

Could there be more surprises before July 8 — or even July 10 or so, if the judge provides a couple more days of decision-making, as he may? The McClatchy board, which makes the decision on who to recommend as the company’s buyer to the bankruptcy judge, can still receive new bids this week. Will any appear?

There remains a big question of valuation. What is McClatchy worth today — and more importantly, given the $300 million purchase price, tomorrow or in 2023? Its just-under-$100 million pre-COVID free cash flow, will be substantially reduced by the major continuing advertising crater driven by pandemic and recession.

With significantly reduced revenue — “we don’t even know what the fourth-quarter will look like, much less the next three years,” one keen financial observer says — what is this company really worth?

One answer to that question is: To whom? While Chatham maintains interests in both Canada’s major Postmedia daily chain, and in AMI’s National Enquirer, it can’t fruitfully combine McClatchy assets with either. It can’t — in the parlance of financialization and consolidation — grab the golden ring of “synergies.” Gannett CEO Mike Reed has claimed that the Gannett/GateHouse merger will produce $300 million in synergies, major cuts of what are said to be redundant and overlapping costs as the two companies — quite fitfully, say those inside the merger — become one.

How much could Alden further squeeze if it combined McClatchy’s properties with its MNG dailies and weeklies? The total could be $100 million or more. And what if Alden further crunched together Tribune’s papers, creating an Alden MNG/McClatchy/Tribune rollup? Such a company would approach the new Gannett in size and reach. Together, Gannett and Alden would control almost one-half of U.S. local daily readership.

All of that math means that McClatchy offers a different value to Alden than it does to Chatham. Alden knows its numbers; if it’s bidding, we’d expect it to be playing to win — and beat Chatham’s offer.

But Chatham — by its position as McClatchy’s largest investor and debtholder — is in a unique position, and most observers believe that, financially, its takeover makes the most sense.

As I’ve written, even if Chatham wins McClatchy, what might it do with it afterwards? In fact, Alden’s emergence as a bidder here renews speculation that Chatham may be a short-term owner. It could well move to merge with Alden’s MNG Enterprises — or the new Gannett, as I’ve suggested — sooner or later.

There’s also the glimmer of hope among civic leaders — both the mayors of Miami and Sacramento have written the bankruptcy judge, appealing for a resolution that supports community journalism — that Chatham may be willing to sell individual properties to civic leaders, backed by philanthropy.

For them, this week’s drama is only Act I.

The standstill that’s not a standstill?

While it’s not surprising, this Alden bid for McClatchy could help explain why, mysteriously to some, Alden agreed to a new “standstill” agreement with Tribune last week. Standstills are meant to offer protection against hostile takeovers by current shareholders. This one appears to be an imperfect vaccine.

Alden chairman Randy Smith joining the Tribune board got the headlines last week. Essentially: The Man With A Dozen Palm Beach Mansions Goes Public. But his presence was a bit overblown. First off, the Tribune board isn’t exactly a Trump rally, but rather a small, fairly private boardroom session.

Second, how much do we really care about why Smith, and not his sidekick-in-newspaper-cutting Heath Freeman or some other underling, took the seat? We’ll have to wait for Freeman’s tell-all, but in the meantime, the question is where this month’s events lead. The smart money still says we will likely see a more formal combination of Alden’s MNG Enterprises newspapers and Tribune’s at some point.

As well-documented in Chicago Tribune reporter Bob Channick’s story, the announced “standstill” to push off an Alden takeover rests on some pretty squishy sand. It seems to be a standstill in name only.

As Channick explained: “A filing Thursday with the Securities and Exchange Commission lays out a number of circumstances — from other major shareholders teaming up to someone making an offer to buy Tribune Publishing — that would terminate the agreement and allow Alden to buy more shares…In fact, Alden itself could make an offer to buy a majority stake in the company, despite the standstill agreement.”

In essence, within the SEC filings, Alden has placed itself in the driver’s seat, able to act when it wants to and fairly able to prevent others from buying Tribune. And all the while, it gets a front-row seat to examine any company financial detail it wants.

And of course it gets the lucky seventh board seat at Tribune Publishing, two months after the company dispatched its two longest-standing and journalism-supporting board members, reducing the board to six. Two of those six, appointed soon after Alden bought a third of the company in November, were hand-picked by Alden.

Add it up, and Alden keeps Tribune right where it wants it while it plays the field.

Or to put it in more graphic terms, as one top industry leader suggested Sunday: “Alden can keep one foot on Tribune’s neck while they’re seeing what plays out with McClatchy.”

In the meantime, as Joshua Benton summed up last week, Alden can continue to let other guys do the cutting, while it assesses longer-term COVID-driven business damage.

Then there’s always, simply, the money. This isn’t the easiest environment to win financing for a newspaper deal. One deeply knowledgeable financial source offers an elegantly simple surmise: “They probably can’t find a way to finance the deal, so they have to wait and see. These guys need leverage to do deals, so this is a delay and blocking tactic.”

And what happens in those hours could prompt a wave of other moves across the rest of the industry.

The dates June 30 and July 1 have called out from the calendar for a while now. On Tuesday, Tribune Publishing will reach the end of two “standstill” periods. Tribune’s two major shareholders — Alden Global Capital, with 33 percent of the company’s shares, and Los Angeles Times owner Patrick Soon-Shiong, with 25 percent — had promised not to actively buy or sell any shares until June 30.

When that restriction ends, you can expect Tribune’s uneasy status quo to come to an end quickly. After a chaotic decade, the chain had been briefly semi-stable after Michael Ferro’s departure from management. But then Alden bought up those shares in November, and since then Tribune has given Alden two board seats, imposed Alden-style cuts, and created Alden-style management chaos.

Then, on Wednesday, final bids for McClatchy’s 30 newspapers are due, as the country’s second-largest chain prepares to wind toward some exit from bankruptcy.

This is the mid-year witching hour for the U.S. daily press, another stirring of the consolidation pot, and another stage in the transformation of newspapers from civic assets to financial instruments. These two big — and potentially interconnected — dramas will determine the futures of the No. 2 and No. 3 local publishers in the country.

The possible combinations and recombinations are numerous. What we know, from a variety of sources, is still piecemeal, with the future of McClatchy’s 30 titles the most uncertain piece.

Here’s one big new possibility to look for: a new potential buyer of McClatchy intent on pulling its newspapers from the clutches of hedge funds and setting up the country’s first major nonprofit newspaper chain. More on that below.

Part of the uncertainty is that the options that seemed possible in December are markedly different now. The one-word reason: coronavirus.

The months of COVID-19 shutdown have only deepened the business issues afflicting the daily newspaper business. Plans that felt like climbable mountains in December now look positively Himalayan. Everyone’s forecasts and valuations have gotten big haircuts. (And some look like they were done in quarantine, with clippers and a mirror.)

With a new wave of infections rampaging across the country, newspaper CEOs now look at another six to 12 months of potential downturn. Small businesses’ struggles will likely leave ad revenues down 35 to 40 percent in 2020, according to Ken Harding, head of FTI Consulting’s respected media practice.

The biggest data point from FTI’s June 1 update: “We project an unrecovered advertising revenue loss between 17 percent and 28 percent as a result of COVID-19 by Q4 2021.”

Those numbers — that projection of extended revenue pain — are driving everyone’s estimations of newspaper company value, which drive their plans for bids and M&A.

The McClatchy drama

Think of this week’s McClatchy action as the beginning of what may become a two-act drama.

Those “final bids” are due on Wednesday. Then one week later, on July 8, a winner will be announced by the McClatchy board. On July 24, bankruptcy judge Michael E. Wiles will review the decision, and either approve it or not. His legal task: resolving the company’s debts as fairly as possible among those owed money.

Finally, they’ll be a formal Department of Justice antitrust review, which should be resolved before year’s end.

In bankruptcy court, wild cards can enter, and one did last week. McClatchy’s unsecured creditors publicly charged what others had been saying a bit more quietly. They alleged that McClatchy’s major 2018 debt refinancing with Chatham Asset Management was “fraudulent.” That refinancing gave Chatham a favorable lien position in bankruptcy; that means Chatham is more likely to be made whole (or more whole) than McClatchy’s unsecured creditors, including pension claimants, who would likely receive pennies on the dollar. While a lawsuit is possible — and could take years, as did some in the Sam Zell/Tribune five-year bankruptcy from hell — it’s more likely there’ll be a settlement that removes that obstacle from finalizing a sale.

Why might July’s drama be only Act I? Because whoever buys McClatchy could then turn around and merge it with another company — or sell off individual McClatchy newspapers, or groups of them. That’s Act II.

Who’s playing in each act?

The one known bidder is Chatham — currently both McClatchy’s lead investor and its largest debt holder. Chatham has already put in a stalking-horse bid of around $300 million.

Auctions like these draw all sorts of lookie-loos. Contemplating a bid can be a great opportunity to examine the innards of a company, to compare benchmarks and metrics — even if the looker has no intention to buy.

This auction has been no different. As the bidding hour approaches, no one expects more than a handful of bids. Likely one, two, or three — maybe, at the outside, four.

Let’s categorize the likeliest bidders:

• The Insider
• The Savior
• The Financial Engineer
• The Roller-Upper

Chatham is The Insider here. It knows McClatchy’s books and operations inside out, and it’s already bid. Its attorneys have said it wouldn’t mind being outbid, and that makes sense: As a hedge fund, it’s in McClatchy for a financial return, not long-term investment or community service. If someone else thinks McClatchy is worth more than they do, they’ll happily take their money.

Most intriguing is The Savior.

Many in the news business have looked aghast at the vultures and financial players who increasingly dominate ownership. They’ve wrung their hands. They’ve offered a vision of new, nonprofit-led future for local news, just as hundreds of smaller sites have set up a shop over the last decade. But nearly all of those startups still pale in size, if not dedication, next to even shrunken local dailies.

The McClatchy bankruptcy has hatched a new idea, one that’s been talked about for at least a couple of years, but mostly hypothetically: Why not buy one of these big struggling chains — and take it nonprofit?

That’s what on the table today. Leaders in the field of nonprofit journalism are deciding over these 48 hours whether or not to make a bid for all of McClatchy, sources tell me. They say they can raise the needed cash of $300 million-plus.

The big question: What then? How would a civic-minded nonprofit approach the tough transformations still ahead for local news, which is still highly dependent on print revenues smack in the middle of the COVID age? In this growing civic-good journalism world, there are many good people with the right motives — but very uneven skills to transform beleaguered companies.

Sources say there’s a newish player in the mix that is strongly considering a bid to be The Financial Engineer, sources say. And it’s not one of the usual suspects — Fortress Investment Group (Gannett’s manager), Apollo Global Management (Gannett’s lender), Alden Global Capital (MNG’s owner, major investor in Tribune and Lee). Those financial giants have each done their share of damage via unending cuts and only murky business transformation.

Then, there are at least two candidates to be The Roller-Upper. No one is putting down a big bet on one of them placing a bid — but no one’s betting against the possibility either.

First, consider the last big roll-up: New Gannett. The combination of Old Gannett and GateHouse, finalized in November, created the most dominant daily publisher in U.S. history, serving about a quarter of daily newspaper readers.

Gannett is highly encumbered by debt. The $1.8 billion loan from Apollo it took to do the deal now feels even more uncomfortable given 2020’s virus-driven ad decline. It just let go its second-in-command CEO Paul Bascobert, who’d been put inside New Gannett by Old Gannett — a scheme that simply didn’t work. It’s also announced an end to at least some of its COVID-related furloughs.

Gannett — and, importantly, Apollo — could make the case to themselves that further roll-up — more scale, more synergies, more cuts — would make the company’s position more secure over the next few years. Gannett + GateHouse + McClatchy is a combination that would reach about a third of American newspaper households. By the standards of old accounting, that’s huge scale. But what is it worth — what’s its value as a bid in bankruptcy court?

The big question for Gannett’s Mike Reed and Apollo’s Leon Black: Will they stay on the sidelines or get in this game?

Then there’s Heath Freeman, the head of Alden. He’s come out of the shadows a bit lately, even giving an interview here and there. His cash-flow-first strategy has worked — for him — with MNG (f.k.a. MediaNews Group and Digital First Media) and he plainly wants to apply it to as much of the industry as he can.

Of course, Freeman may have his hands full with the week’s other big deadline. On Tuesday, his standstill agreement expires with Tribune. While Alden and Tribune have managed to keep their plans very close to the vest, the wide expectation is that Tribune and MNG will move toward formal merger soon — perhaps very soon.

That combination would create a cash-driven newspaper company reaching more than 15 percent of U.S. newspaper readers.

Follow-on civic buyers?

That’s just this week’s potential action. How about Act II?

Whoever buys McClatchy whole may move to either merge it with another player (see The Roller-Uppers above) or sell off some of all of its pieces — whatever’s the best way to maximize its investment. One data point: Apollo’s and Chatham’s leaders have a good working relationship, say sources.

Here we could also see the emergence of more civic buyers. The mayors of both Miami (home of McClatchy’s Herald) and Sacramento (home of McClatchy’s flagship Bee) have publicly raised calls to support community-oriented buyers. We’ve heard such civic calls for several years, in many cities — but the question comes down to, as most do, funding.

There the intrigue is beginning to mount. If McClatchy’s West Coast properties come loose, sources say, philanthropic sources could be tapped for about $20 million within a year, in California (where McClatchy has five titles) and in the state of Washington, where it owns four). There’s also at least one other civically oriented private buyer waiting in the wings if individual properties come into the marketplace.

On its own, that may seem like just one more move in the chess game between major news companies and the platforms. But it could also be an indication of a more geologic movement. Will the rest of 2020 bring tectonic shifts in platforms’ power over news — or just a few more small tremors?

The growing ad boycott of Facebook by global marketers is another indication that the shaking may bring more of a jolt this time. So are the state attorneys generals’ actions and the soon-to-come Department of Justice antitrust move.

“It’s time to re-examine all of our relationships with the big platforms,” New York Times COO Meredith Levien told me. “And we’re reexamining them on three axes that are all interrelated, but different with each of the players.”

Levien’s three questions:

• “What role does the company play in helping bring audiences to the Times? Or said more technically, what role do they play in that funnel?”
• “What role does this company play in helping us do the main thing we’re trying to do? Which is scale direct relationships with people and get them to form a habit and ultimately pay.”
• What’s the value equation — “recognizing that these companies get substantial value from our investment in original journalism”?

“All three of those things really matter,” says Levien, who came to the Times in 2013 as head of advertising and moved into the COO job, Mark Thompson’s second-in-command, three years ago. She’s widely considered a prime contender for Thompson’s job whenever the 62-year-old CEO exits.

“At this moment, it doesn’t make sense for us to participate in Apple News anymore.”

This likely won’t be the only adjustment the Times makes in the coming months on its platform relationships. “In the last year, 18 months, we’re thinking really hard about all of our relationships in this context,” she said. “We’re really trying to deeply calibrate how do we cut our own top through that ecosystem in a way that accounts for its reality? That’s really what I’m describing to you. We get a little better with every passing year at how we do that. So that’s why you see us making a change like this.”

In short, the Times audience machine is proving more able to move towards its goal — 10 million subscribers in 2025 — on its own.

“This has been a moment where something like 250 million — somewhere between 250 and 300 million people — used The New York Times at the height of the COVID crisis,” Levien said. “When something like 6 in 10 American adults used The New York Times in March. And that’s a bigger opportunity than we’ve had before to drive relationships with people.

“Ultimately the thing we’re trying to do is play a bigger role in many more people’s lives. And I think with each passing year, we’re getting better and better at doing that ourselves. That doesn’t mean we don’t need distribution partners — we certainly do. That doesn’t mean we don’t need to find the outlets for our content that help us build audience. But I think that the equation for how we evaluate them changes.”

So this isn’t The New York Times cutting off all its platform relationships. But it’s not a minor tremor, either.

The publisher/platform dance

Think of this as the next starting point for negotiation — the sort of negotiation common when players are on a more even playing field, reassessing their mutual value.

But of course this still isn’t close to being an even playing field. The absolute dominance of the big platforms in business life is hard to overestimate. The Times, for instance, will still work closely with Apple on podcasts — considering the increasing value of its flagship franchist The Daily — and via its App Store, where the Times mobile app has proved key to building its strong subscriber engagement times.

Thompson hasn’t been shy about talking about the dangerous dance publishers still feel compelled to do with the huge platforms. Just a year ago, he spoke about why the Times, like The Washington Post, didn’t join in the launch of Apple News+, Apple’s fledgling, magazine-heavy paid offering. He said then that Apple News+ “jumbled different news sources into these superficially attractive mixtures.”

It can be tough to understand the questions in these complex news company/aggregator relationships. In many ways, it comes down to how consumers understand what they’re getting from whom.

Ask people and many will tell you they’re getting news “from their phones.” And they are. But The New York Times — like all other news publishers who see reader revenue as the only route forward — wants them to know they’re getting that news from them. The Times want a direct reader relationship — one that can hopefully be converted to subscription.

Of course, that publisher–aggregator push–pull conflict goes back to the early web. Yahoo News — and debates among publishers about whether and how they should participate in it — dates back more than two decades. (As an executive at Knight Ridder Digital, I recall negotiating a 1999-era aggregation deal with CNET’s Snap news aggregation product and debating the same questions: Who is getting what value here?)

The Times has been holding back what it gives to Apple News for a long time. “We’ve been doing a limited number of stories a day — it went from a lot of stories at the beginning, broadly, to a smaller number,” Levien said. In return, the Times gets to promote its newsletters, subscription offers, and other calls-to-action, and it gets Comscore credit for its audience reading there. Basically, it gets branding and reach — but no direct revenue stream.

Even some of its users may be confused about what Apple News is, exactly. For many, it’s just generic “news on my phone,” a set of notifications or a curation that pops up if they purposely (or accidentally) swipe or touch something. But it reaches a big audience — 125 million users a month as of April, up from 100 million three months earlier. It’s one of several platform news aggregation plays: Google and Facebook compete directly worldwide, and Axel Springer’s Upday competes in Europe. It’s distinct from Apple News+, which is mainly a magazine product plus three strong news players, The Wall Street Journal, the Los Angeles Times, and The Toronto Star.

Apple News says the Times is one of the few publishers to opt out of its baseline product.

“The New York Times has only offered Apple News a few stories per day,” Apple spokesperson Fay Sliger said in a statement. “We are committed to providing the more than 125 million people who use Apple News with the most trusted information and will continue to do so through our collaboration with thousands of publishers, including The Wall Street Journal, The Washington Post, the Los Angeles Times, the Houston Chronicle, the Miami Herald, and the San Francisco Chronicle, and we will continue to add great new outlets for readers.

“We are also committed to supporting quality journalism through the proven business models of advertising, subscriptions, and commerce.”

How the Times did its calculation

The Times’ decision is all about the power of the direct publisher–journalist–reader relationship — the core of the reader revenue proposition — and the only way forward for news companies these days.

The Times’ move could be highly specific to the Times and not a harbinger of shifts to come. After all, no one else has been able to accomplish what the Times has: 6 million total subscribers, more than triple the number it had at the height of print, and on pace to reach its goal of 10 million in 2025.

The farther it finds itself along that road, the more confidence it has in its own capabilities. And the more readers and subscribers it has, the more data it can analyze to see what works with what sorts of readers. And that analysis proved this to the Times: Apple News was not a net plus.

How did its analysis work? There are two calculations. First is the question of how the Times itself can convert its more of its current readers into subscribers.

“We’re getting increasingly confident in our ability to build and scale direct relationships on our own platforms,” Levien said. “Therefore, we’re very focused on: What does the funnel look like? What does the distribution partner bring to us? We’re just getting sort of clearer and sharper about it. And then as we think about any of these relationships, we’re also asking ourselves: Is this a product that is mostly, or purely, about bringing audience to the Times?”

Second, there’s this intriguing calculation — partly quantitative and, I’d suspect, deeply intuitive as well: Is Apple News (or any platform that want the Times content) a substitute — the dreaded good-enough alternative for busy news readers?

“There are plenty of people in the world that say, “I get my news from the internet.” Which is something that isn’t a news destination,” she said. “We think very hard about if something is likely to be, in whole or in part, a substitutional product. It makes us think hard about value exchange. Are we getting enough in terms of value exchange? And that might be economics, that might be audience sent our way. It might be something that makes it easier for us to drive a direct relationship. That’s the calculator.”

The shift?

Is this indeed part of a wider shift in the relationship of major news providers and Google and Facebook?

Consider the latest datapoint: Google announced Friday a new program to “license” news from publishers, put into perspective well by the Lab’s Joshua Benton. Google and Facebook have been ramping up programs to aid publishers. Some of these programs have real value, in training, in funding, or in a few cases — quite selectively — in actually paying for news articles. To date, regional publishers tell me they’ve heard little to nothing about direct payment for news content. That could change, or the Google program — which noted Germany’s Der Spiegel, Australia’s InQueensland and InDaily, and Brazil’s Diarios Associados in its initial release — may well just focus very selectively in its choice of titles and geography.

It’s no coincidence that these pay programs are ramping up in lockstep with pressures on the platforms mounting across at least three continents. In Australia, in Canada and in Europe, legislators and regulators have raised their voices and leveled new threats. The mantra around the news media world: Pay us.

We could see this coming, even before the added COVID-driven pressures on publishers, as I pointed out in January. And there’s no doubt we’ll see more of it. Given the state of generalized global angst, of populist reaction, and of tech backlash — not to mention the oh-so-convenient target Big Tech offers, Google and Facebook in particular, but also Apple, Amazon, and Twitter — these companies know they have to give in, at least a little.

So they act as any intelligent profit-maximizing corporations would do: calculate how much they can “voluntarily” give in order to stave off more draconian actions, whether regulatory, antitrust, or tax-based.

I asked Levien if the Times’ ability to step away from Apple News was unique, given its digital success and position in the news marketplace. Her answer was circumspect.

“I would say many publishers’ businesses look different, from one another and from ours. So I’m not going to speak for other publishers,” she said. “What I would say though, is I do think that the economics for any publisher should be such that they can support the work, the extensive work of all the original, independent journalists.

“Our investment in journalism is only going up. It will go up this year — even this year, it’s only going up. We are still hiring engineers and data scientists and product managers and product designers, in relatively large number.”

(Indeed, it currently lists 128 U.S.-based job openings, including for 20 editors, 17 in audio, 10 reporters, 7 data analysts, and more than a dozen developers.)

“Even in a year where our ad business is under as much pressure as it is. So, the thing that we are trying to do is going to require constant investment. And at The New York Times, in good times and in harder times, the first dollar goes to the journalism in the investment.”

Many different metrics count in the digital news business — but all of them are built on the foundation of large volumes of high-quality original news reporting and analysis. That’s the key metric: How many journalists and people with associated skill sets in product and audience can a news organization support? And how does each and every platform deal support that — or not?

For many, it represents the unique New York City politician whose presidential flirtations reshuffled our politics for a time. For some, it’s his immense wealth and the places — both philanthropic and political — it flows. Then there’s “the Bloomberg,” the business news terminal that built Michael Bloomberg’s company and fortune, and which remains a cash cow today.

What it didn’t represent until relatively recently was streaming video — an online channel first known as TicToc and then, when the app TikTok annexed the world’s mindshare, rebranded as QuickTake.

QuickTake is Bloomberg Media’s latest product push, and another piece of evidence that the company is a long-term, high-impact news media players — even though it gets relatively little coverage compared to its peers.

As COVID-19’s financial damage deepens, there aren’t many media companies in the position to be able to take advantage of a recession — and invest. Bloomberg Media, headed by CEO Justin B. Smith, is investing in QuickTake, with a staffing up to 100, and big plans for fall.

“Starting in September, we’re actually creating full streaming programming with anchors and shows and new series,” Smith says. “We’re going to be unveiling a whole slate of new programming.”

Smith is known as an innovator, viewed by many of his peers as a transformer. As CEO at Atlantic Media, he assembled and led a team that built a respected and talented company, emerging out of (very) Old World magazines into a diversified B2B and B2C leader — a model operation that owner David Bradley has been selling off piece by piece for several years.

Smith moved to Bloomberg Media in 2013, and I first captured his strategic plans for growth there in 2015. The company includes the various verticals of Bloomberg.com, Bloomberg Businessweek, the recently bought-and-relaunched CityLab, and the expanding QuickTake.

All of that’s powered by what is probably the largest number of journalists working for any single company outside of Japan: 2,700 reporters, editors, and analysts working in 120 bureaus around the world. That’s scale, and it’s produced a big consumer business:

• Bloomberg Media reaches an audience of 90 million per month.
• About 30 percent of its revenue comes from outside the United States.
• Ad revenue contributes about 55 percent of that total revenue, with subscriptions and licensing adding about 20 percent a piece.

Bloomberg is one of the Digital Dozen, a term I first identified in my 2010 book Newsonomics. It’s one of the limited number of enduring, largely global news brands for which the Internet was a true opportunity for expansion, financially, editorially, and in terms of audience. It’s taken most of those news companies more than a decade to transform their businesses for digital — but they’re now seeing the fruits of that effort.

Adaptability has always been key to Smith’s strategies, and it remains so today. In this Q&A, we talk a lot about consumer reader revenue — a business line Bloomberg Media came relatively late to, in 2018

“You need to constantly evolve your business model,” he told me. “I mean, what we’ve been talking about here, basically, is taking a huge global business media company and turning it into a reader-revenue company, and turning it into a company that is playing in the global OTT, full video space. And then the third leg of the stool, is live events piece.”

(Live events are on hold, of course, and we also cover the quick move to virtual events — its challenges and longer-term opportunities.)

Bloomberg is — like the Times, the Post, the Journal, CNN, The Guardian, NPR, and others in the Digital Dozen — a case of the old and the new working here. Targeting well-heeled business news readers with high digital subscription prices…while moving aggressively to lure a younger demographic into business news video, hopefully leading them into long-term Bloomberg customers. One foot on the shakier ground of today, one looking for a step forward.

With advertising’s coronavirus recession, why lean way into a new ad-driven model with QuickTake?

“The answer is that, if there is any part of the advertising ecosystem that you actually want to be leaning into for 2020, 2021, 2022, it’s this demographic on mobile, on social, and in video,” he says. “When things come back, as they will, I think that traditional advertising will probably suffer, and you want to move your business and your model to the place on the media chessboard where the dollars are going to be going” — the TV money that will follow the audience to streaming.

Amid all the model evolution, though, Smith is perhaps stronger than ever before on one key element: It’s people who make the difference. “At the top of every one of my lists, the super ingredient is talent,” he says.

Talent, scale, superior tech, and continuous innovation are the keys to the Bloomberg Media model. In our conversation, lightly edited for clarity, we talk about selling advertising in a Google-Facebook-dominated world, remote work, virtual conferences, paywall lessons, and QuickTake’s future.

The news year so far

The subscription business

Bloombergian scale

QuickTake

Virtual events

Revenue promiscuity

The COVID-19 crisis both threatens and promises to reshuffle business and societal thinking about the role of local news in the 2020s. Call it pandemic panic. The crisis has clearly accelerated the known drivers of industry change worldwide. That could well lead to more consolidation of newspapers and more hedge fund and private equity control.

This earth-trembling change has also raised some new possibilities. What if the platforms finally do give in to decade-long pressures to pay publishers for news? What if governments, in one of the many ways being discussed, actually funneled funding to pay journalists to do local journalism? What if new and more public-spirited buyers/owners emerged, buying up papers that only bottom-feeding financial buyers have seen fit to acquire?

Keep those big-picture possibilities in mind as we first delve back into the important (but by now a little mundane) world of daily newspaper M&A.

But there are those 20 undisclosed parties crunching McClatchy’s numbers. They may well include some names familiar to those who have followed the Consolidation Games of the last year and a half.

Conventional wisdom holds that the New Gannett can’t play. After all, it’s already burdened by the $1.8 billion in debt it took on to put together its GateHouse merger in November. But what about its lender, Apollo Global Management? Insiders have told me that Apollo has been talking with Gannett CEO Mike Reed about a structuring of their five-year deal, given the immense and immediate impact of the coronavirus crisis on cash flow.

Could Apollo — which strategized a newspaper industry rollup back in 2015 when it almost bought Digital First Media — decide that a 2020s version would make financial sense? For the financial companies — Apollo, Chatham, Alden Global Capital, Gannett manager Fortress Investment Group — it’s all about the numbers.

One critical question for them: How do you value McClatchy’s cash flow over the next few years at a time when projections even six months out are deeply uncertain? Industry consultant FTI is now forecasting that 1 in 5 pre-COVID ad dollars might not come back to newspaper companies once this pandemic nightmare concludes. (Though annual ad revenue declines not much smaller than that have become numbingly common at newspaper companies in recent years.)

Another question: How much in the way of corporate overhead and general centralization synergies could be wrung by merging McClatchy into the new Gannett? Such a move would create a behemoth newspaper company (to the extent newspaper companies can be behemoths anymore), controlling about a third of U.S. daily print circulation in more than 160 cities. If the numbers add up, could Apollo end up owing that giant?

Given the many steps that would take and all the vagaries of future cash flow, most financial observers consider that unlikely — at least in the short term.

Quietly, the Alden/Tribune merger moves forward

And then there’s Alden. As we’ve reported, Alden is on a trajectory to takeover/merge with Tribune Publishing this year. Our most recent datapoint:

Tucked inside the company’s April 8 notice of its annual meeting — which of course will be virtual — is this:

Nominees for Director: The Board of Directors has nominated the six individuals listed below for election as directors at the Annual Meeting. All nominees are currently serving as directors of the Company. Ms. [Dana Goldsmith] Needleman and Mr. [Christopher] Minnetian were both appointed to the Board of Directors pursuant to the Cooperation Agreement dated as of December 1, 2019 by and among the Company, Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. (the “Cooperation Agreement”).

It sounds like the usual corporate filing-speak. 

But what’s omitted is the big story. The board currently has eight members, but it’s only nominating six.

David Dreier, who served as the board’s chairman until Alden’s rapid insertion into the company’s affairs six months ago, isn’t being re-nominated. Neither is Eddy Hartenstein, also a former board chair and long-serving board member, as well as former publisher and CEO of the Los Angeles Times Media Group. Both of them received criticism for their acquiescence to Michael Ferro’s Tronckist regime, but both have also been considered relative Tribune Publishing stalwarts, advocates of local journalism.

After Alden bought up Tribune stock late last year, one of its demands was that Tribune grow its board from six to eight members by adding the Alden-affiliated Minnetian and Needleman. Now it’s dropping back to six, with the two Alden picks sticking around.

The arithmetic is clear. Alden’s Heath Freeman — already exerting great influence at Tribune, which dispatched CEO Tim Knight and pushed forward with significant job cuts pre-COVID — is lining up the company for a merger with his own MNG Enterprises. Observers expect that the soon-to-be-reduced Tribune board will move to “explore the best use of its assets.” Then, most likely, would come the appointment of an “independent” board group (without the would-be-conflicted Alden 2), who would then lead a sales process. The likeliest result: a merger, in some form, between Tribune Publishing and Alden’s MNG Enterprises.

(The NewsGuild, which represents newsroom staff at the Chicago Tribune and several other Tribune Publishing papers, is promising a fight. This week, it announced a proxy fight aimed at getting the two Alden directors off the board, questioning whether “their interests are aligned with those of Tribune Publishing.”)

What might that increasingly likely deal mean for a possible further merger with McClatchy?

In its bankruptcy filings, McClatchy has acknowledged what I’ve reported over the past couple of years: multiple failed efforts to merge with Tribune. If Alden wasn’t circling around Chicago, those who know the companies well believe a Tribune/McClatchy combination would make a lot of sense. Both focus on larger metro markets, as opposed to the smaller towns at the core of Gannett. They’ve had similar editorial philosophies and business strategies over time.

The thinking now is that an Alden/Tribune tie-up would foreclose a merger with a post-bankrupt McClatchy. Maybe that’s true — maybe Chatham, if and when it becomes McClatchy’s controlling owner, will just operate it for a while.

Or maybe not. Too much is up the air here. But watch the timing.

An Alden/Tribune merger would likely be announced sometime after it slims its board — its annual meeting is May 21 — and goes through that “exploration” and “process.” That might mean a merger announcement in June or July — the same time when we expect McClatchy to emerge from bankruptcy.

Someone’s taking away chairs

My expectation requires a new metaphor. The Consolidation Games are adding a new event, musical chairs. The industry’s music has slowed, its cash flow down to an adagio. The number of chairs for CEOs decreases by the month, as mergers take what had been independent newspaper chains — most with long histories of civic mission — and turn them into tradable financial assets harvested for short-term gain.

Not long ago — like, last October — a list of the major American newspaper chains would have included Gannett, GateHouse, MediaNews (MNG), Tribune, McClatchy, Berkshire Hathaway Media, and Lee.

GateHouse bought Gannett and then took its name; Berkshire Hathaway loaned Lee the money to buy it out of the business. Depending on what happens with MNG, McClatchy, and Tribune, that list of 7 companies could be down to 4 or even 3 by year’s end. Collectively, the companies who remain would control well over 50% of daily circulation in the country.

Only one survivor, Lee, would still be controlled by “newspaper people,” and most of its papers are smaller; it has only four papers that sell more than 50,000 copies on weekdays (Buffalo, St. Louis, Omaha, and Richmond).

Of course it’s possible that new players might see this as the perfect time to enter the business. The price to buy a newspaper company has never been lower! Recession risk would scare away all but the deeply pocketed, deeply ambitious, and perhaps deeply political would-be acquirers away. It’s the Buffetts of the world who can afford to take a long-term view in such rough times — though even Buffett decries the current uncertainty and says he isn’t buying anything. (He wouldn’t be buying newspapers, anyway.)

So let’s consider one deeply pocketed, deeply political media player that I first mentioned as a possible newspaper industry entrant in January: Sinclair Broadcast Group.

“They’ve studied it,” says one source familiar with those conversations. “They believe that major cities will be served by a strong local news company — outputting to both video and text/print — and they believe that buying local newspapers is one way to get there.”

There are some clear hurdles, including the still-on-the-books rules against owning dominant newspaper and broadcast outlets in the same metro. But just three weeks ago, Sinclair was among those petitioning the Supreme Court to review an appeals court decision that had reinstated those rules after an FCC attempt at deregulation. There’s a good chance the court could relax those rules. Sinclair is based in Baltimore; it could be interested in The Baltimore Sun, should it break loose from Tribune or a Tribune/Alden merger. It could be interested in a lot of newspapers: Sinclair currently owns or operates 191 television stations in 89 markets.

Or will platform “licensing” revenue save the day?

Google and Facebook hire some of the best legal talent in the western world, and they’ve been able to swat away, delay, and skirmish interminably with the forces that demand they pay up for their use of news content. For more than two decades, newspaper companies around the world have wanted platforms to pay a license fee — like the ones the music industry and local TV stations get, say — for the snippets of news content they publish. They’ve been largely unsuccessful.

As the Google/Facebook duopoly has come to dominate the digital advertising business, and as the ad revenues of news publishers have fallen off a cliff, the intermittent cries have grown. Now, they’re joining in unison. Will they be able to pry loose big new revenue streams now?

I wouldn’t bet against the platforms — it’s usually not a winning bet — but there’s no doubt that executives in Mountain View and Sunnyvale know they now have a bigger problem on their hands.

In the last month alone, Australia and France have demanded payment. Canada is getting a full-court press for help from its publishers, including imposing new pressure on the platforms. “An urgent message to the Government of Canada from the publishers of Canada’s major newspapers” went out across the nation on Saturday, Canada’s big weekend newspaper day.

Most notably, U.S. publishers are also working — more quietly, but more aggressively — to get what they believe has long been due them. They’ve appreciated what largesse has been provided by both Google and Facebook in their multi-hundred-million-dollar journalism support programs, and they’ve recognized the many earnest people inside those companies who aim to offer local news a lifeline. But no one believes those grants are — or promise to be — the game-changer that society and their businesses require.

“This could be the year,” says one executive involved in the U.S. movement. “The stars may have aligned.”

Among those stars: The platforms have achieved something few others have: bipartisan questioning of their activities. Both Republican and Democratic politicians love to rail against Big Tech, whether they’re citing the 2016 election, misinformation in general, company efforts against misinformation, growing privacy concerns, monopolistic behavior, or the platforms’ impact on the system that long provided Americans local news.

More people have looked into the Black Mirror and haven’t liked what they’ve seen. Techlash 2020 — still powerful despite (or perhaps because) it’s the platforms who will likely weather the coronavirus downturn best — could result in a new stream of revenue to news publishers.

As I wrote in January, the payment issues of who, how, when, and where are gnarly ones. The platform can fairly cite that gnarliness. They also like to cite the humorous algo blindness they like to claim (“How would we ever figure out how to fairly attribute value to news producers?”) while they dodge, weave, and aim to make separate deals with the largest national/global news producers. Separating out the Timeses, Posts, Journals, and Guardians from the larger, bedraggled news herd is an classic divide-and-conquer strategy that’s long been one facet of the game. (Note Facebook’s payments to publishers for its News Tab — individual deals primarily targeting the top of the industry.)

Then, of course, there’s the irony that it’s the very financialization of the industry — the hedge funds and PE firms who stand to benefit directly from any aid to newspaper companies — may be the platforms’ best argument for opposing payments for content.

Alden president Heath Freeman’s recent “Dear Colleagues” letter, circulated by new New York Times media columnist Ben Smith, offers the perfect foil. “Fund vulture journalism?” the platforms can cry. “They’re worse than us!”

Indeed, look at the blowback big corporate players have faced if it comes out that they’ve taken bailout money. While this sort of platform payout wouldn’t quite be characterized as “bailout money,” the optics are less favorable for a news industry that is — at least in the U.S., and Canada — dominated by financial players.

We’re in this pandemic moment in which COVID-19 fears have unexpectedly revalued the sort of experienced, balanced reporting a good local news outlet can provide. And yet we’re stuck talking about the interaction of a few hedge funds, focused on little else beyond profit, and a few tech companies with unprecedented dominance.

Then there’s this to ponder: If Google and Facebook finally began paying for the supply chain of news — something akin to the retransmission-fee revenue stream that revolutionized the local TV business model — what would be the new value of these news companies? Pouring hundreds of millions, if not billions, into their revenue streams would have a real and significant effect. It could offset the profound loss of advertising and semi-stabilize companies that haven’t felt stable since 2007 or so. If that happened, how much more market-valuable would newspaper titles and newspaper companies become?

Factor that into your crystal ball and the “multiples” that newspaper companies might be “worth” produce a few new swirls of possibility. If cash flow were no longer projected to decline inexorably — if they were at least stable —would these old “newspaper” assets, their blackletter flags mostly digitized, become more valued businesses?

That is a big “if.” But it’s one more plausible than a year ago.

Finally, the will-platforms-pay-up question has at least two big implications. First, the money guys — the would-be buyers and consolidators like Alden, Apollo, or Chatham. Heath Freeman’s letter shows he sees the potential for major value creation if the platforms can be pushed to a deal. How does even the possibility of a big platform settlement figure into the immediate questions of consolidation — the ones that’ll be answered within just a few months?

Second, what about all the next-gen thinking in the local-news-revival world? Major foundations, the American Journalism Project, news entrepreneur Steve Waldman, and others advocate a reordering of local news. Among the prevailing ideas is one that Waldman has dubbed “replanting”: buying out and replacing the financially driven owners of the daily press, through something like a “deconsolidation fund.” A couple of billion could do that, and that’s not completely impossible money to ponder. The perhaps bigger question: Where does the money come from to operate a resurgent local news operation — and hopefully to make it grow?

That platform “retransmission” money could be part of a big new idea. By itself, platform money would be meaningful. But combine it with some of the newer proposals now being advanced and an updated financial business model may be possible for the local press of the 2020s.

Part of that is government, government-funneled, or government-incentivized funding. Most immediately, there’s the federal COVID-related bailout money. Some mostly smaller newspapers have been able to take advantage of that short-term loan-turned-to-grant aid; bigger ones are too big or too debt-encumbered to make use of them. Gannett’s Mike Reed has told employees the company benefits from federal programs that allow the postponing of both FICA and pension plan payments; he’s estimated as much as $150 million in delayable bills, according to Gannett sources.

There’s a push to expand coronavirus-related government ad programs, directed toward local newspapers. There are also several proposals to use the tax system to incentivize publishers, investors, and/or consumers to provide more money to pay journalists.

The big national responses, led by the News Media Alliance, could break something loose. It’s asking Congress to give it an anti-trust exemption so its members can negotiate as one with the platforms, as well as pushing forward on multiple industry aid programs.

And in some communities facing financialized ownership, journalists and their supporters aim to separate out once-robust titles from the hedge fund herd. They look to cities like Minneapolis, Seattle, L.A., Charleston, Philadelphia, and Boston for inspiration, hoping to find civic-minded wealthy people to revive a paper. The Save Our Sun movement is trying in Baltimore; it joins other recent efforts in Chicago and Sacramento. All of these efforts have now been made more complicated, at least in the short-term, by COVID-driven uncertainty.

Depending on how you look at it, this virus has changed everything — radically changed what 2020 will look like for local news — or simply accelerated the industry down the path it was pointed toward before all this. Wealthy saviors, platform complaints, nonprofit dreams, hedge fund nightmares — those themes have all been with us for quite some time.

The entire company — valued at $18.5 billion-with-a-“b” 15 years ago when it owned TV stations but many fewer newspapers, not to mention $823 million-with-an-“m” as recently as January — is today worth just $88 million. Gannett — the largest chain in the nation, delivering 25 percent of the nation’s daily newspapers each morning — now trades at 12 cents below the frozen level of its bankrupt peer, McClatchy.

The company’s board has prescribed a poison pill, announced Tuesday, as one stopgap treatment for its woes. It seemed to work at first; Gannett’s stock price shot up 57 percent, briefly even touching $1. But the optimism faded as the day went on, and GCI ended the day a few pennies below where it had started.

The company’s market value can’t fall much lower, mathematically speaking, but the questions about its future continue to multiply. Why did the stock fall off the cliff? Why the poison pill? What’s the next step with Apollo Global Management, the private equity firm to which Gannett’s owes nearly $1.8 billion-with-a-“b”?

In this new saga of Consolidation Games action, worlds are colliding: the worlds of supposed merger synergies, of coronavirus-driven shutdown, and of federal bailouts. They’ve combined to confront this new company with challenges that seem overwhelming.

Like all newspaper companies (and to some extent all media companies), Gannett has been battered by COVID-19’s assault on ad revenues. In the second quarter, sources tell me, Gannett will be down at least 30 percent in ad revenue, a number that parallels the overall losses industry-wide. (Some publishers continue to report projected losses as high as 60 percent, but 30 to 50 percent is the range most agree upon.) That’s for April; May is now expected to be similar, and at the moment, there’s not much reason to think June will be very different. It adds up to an unimaginable Q2 of losses for great majority of local newspaper publishers.

This pain coincides, ironically enough, with perhaps the most intense period of readership — and appreciation — by local news audiences in recent memory. But the irony has faded quickly as publishers, their employees, and soon their readers confront the resulting ratcheting down of the local news business.

The new Gannett board faces its own unique challenge, since the company is in the middle of what was proving to be a gnarly restructuring, prompted by the merger between the No. 1 (“old” Gannett) and No. 2 (GateHouse) newspaper chains. That’s a restructuring of organization, technology, staffing, and most intractably, culture. As one might expect, reports even pre-virus found a lot of ongoing pushing and shoving for position, with new second-in-command Paul Bascobert having a tough time putting the new pieces together.

It was that restructuring that provided the financial justification for the massive merger. (The deal closed in November with Gannett shareholders getting $12.06 per share — $6.25 in cash and the rest, now notably, in stock.) Gannett CEO Mike Reed has publicly promised the market $300 million in “synergies,” or cost savings. A number much closer to $400 million had become an internal target, sources tell me.

Now the company has announced $100 million to $125 million in additional cuts, first in the form of last week’s announced pay cuts and furloughs. That’s on top of the earlier $300 million-plus.

Let’s look at the action in progess. (Mike Reed declined to comment for this piece.)

Start with the pill. A poison pill is an attempt by a company to prevent or dissuade a hostile takeover by declaring that, should such an event occur, something terrible would happen. The pill in this case gives existing shareholders the right to buy shares at a 50 percent discount should a raider start buying shares in a takeover effort.

Financial observers describe it as a curious move here. We’ve thus far seen no efforts to buy up Gannett stock — quite the opposite, actually. It’s possible that such a buy will be signaled by SEC-required filings in the days to come, but it hasn’t yet been detected.

How desirable is Gannett, anyway, even at a share price perilously close to corporate pocket change? (Jeff Bezos just bought a house that cost almost twice as much as Gannett is worth.) $88 million plus a premium of 10-20 percent seems awfully cheap for a publisher that reaches the doorsteps of a quarter of the American newspaper reading public — many of them voters.

Of course, behind that purchase price lies the outsized debt any buyer would face. The deal makers, led and managed by Fortress Investment Group, took on that debt in what now seems like a case of extremely bad timing. In late February, Gannett announced it had paid down $45.2 million of its $1.8 billion loan from Apollo, a loan with an 11.5 percent interest rate at a time when the Fed is pushing rates as close to zero as possible.

Any Gannett buyer would have to pay off Apollo, or at least make a new deal with it. Who might want to, or could? Even the one player still active in newspaper M&A — Heath Freeman of the dreaded Alden Global Capital — would seem a long shot to put that deal together. The risk in the newspaper business has only gotten riskier.

But it’s unlikely even vaunted risk-taker Leon Black, Apollo’s founder and CEO — and a man Bloomberg recently called “the most feared man in the most aggressive realm of finance” — could imagine the COVID-inflicted damage Gannett has taken.

(That said, here’s a bit from that Bloomberg profile: “Black built his company, Apollo Global Management Inc., by buying struggling businesses with huge piles of debt at bargain-basement prices, imposing austerity measures on the staff, and extracting huge dividend payments and management fees. Many of Apollo’s most lucrative deals have been from companies other firms wouldn’t go near…’We’ve actually made our most money during recessions…Everybody else is running for the doors, and we’re backing up the trucks.'” Sound familiar?)

So, how able will Gannett be to keep making payments to Apollo and keep the business operating?

That’s a cash flow analysis that will change depending on the shutdown’s length and depth. This lost second quarter will eviscerate anticipated profits. In addition, Gannett and all publishers will find it increasingly difficult to collect on some first-quarter-run advertising payments; many advertisers are on life support themselves, unable or unwilling to pay their bills. Small businesses ask publishers like Gannett to “accommodate” them, given the extraordinary circumstances.

Given all that, sources tell me that Reed and Apollo are talking about a similar kind of accommodation that would ease the financial pressures on Gannett.

Apollo is in the catbird’s seat here. As Gannett’s chief lender, it has first call on the company should it be unable to meet its contractual obligations. Beyond the payments themselves, the Apollo loan includes a number of fairly standard covenants that put clear limits on the company’s spending and debt issuance. (You may remember that Gannett was not allowed to issue a shareholder dividend in Q1 because Apollo wouldn’t allow it “in line with our credit agreement.”)

In this deal, Gannett could find itself running afoul of “gross leverage ratios” — essentially how much cash flow it’s generating compared to the debt it has on its books. Violating covenants can provide lenders the ability to make demands on the borrower.

There are contracts, and then there’s the world of the moment. If Gannett’s financial fortunes worsen — as an economy stays shuttered or sputters through soft opening after soft opening — does Apollo really want to push for control of the company? Right now, it’s a passive player, as one financial observer puts it, “but it’s clearly in charge of the capital structure.”

Apollo continues to be one of the most active PE companies in and around news media. After failing to acquire Alden’s Digital First Media in 2015, it bought Cox’s local broadcast properties last year. Just a week ago, it dropped a bid to add to its broadcast holdings, abandoning talks with big player TEGNA, the broadcast offshoot of the Gannett split of 2015. Clearly, it’s got more appetite for the media business right now than most of its brethren. But how much does the barren landscape of local newspapers still offer Apollo a business case for ownership?

Down the road, we could see both the “D” and “B” words arise. Default, on the loan obligation. Bankruptcy, as in Gannett’s inability to go forward given the twin pressures of its debt and advertising depression.

Those aren’t the words being discussed right now, most observers believe, but they could well lie ahead. Chatham Asset Management, long McClatchy’s major lender, will become its major shareholder — and thus controller — when the company exits bankruptcy, likely this summer. That sort of prepack bankruptcy is one plausible scenario that could be forced by Apollo — but only one.

There’s another “D” word that Gannett has already acted on: dividend. Dividends have been pivotal in propping up publicly traded newspaper stocks over the past several years. Even if investors didn’t believe a newspaper turnaround was likely, they knew that predictable dividends would pay out quarterly cash. Last week, assessing the immediate damage, Gannett took the quick step of suspending its planned Q2 dividend, a sign of its duress.

Why did Gannett shares tank to less than a dollar over the last week? A big part of it is that cessation of the dividend, financial observers say. Institutional funds, which had been holding shares for their dividend payouts, began to abandon it. Some had to, given the rules of their funds; others just thought it was a good time to get out.

Open at the stocks app on your phone and check out the next ring of descent in the financial hell of public newspaper businesses. Bankrupt McClatchy is frozen at 75 cents, no longer a creature of the market. Gannett closed yesterday at 63 cents. Lee Enterprises, too, has dropped like a stone, to 85 cents, just a few months after buying Berkshire Hathaway Media. Only Tribune Publishing, because of its likely merger with Alden Global Capital’s MNG Enterprises in the next few months, has maintained any significant value at $7.37 a share — and that’s still down by almost half in six months.

The end of publicly traded newspaper companies will soon be upon us. They may have seemed like a great idea 15, 25, or 35 years ago, but it’s now mostly private owners of financial capacity and vision who seem to stand a chance of finding a way forward for local news.

What about the federal bailout, you may ask? Gannett is too big for the now-chaotic Small Business Administration loan-to-grant program, which is limited to companies with fewer than 500 employees.

It will be eligible for the Treasury program, whose regulations are still in progress. There it will face intense competition. Unlike the SBA program, which is intended to spend taxpayer money, the Treasury program is intended to make, or at least not lose, money — much like the Great Recession’s politically maligned but economically successful TARP. Gannett’s case may be hard to make on that question, especially in the longer term. Plus, bailouts are inevitably influenced by politics. Given this administration’s war on the press, how much will that further disadvantage Gannett and other larger newspaper companies? We don’t yet know.

Admid all this drama, Gannett welcomed a new chief financial officer Monday. That’s a tough job to walk into, but Douglas Horne’s most recent experience may make the challenge seem more reasonable. Horne left his post in November as global controller for the We Company, parent of commercial real estate leasing firm WeWork. The euphoric rise and spectacular collapse of WeWork — now embroiled in a major public fight with its funder Softbank — has been quite a story to behold. So maybe he’s the one person for whom Gannett’s current crisis will seem relatively tame.

“We are all going to jump ahead three years,” Mike Orren, chief product officer of The Dallas Morning News, suggested to me last week.

At least. Ask an American newspaper exec a few weeks ago what they thought 2025 would look like, and they’d tell it you it would be much more digital, far less print, and more dependent on reader revenue than advertising. Some of them would have told you they think they had a plan to get there. Others, if they were being candid, would have said they didn’t see the route yet, but they hoped to find one in time.

The COVID-19 crisis has clearly accelerated that timeline — and may have ripped it to shreds altogether, depending on how long the shutdown lasts and how deep the resulting recession gets.

Make no mistake, though: Many of the decisions being made right now and in the next few weeks will be permanent ones. No newspaper that drops print days of publication will ever add them back. Humpty Dumpty won’t put the 20th-century newspaper back together again. There can be no return to status quo ante; the ante was already vanishing.

Will these decisions “save” the local press, as we’re bombarded with stories of systemic, perhaps irreversible failure in North America, the U.K., and Europe? One way or the other, these are now existential decisions that can no longer be avoided or postponed.

Right now, publishers are combing through Friday’s federal bailout legislation, “trying to determine if they qualify, for how much and when the money might be available,” David Chavern, CEO of the News Media Alliance, told me Monday. “That is going to take at least a several more days (if not a bit longer) — and I assume that some of these publishers are holding off personnel actions until they know the answers.”

Gannett, now by far the largest local news chain, has already announced pay cuts and furloughs, in both the U.S. and U.K. But all publishers, big and small, are now considering their options. Those include layoffs, rapidly eliminating several days of print publishing, reducing their ad sales staff, and questioning their need for large central offices as remote work becomes a workable norm.

All of those ideas have been discussed for years. But now they have to make decisions they’d hoped could wait a few more. The decisions they make, and how they can act on them, will tell us a lot about how much of the local press is left — and how much isn’t — come 2021.

That’s an internal view. Of course, local newspapers operate in a broader media world — including local public media, local TV, and local startups. In some larger cities, public radio stations are taking audience (and sometimes talent) from the dailies. Local commercial TV stations are feeling advertising pain too, but they still have more capacity to sustain themselves — and grab future market share. “They’re expanding more in digital and in social,” says TV business expert Bob Papper, who tracks the industry closely. That’s true even after Michael Bloomberg’s one-man subsidy of local TV ran its course.

Then there’s the nascent independent local press, from VTDigger to Berkeleyside, Charlotte Agenda to The Colorado Sun, The Memphian to MinnPost. Many of these green shoots are finding a little more sunlight — but they’ll be the first to tell you that it’s a tough road replacing their town’s flagging ancestral dailies. Meanwhile, amidst the carnage, some schemers and dreamers are strategizing about what they see as the detritus of a daily industry, waiting to be bought out or taken off by a new generation of local news builders. They’re early in that process; that’s a story for another day.

Let’s step back for a moment and consider the larger society in which local news — and all of us — now all operate. The double whammy of virus terror and economic calamity has made real a whole host of underlying issues — from generational equity to the ragged safety net, affordable child care to cramped housing, the entire panoply of inequities baked into our society.

Perhaps this will be merely a short bout of home detention followed by a fast, v-shaped economic recovery. Maybe these issues will dissolve quickly in the public discourse. For tens of millions, though, they will remain ever-present, defining their lives and their possibilities.

How will the local press of the 2020s cover these realities of life on the ground when we return, blinking, into the sunlight? Will journalism at all levels be strong enough to contribute the deep reporting and analysis that that intelligent fixes require? Will a society shocked by American incompetence in the face of an enemy find its future aided by the press it deserves and requires? Or will a nation of emptied-out newsrooms be unable to meet the moment?

As I wrote Friday, the biggest problem in America isn’t (yet, at least) newspapers going under. It’s ghost papers, strip-mined by ownership, disguised as news sources but actually offering very little in the way of local news or community leadership. The press, whatever its form, finds itself in a classic position: Lead, follow, or get the hell out of the way.

In the shorter term, though, the set of life-or-death questions local newspaper companies face right now is fairly clear.

• Will we keep seven days of print publishing?
• What does it mean to run a mainly reader revenue-driven business?
• How do we find the right people with the right skills to run a digital business?
• How many journalists will our new business reality allow us to pay?
• Will we still expect journalists to report to a central office every day?
• What do “advertising” and “events” look like?
• Should we merge or sell?

So let’s look at each of these more deeply to see what a prematurely arriving 2025 means to readers, journalists, newspaper employees, and publishers.

Nearly every publisher has looked at this question — and nervously stepped back, ever since Advance Local stepped out way ahead of the crowd in 2012. Their compelling fear: Would ending seven-day print be a final breaking point for the habits for decades-long subscribers — the ones now paying $400 to $1,000 a year for home delivery? How many of these customers wouldn’t even transition to a lower price point for some print and more digital? How many would, like so many newspaper subscribers before them, just go away?

McClatchy provided one of the best and most watched dress rehearsals in the trade last year. Last summer, I wrote about how the company began its program of dropping print Saturdays for a single weekend edition — something the Europeans did successfully ages ago. Now McClatchy’s little experiment has become the standard across the entire 30-title chain. And its results are clear.

“The retention from digital Saturdays has been nearly total,” Sara Glines, regional publisher for McClatchy’s Carolina properties, told me Monday:

We lost less than a dozen subscribers in each market, in some markets less than a handful. Digital activation went up immediately. E-edition usage went up on Saturdays. In today’s coronavirus environment, those digital activations have gone a long way in bringing more readers to our digital platforms for breaking news and updates. Miami Herald and El Nuevo Herald were our last markets to launch digital Saturdays. Their first digital Saturday was March 21. It went just as smoothly as all other markets.

How well does McClatchy’s Saturday strategy translate to the broader industry? We know the lessons:

• Communication: Talk to readers early and often about why day-cutting is happening.
• Move relevant features and news into other products, digital or print, that make sense to readers. Reconfigure the Sunday paper into more of a week-in-review, stronger-in-features product.
• Set new pricing that customers think is fair.

But those essential-to-execute guidelines only tell us so much. Dropping Saturdays saves publishers some money — but not that much. With as much as half of their ad money evaporated by COVID-19, publishers will need bigger savings — which means cutting more days.

Readers who might easily adjust to the logic of a weekend paper might also think that saying goodbye to Monday, Tuesday, Thursday, and Saturday, all at the same time, is too much. If it’s too much for readers, and they drop their subscriptions entirely, then the local news business spirals downward even more quickly.

If it works, though, it can save a lot of money.

A huge portion of newspapers’ budgets remains tied up in manufacturing: presses, paper, ink, trucks, and all the people who handle them. (These are the often forgotten newspaper employees, the ones who realize their jobs are going away, but nonetheless like the idea of that happening in 2025 more than 2020. Let’s not forget them.)

“There are so many variables,” one veteran of the trade told me:

Most important: Do you outsource printing or not? If you do, then you can usually cut days and save money. If you own your own presses, it’s harder to manage. Pressmen don’t work just two days. What does it do to your distribution network; can they afford to operate just two days a week? Do you have an agreement to print and distribute other papers like The New York Times or USA Today?

That reckoning — to in-source or outsource — has led to much more regionalized printing, like The Columbus Dispatch being printed 175 miles away in Indianapolis. Those longer distances lead to much earlier editorial deadlines, which means missing late news or sports — often resulting in a print product that’s 36 hours behind the news we read on our smartphones. That’s part of this unending spindown of the newspaper industry.

What’s the 2025 business view here? Expect that most surviving dailies will offer as robust a Sunday print product as they can, and digital through the day, through the week. Or maybe it’s Sunday and Wednesday, for midweek print advertising, depending on individual markets. Or maybe the big Sunday paper shifts back to Friday or Saturday to capture more weekend reading and shopping. Done well, a publisher that shifts from seven days to a couple can expect to retain 75 to 90 percent of existing print advertising. But publishers have been properly wary of that ripcord now dangling in their corner office.

We’ve already seen several titles, most prominently the Tampa Bay Times, announced radical day cuts, within this crisis, and we’ll see more. The question is how many more, and how many days will they be cutting? Even in relatively prosperous California, major publishers are planning to drop Saturday print by early next year, knowledgeable sources tell me.

What does it mean to run a mainly reader-revenue-driven business?

The national news brands offer the best-practice playbooks here.

Business intelligence forms the foundation of their business, with an ever-evolving understanding of how to win — and keep — paying subscribers. That intel has then led to newsroom staffing expansion. They’re creating a virtual flywheel of more and better content and services to readers, who then pay for subscriptions and build a new — bigger — business.

For the locally oriented companies, though, that model is daunting. Do they have the will, capital, time, and talent to apply proven lessons?

How do we find the right people with the right skills to run a digital business?

Going digital (doesn’t that sound odd in 2020?) means committing to a business run by people with digital skills, and not enough publishers have truly done that. Time’s now up. As I noted in my start-of-the-decade Epiphanies piece: “The brain drain is real. What’s the biggest problem in the news business? The collapse of ad revenue? Facebook? Dis- and misinformation? Aging print subscribers? Surprisingly, over the last year numerous publishers and CEOs have confided what troubles them most: talent.” That truism makes the accelerated movement to “digital” even tougher.

How many journalists will our new business reality enable us to pay?

Some smaller chain newspapers were already down to the most skeleton of product-producing staffs, pre-COVID-19. We’ll now see tested the question of how low on staffing they can go — just to get a product out. The more important question, though, is: How many people do they need to produce something readers will pay for?

Will we still expect journalists to report to a central office every day?

Having learned that they can produce the news almost entirely remotely (other than printing and distribution), how much will news organizations want to reconfigure their workspaces to generate savings out of reduced office space?

“We’re 100 percent remote,” says Mike Klingensmith, publisher of the Star Tribune. “Nobody is in our office. I don’t know how we are doing it. Everyone may figure out we don’t need an office after all.”

About 20 percent of newspaper employees work in the physical business of print, manufacturing, and distribution. For the rest, this small unthinkable is now thinkable.

What do “advertising” and “events” look like?

Publishers have continued to make and re-make their ad priorities, staffing, and skills as The Duopoly and digital have forever changed the nature of advertising. This crisis — with some portion of that missing advertising likely never to return — will prompt more rethinking. How much inside sales versus how much outside? How much branded? How much direct versus programmatic?

The events business is also a big question mark, as Josh Benton explored last week. O’Reilly Media deciding to end its big event business was shocking. I agree with the sentiments of Rafat Ali, founder of travel B2B leader Skift: “If we ever give in to the idea that face-to-face events will be over, then we should also give up on the idea that people will travel again. We might as well give up on, well, everything.” Rafat-like, and as ever, to the point.

He expresses a global POV; let me add a local one. The future of the local press is in a deep and authentic relationship with its readers and communities. And that means people in close contact, post-coronavirus. Events of all kinds will be a major part of that future for the successful.

Will we have to merge or sell to stay in business?

The Olympics may have been pushed to 2021, but The Consolidation Games is going ahead as scheduled, virus schmirus. In fact, there’s good reason to believe this crisis is accelerating an M&A process that had already been moving fast.

Share prices for publicly traded chains have dropped dramatically, with Gannett floating just below $2 Monday. When GateHouse bought Gannett — just over four months ago! — this was the deal: “$12.06 a share in cash and stock, based on New Media’s Friday closing price, with a promise of $6.25 in cash and 0.5427 of a New Media share for each Gannett share.” From that to two bucks is quite a fall.

Depending on the duration of this crisis, Gannett’s shares are likely to rise eventually. But its big question remains the $1.8 billion in debt — at 11.5 percent interest — that it took on to make the merger work. Will Gannett be able to keep on schedule with those payments — while, you know, actually operating the company — if the ad exodus extends into summer or fall?

It’s not just future earnings that these companies need to worry about it. It’s also collecting on what’s already been sold, on ads that have already run.

“One of biggest issues is cash flow,” one news industry financial veteran told me. “What if all those SMBs [small to midsize businesses] don’t pay for January and February ads? Even if they have cash, they don’t want to cut checks. Even places like Macy’s may just not pay for January inserts.”

(Here we meet one of the great players in any crisis: attorneys. “In this whole mess, expect full employment of lawyers arguing ‘force majeure’ as a reason not to enforce contracts businesses want to get out of,'” that finance source continued. Is a pandemic an Act of God? It’s a legal “gray area.”)

These are more than abstract concerns. Metro publishers have already told me about major advertisers asking for givebacks and “accommodations.”

Some, including me and much wealthier investor Leon Cooperman, have long doubted Gannett’s ability to pay off that five-year loan while continuing to pay a hefty dividend to shareholders and keep enough people in its newsrooms with the cash flow it could expect.

This crisis only makes those doubts grow stronger.

It’s way too early to mention the “D” word — default — though it is being brought up offline.

Now consider the other drama that’s been submerged in the virus crisis. What will become of Alden Global Capital’s essential takeover of Tribune Publishing? It’s likely more “logical” — in terms of profit maximization — than it was before. Sources tell me a merger between Tribune and Alden’s MNG Enterprises is likely to be announced before the June 30 that is so pivotal in Tribune’s future.

One financial source tells me the deal will be a mix of cash and stock: “Tribune is the acquirer. That would leave them with more liquid security, a big beneficiary of all the synergies. Tribune can fit it into their balance sheet, since it has little debt, with no problem.” (At the moment, Tribune debt stands at $37.6 million.)

Tribune has already begun to look more like Alden’s MNG, notorious as the industry’s most aggressive newsroom shrinker. Tribune has been cutting costs, reducing management positions, and searching for efficiencies wherever it can find them. This current crisis only adds impetus to that work.

In that scenario, Tribune properties — in major cities like Chicago, New York, Baltimore, and Orlando — will probably begin to look more like MNG papers The Mercury News and The Denver Post. Newsrooms cut to be the bone. Disinvestment from what Alden has always seen as a largely mythical digital future.

Financially, it’s a strategy that has worked for Alden. Enough older subscribers have accepted its higher pricing, and it’s found just enough buyers of its minimal digital products to keep the profits coming.

While its numbers aren’t as good as what I reported two years ago, its top properties still throw off (or did pre-coronavirus) margins of more than 20 percent. That’s unheard of among nearly all other publishers.

So what will this crisis mean to Alden and its president and chief dealmaker, Heath Freeman? “Heath could use this to run the table,” one observer said.

It’s easy to see why and how that indeed might be possible. Look at what the chain landscape may be by summer. McClatchy, one of the now lonely “independent” chains, will emerge from bankruptcy in four to six months (unless virus-driven delays lengthen the process). At that point, controlling owner Chatham Asset Management will look at its options.

One will be merging with the new Alden+Tribune.

Another, maybe, would be turning to Gannett. That would require a larger financially rejiggering, though, with lender Apollo a key player.

Either way, given the deep declines the industry faced pre-COVID, plus the unknown toll going forward, we could well see this reality: four hedge funds and private equity firms controlling a majority of America’s daily press as 2020 rolls on into darkness.

Chatham, Apollo, Alden, and Fortress Investment Group (which holds a contract to manage Gannett through 2021) may well get to decide amongst themselves how to divvy up the properties that deliver the local news most Americans get.

That’s not the picture Seattle Times owner Frank Blethen has in mind as he has launched his “Save The Free Press Initiative” in December. But it’s a reality we may all soon face.

This extreme moment is forcing publishers’ hands. Undoubtedly, some may look back on the other side of COVID-19 and say: “That worked well. We should have done it earlier.” Others will wish they’d had more time to think about jumping.

If publishers’ can still see any water in the glass at all — it seems to be emptying day by day — they might invoke Rahm Emanuel’s timely advice about the Great Recession at the start of Barack Obama’s presidency: “You never want a serious crisis to go to waste.”

This is a crisis. This is serious. And there’s no time left to waste.

What’s black and white and now deemed “essential”?

Newspapers, of course — the communications medium that, along with its media peers, has been formally recognized as a public good by cities and states trying to determine which slices of their economies not to shut down. Factual local reporting is indeed an “essential” in an age of fear and misinformation.

That’s the sliver of silver lining in this time of unprecedented financial stress. Our work, as journalists and as institutions, is being consumed and appreciated.

“We’ve gotten all these great letters that ‘Our respect and admiration for your work has never been higher,” says Star Tribune publisher Mike Klingensmith, whose Minneapolis daily has seen big spikes in readership as well.

“Your reporting during the COVID-19 crisis has been top-drawer and inspired me, finally, to execute the much overdue annual subscription ‘donation’,” one new member wrote Colorado Sun editor Larry Ryckman this week. “Please keep up the good work and know that your reporting is incredibly valuable, not merely during this crisis.”

Colorado Public Radio also feels the love, including this heartfelt tweet:

So true. My auto-donation to @CPRNews came out of bank today & I admit I was tempted to cancel it before next month (husband lost job and our health insurance this week) but after 2-seconds I realized they’re some of my best friends right now and I’m happy to pay that bill https://t.co/AvnVUtghtQ

— KB (@kb80202) March 19, 2020

“Audience feedback and digital use has been tremendous, and the numbers are stunning,” sums up Colorado Public Radio head Stewart Vanderwilt.

A giant story like coronavirus is often when journalists feel most connected to the sense of mission that got them into this line of work. It’s the love — plus a much-appreciated viral bump in audience, subscriptions, and memberships — that is buoying otherwise overwhelmed publishers and newsrooms.

More bittersweet is how one innovative local news exec put it to me: “This may be our last chance to prove how valuable we are.”

CNN, MSNBC, The New York Times, The Washington Post, The Wall Street Journal, NPR, the AP, and more are providing the national reporting. They show us, through words and graphics and images, the scale of the tragedy and the many flaws in the federal government’s response to the crisis. But they can’t answer the fundamentally local questions urgent on minds nationwide.

How many people are sick near me? How well equipped is my hospital? Where can and can’t I go? What’s my mayor or my governor doing to help? Who can deliver what? Where can I get tested? And a hundred other perhaps life-or-death decisions as half of Americans nervously face indefinite home detention.

Many of the country’s 20,000-plus journalists have risen to the occasion, working the phones, filing remotely, and venturing out into the invisible threat to get the stories that require the sight or even touch of other humans. All while wondering: How long will I have my job?

That’s the terrible irony of this moment. The amount of time Americans spend with journalists’ work and their willingness to pay for it have both spiked, higher than at any point since Election 2016, maybe before. But the business that has supported these journalists — shakily, on wobbly wheels — now finds the near future almost impossible to navigate.

The question of the hour: How many journalists will still have jobs once the initial virus panic subsides? How much factually reported news — especially local news — will Americans be able to get in the aftermath of this siege?

The answer lies in great part on the people in those quotes above: It is readers and their willingness to support the news who increasingly distinguish the survivors from those facing the end of the road. Advertising, which has been doing a slow disappearing act since 2008, has been cut in half in the space of two weeks. It’s unlikely to come back quickly — the parts that do come back at all.

The problem is the same it’s been for years: The increases in reader revenue are outmatched by the declines in advertising. So this very welcome swell of support from audiences is being swamped by the much larger evaporation of ad revenue. News publishers nationwide are afflicted with existential gut checks — aches that get a little worse with each day’s new dot on the chart of coronavirus cases.

Let’s look first at the cliff-edge effects — which are dramatic — and then plumb the good news of reader engagement and subscription. In an upcoming piece, peering ahead five years or so, I’ll take a look at the big takeaways and likely longer-term impacts of this sudden twist of fate.

A profound advertising crisis

This event isn’t just a black swan, Nassim Nicholas Taleb’s parlance for an unexpected happening that forever alters the course of history. For dailies — in the U.S., in Canada, in the U.K., and really globally — it’s a flock of black swans.

Why? The daily newspaper industry has been on a respirator of its own for more than a decade. Ever since the Great Recession sucked 17 percent of advertising oxygen out of the system in 2008 — then another 27 percent in 2009 — it’s been climbing uphill, its gasps growing more frantic as financial operators consolidate and stripmine what was once a profoundly local industry. All together, American newspapers have lost more than 70 percent of their ad dollars since 2006.

The industry enters this turning-point event with about $1 billion remaining in total annual profits. That’s a fraction of what it was at its height, but it’s still a lot of money — which is why the financial consolidation I’ve chronicled over the last year has continued.

If the massive ad losses we’re now beginning to see remain in place for months, all of that profitability will be gone, and then some. We’ll enter a new stage of loss: The news deserts will become the norm, the oases the rarity.

How bad is it out there? The overall ad business — call it advertising, sponsorship, underwriting — is in depression.

I’ve spoken with more than a dozen well-placed executives in the industry, and the consensus is that, in April, daily publishers will lose between 30 and 50 percent of their total ad revenue. Things are unlikely to improve until we’re past mass sequestration, whenever that is.

“We’re hitting the end of March,” one highly experienced ad exec told me. “We see what’s coming. Big, big misses [of revenue expectations].”

The numbers are necessarily imprecise, and they change daily. March, ironically enough, started surprisingly strong for some publishers. Several noted stable businesses, even a little growth here and there.

Then the virus. April will start off with many fewer bookings and many more cancellations. The second quarter is one big question mark, but publishers also know what a 50 percent drop isn’t even the worst-case scenario. Retailers are closed. Car dealers aren’t selling. Few people are hiring, and who’s brave enough to venture into a new house or apartment to look around?

Then there’s preprints. These Sunday circulars and inserts have remained a robust, high-margin product for many publishers. But many of the big-box stores that paid for them are now closed, including major (if perennially dwindling) retailer Macy’s. Those that remain open, the Targets and Walgreens and grocery stores, wonder what they can advertise; supply chains for both essentials and non-essentials remains uncertain, and people aren’t doing a lot of spontaneous shopping sparked by a deal in an ad.

Is anything holding up okay? The legal ads that newspaper carry of official government actions. Obituaries (darkly enough). And, where they’re legal (and have been allowed to remain open), marijuana dispensaries. (They deliver!)

But the uncertainty is near-universal. “Even those who have something to sell are really concerned about doing it,” one revenue exec told me. “They’re unclear on how to get their message right and not seeming to profiteer.”

Seattle Times president Alan Fisco provides detail:

We have seen deep losses, not surprisingly, in travel, entertainment, restaurant, auto advertising (particularly in our smaller markets, Yakima and Walla Walla).

Our projections show April to be significantly worse than the hit we are taking in March. The annual print declines look to be double what we were experiencing prior to this.

And in spite of significant traffic increases, while we are seeing an increase in programmatic [advertising], it isn’t enough to offset our O&O [self-sold advertising] losses and some of our audience extension product losses (search and social).

(The Seattle Times’ remarkable coverage of the country’s first hotspot was highlighted here.)

Most local dailies have entered this crisis still more dependent on ad revenue than on reader revenue, even though the percentages have moved closer to parity after three years of double-digit print ad decline. They have envied The New York Times, The Wall Street Journal, and The Washington Post for having achieved business models based primarily on reader revenue.

(Ironically, coronavirus will likely push a lot of local publishers into that elite club — but through cratered ad revenue, not soaring reader revenue.)

The devastation across news media is universal but, inevitably, uneven. All local sources of news — daily newspapers, local digital, public radio stations, local TV stations — are reporting deepening losses.

It’s those most reliant on advertising that are most at risk. As reported earlier here at the Lab, it’s alternative weeklies and other free papers that look to be in the first trench. Significantly, the alt-weekly trade entered this year weaker than it’s ever been; no more than a dozen of them nationwide could be called significantly profitable, sources tell me.

“Eighty percent of our advertisers are restaurants, clubs, performance venues and all that is gone for at least two months,” one alt-weekly publisher told me Thursday, underlining how alt-weeklies’ strength — their connection to a vibrant city life — has turned against them.

Among independent digital sites, many of them members of LION Publishers and/or INN, sponsorship/advertising has indeed taken a hit. But since few depend overwhelmingly on it, the effects are worrisome more than catastrophic.

“Ironically, the nonprofits we’re hearing from with struggles right now are those that have done a lot to diversify their revenue streams,” says Sue Cross, executive director of INN, the Institute for Nonprofit News. These are news organizations that were doing a lot of events — now cancelled and with a less-certain future. Or they had big in-person spring fundraisers now forced to pivot to virtual, but that doesn’t replace substantial sponsorship revenue.

Five years ago, Ted Williams founded Charlotte Agenda, one of the liveliest and most commercially savvy sites on the emerging landscape. CA is taking some fire, but has so far it’s been manageable:

Revenues are down around 25 percent. This decrease consists of the drop-in job postings, event listings, and short-term ad deals. We’re fortunate that over 65 percent of our revenue comes from 12-month sponsorship deals across 28 big brands, most of which are negotiated in late fall.

Public radio, too, which depends more greatly on membership revenue than on advertising (or underwriting, as they call it), is also taking a hit.

“On the revenue side, we could see a negative swing of as much as $2 million in the final quarter, ending June 30,” says Vanderwilt of Colorado Public Radio, which has seen a remarkable surge of online readership and radio listenership. “Thirty to forty percent of our sponsorship is from the categories most immediately impacted by the need for social distancing and actual shutdowns. Arts, entertainment, events, restaurants, clubs — and education. Just about all have cancelled/paused their schedules.”

“We have seen some upticks in unsolicited donations coming in,” says Tim Olson, senior vice president of strategic relationships at KQED, the nation’s biggest regional station. But it too has suffered some sponsor loss and is, for now at least, forgoing another tried-and-true revenue source:

Public media stations, particularly news and information public radio stations, have almost all cancelled their on-air pledge drives in order to continue uninterrupted coverage of COVID-19. On air drives are critical drivers of new donors, and reminder to current donors, so the loss of on-air drives is likely to have an effect.

Local TV stations are also assessing what the spring will look like. Several are forecasting a 20 to 30 percent loss at this point in advertising. While they don’t have reader revenue, their ample retransmission fee contracts provide a big steady source of income.

Even with record consumption of digital news, advertising there is fetching far less than you might think. The reasons are straightforward: Many advertisers specify that they don’t want their products to appear next to a virus-related story — and that’s where most of the traffic is, of course. And with all businesses on temporary hold, demand for advertising is down.

That has led programmatic pricing, several publishers say, to be down about 30 percent. One told me it’s now dropping closer to 50 percent as society closes more doors.

In any event, all legacy local media — newspapers, TV, and public radio — are still much more reliant on their core legacy revenue than on digital dollars. So even increases in digital revenue don’t do much to counter the current big declines elsewhere.

The public’s hunger for local news is proven

That’s a lot of bleakness in advertising. But amid it all, there’s a little sunshine in digital subscriptions — the closest thing to a path forward for local newspapers.

Mike Orren, chief product officer at The Dallas Morning News, ticks off these amazing numbers: “Pageviews are up 90 percent. Users are up 70 percent. New users are up 75 percent. Sessions are up 96 percent. Sessions per user are up 14 percent. Session duration is up 9 percent.” And all that has pumped up digital subs.

Digital subscriptions are way up at the strongest local newspapers, with new weekly signups up 2× to 5× over pre-virus times. That’s thousands of much-needed new customers.

(How well are the two general-news pay leaders, The New York Times and The Washington Post, doing? They won’t say. We’ll find out the Times’ experience at its next earnings report.)

That kind of digital subscription growth is widely reported among medium-to-large local papers that do two things well: (1) fund a newsroom able to cover the local crisis in knowledgable depth; (2) have a system in place that facilitates quick and easy subscription signups.

Many newspapers fail to meet both those criteria, and they’ve seen a flatter growth ramp.

Notably, several publishers say that lots of people aren’t waiting to hit a paywall and run out of free articles for the month — they’re hitting those Subscribe buttons earlier and unprompted. They’re acting on both the value of the journalism and the community service.

One other indication of increased loyalty: fewer subscription cancellations. Churn is down. “We’re adding 50 to 70 subscribers every single day and seeing very little churn,” Tampa Bay Times editor Mark Katches told the Local News Initiative. “Churn is as common as the sunrise, but we’re experiencing the lowest churn rate this month that we’ve seen since we introduced the pay meter about a year ago. We attribute that to high interest in our coverage.”

The New York Times requires a new user’s registration in order to have free access to its coronavirus coverage. But most publishers have just opened their coverage up without any friction.

The Dallas Morning News’ strategy is somewhere nuanced and in between. It requires readers to sign up for a virus newsletter in order to get to unlimited related coverage, but it doesn’t require any more information than an email address. “It’s less friction,” Orren says. The idea has paid dividends: That newsletter now has an astounding 334,000 subscribers.

Some of more ambitious local news startups also report impressive numbers. The 18-month-old Colorado Sun is seeing a spurt.

“We have had nearly 600 new members sign up so far this month,” editor Ryckman told me Wednesday. “We signed up 330 new members in February, so we’re easily on track to double that pace by the end of the month.” The site overall has more than 8,000 paying members, with about 1,400 of those at the premium level. “Our traffic has been regularly 3× a normal day — and has been has high as 10×,” he said.

The Daily Memphian, also about 18 months old, is seeing a response both to its coverage and to appeals from its editor Eric Barnes: “Sub starts have jumped 250 percent in the last 2 weeks. And that’s even though we’ve made all our COVID stories free (and that’s 80 percent or more of what we’re doing).”

Barnes underlines the need to remind readers of the costs of journalism. “But we’ve been very intentional with calls to action in stories and newsletters, along the lines of “Our articles are free — but covering the news is not. Please subscribe.” (Memphian sports columnist Geoff Calkins wrote his own direct appeal to readers, aiming to reach a different kind of reader-relationship connection.)

LION Publishers executive director Chris Krewson reports good uptake among his more aggressive member local news orgs. “Berkeleyside has signed up 267 new members since starting a campaign around the virus a few weeks ago, and also gotten donations from existing members, for a total of $50,000 in new-member revenue. The Berkshire Eagle launched a membership campaign and already has 300 members.”

“Many members are reporting huge increases in traffic — five, even ten times their normal pageviews, and also increases in community support and donations,” says INN’s Cross. “Even very small sites are hosting Facebook groups and seeing thousands join overnight, organizing collaboratives of all media in their towns.”

Pulitzer-winning Portland alt-weekly Willamette Week launched a voluntary membership program back in September. As of week ago, it had signed up 510 members. Seven days later and more than 1,100 new members have signed up. “In addition to the much-needed cash, those [and their comments] are tonic for the soul,” publisher and editor Mark Zusman told me Thursday.

For public radio, this crisis has been more about affirming its valued place in listeners’ and readers’ lives — in greater engagement — than in signing up new members. Over the past five years, most of the top 20 public radio stations have morphed more fully into “public media,” investing heavily in digital local news. Those that did are also reaping the returns.

“As of yesterday, CPR.org had over 2 million uniques and [on its separate site] Denverite 500,000,” says CPR’s Vanderwilt. That’s double and quadruple normal traffic, respectively. “The daily Lookout newsletter subs have grown 36 percent since March 1. We have also started publishing twice a day plus news alerts. Open rate has climbed from 32 percent to 41 percent.”

The public, for now, is eating up the added frequency and opening more of those newsletters. At KQED, pageviews have doubled and time spent on pages is up by a quarter. Overall, the public’s hunger for local news at this time is proven.

At metros, daily visits on digital are up an average of 122 percent as of the third week of March. And the pace is accelerating: “a 35% increase from Week 2 to Week 3 [and] no signs of slowing down as we enter the last week of March,” according to Pete Doucette, now a managing director at FTI Consulting. Doucette played a big part in building The Boston Globe’s digital audience and subscription business. His comprehensive take on digital subscriptions, and how to maximize both volume and pricing at this critical juncture is a must-read for all in the business. (The Local News Initiative at Medill offers an excellent roundup as well. )

These trends, we must underline, are global — both the traffic gains and the revenue losses. Major German publishers like Bild and Spiegel Online “all have huge gains,” according to journalist Ulrike Langer. “But none of these publishers have been able to monetize their huge rise in traffic volume in terms of advertising. Ad volume has sharply declined and most advertisers don’t want to see their ads next to coronavirus news.” Different continent, same issue.

What’s left to be “unthinkable”?

Humans are inherently adaptable. We have the life-affirming (and seemingly planet-destroying) capability of adapting to anything. We will adapt here too, no matter the human nor economic toll. A scale of destruction that would have once been “unthinkable” becomes quite thinkable indeed — then assessable, and then actionable. Those of us who’ve tracked the shrinking of the American press should have learned that lesson already.

We all expected a recession would arrive at some point, even if we thought of it kind of distantly, and we knew it would deal a new blow to the beleaguered newspaper industry. (In fact, I see that I’ve noted that possibility here at least three dozen times over the years — including this 2011 (!) entry, The newsonomics of the next recession.”)

Now that it’s arrived on our doorstep, our language has changed. Less “decline” and “deterioration,” more “annihilation” and “extinction“.

“Extinction” certainly draws a sharp picture, and it will be literally true for some of the press. But that picture may not be the most precise. More journalists gone. More publishers gone. Local news greatly reduced.

That’s all coming. But how do we — and the publics we serve — gauge what’s left?

The cuts at alt-weeklies and city magazines became public first. The earliest reports of cuts and layoffs at daily newspapers have begun to seep out. Expect a lot more of them. “Everyone’s making contingency plans,” one industry insider says. Layoffs, furloughs, salary cuts, four-day weeks — however it’s framed, cuts to staffing are on the way.

The fact that readers’ newfound appreciation of the local press is based on the work of those reporters and those newsrooms should limit the cuts. But they often won’t. And then there are the newspapers that have already been cut so much that they barely have enough people to put out a paper everyday. (And that’s before we see much of the most direct impact coronavirus can have on a news organization: sick journalists and other staffers whose extended absence from work makes everything harder.)

One wild card: the federal bailout, which features loans that can be turned into grants if companies maintain staffing. But it remains unclear if the scale of that help — and how accessible it is to publishers — will be enough to make a big difference.

Several years ago, Penny Abernathy’s mapping of America’s “news deserts” established a universal point of reference for discussions about local news. I’ve suggested that, for all the communities down to one or zero news sources, the bigger problem is the ghost newspapers that now pervade the landscape, stripped to the skeleton.

This crisis, like the declines of the past decade, will probably be less about pure extinction and more about new apparitions. Newspapers gutted in a way previously “unthinkable.” Badly wounded (but still faintly breathing) dinosaurs, if you will.

How do we judge if a newspaper is still “alive”? By most definitions, it’s the appearance of a product, usually in print but now digital, that carries a dignified nameplate, preferably in a familiar German blackletter font.

The financial companies that have and will continue to consolidate the local press — perhaps now at an accelerated pace — know that, and they’ve build a cynical strategy atop it. Keep the nameplate and fill the space between the ads with national wire copy, stories pretending to be “local” (but really from someplace three newspapers away), self-serving columns from mayors and local corporate leaders, and lots of low-cost calendar items.

“Fake news” is a truly odious epithet. But we’re now truly into the faux news era in local news. It’s a thin patina of fraudulent localness, packaged in the wrappings of a century ago, and priced at $600, $700, or $800 a year for seniors who nostalgically (or unknowingly, through the magic of the credit card) continue to pay until the day they don’t.

If we define “life” — or non-extinction — by the mere persistence of an old nameplate, we obscure the damage being done to local communities every single day. As we begin to list out the longer-term impacts of the current catastrophe, put that one higher on the list.

All of this — this March massacre of news revenue — is prologue, of course. We just don’t yet know what it’s prologue to. The 2020 calendar has never looked longer.

As one of the most successful, optimistic, and progressive of today’s publishers told me: “If it’s a couple of months, we’ll make it through. If it’s six months, all bets are off.”

The $2.2 trillion CARES Act will likely become law at some point today. It’s a bailout that has got local news publishers and their trade groups scurrying; they’re eyeing two big pieces of it. As details continue to emerge and regulations await writing, we can begin to understand what in this legislation might make a difference to the beleaguered news industry.

(It’s important to understand, though, that much of the information about the bill, not to mention its future implementation, is still fragmentary.)

Publishing companies with fewer than 1,000 employees will turn to the $300-billion-plus allocation for the Small Business Administration. (Estimates for the total range from $349 billion to $377 billion at the moment. Yes, could be a $30 billion rounding error.) SBA will now be able to approve “loans” of up to a million dollars, up from the current limit of $300,000. Even better, these low-interest loans (4% interest max) can be turned into grants so long as payrolls are maintained. (What does “maintained” mean, exactly? That’s detail still to come; SBA is supposed to aim to have its new regulations in place within 15 days.)

Much of America’s daily and weekly press can benefit from the new SBA program. The main idea: Keep payroll in place for the current workforce. It is a program aimed squarely at the onrushing second quarter.

Publishers will be able to apply the money to rent and utilities as well, says Danielle Coffey, senior vice president and general counsel for the News Media Alliance, who has been poring through the legislation.

Already, publishers and their trade groups — notably News Media Alliance and America’s Newspapers (the result of the recent merger of Inland Press Association and the Southern Newspaper Publisher Association) — are combing through the legislation, determining the key points that will inform publisher decision making.

Those publishers, along with many other small business owners, will soon visit (physically or digitally) the SBA-approved banks that will review and distribute the funds. Those banks themselves are sure to be overwhelmed.

Those loans will be a lifeline for some publishers, as society’s great disappearance has taken as much as half of advertising revenue (maybe more!) from the press in shockingly short time. Will this SBA lifeline be enough to make a difference? Certainly, the size of a local news enterprise determines how far hundreds of thousands of dollars can go. Certainly, though, no one can be sure. Barring a major Easter surprise, no one expects this lost ad business to come back big or come back strong. But a million dollars buys one important thing for smaller companies: time.

Between SBA loans and a paycheck protection provision, it’s believed that the most a sub-1,000-employees company could receive would be 2.5 times its average monthly payroll, not to exceed $10 million.

These smaller companies provide vital news across the vast reaches of the country. But the reality is that most of the country’s newspaper readers are now served by dailies owned by larger companies.

Companies with between 1,000 and 10,000 employees graduate into a larger and wildly competitively pool, already dubbed the Mnuchin Fund by some. Treasury Secretary Steven Mnuchin has been given a checkbook of around $454 billion to help these employers.

Who can qualify? Basically, other than airlines, air cargo, and security companies — all of which are covered under other parts of wider bailout — it’s everyone into the big pool. Hoteliers, big restaurant companies, retailers of every kind…and newspaper chains. “It’s very unformed,” says David Chavern, CEO of the News Media Alliance, which represents the largest newspapers, mainly metros and chains, in the daily newspaper industry.

What will the Mnuchin rules be? No one yet knows, as the press raises comparisons to the last crisis’ TARP legislation. That’s the bailout that, some pundits believe, both saved the country from a depression and spawned a political revolt that determined much of the politics of the next decade. (Well described in brief on The New York Times’ The Daily’s Thursday podcast.)

“There are a lot of unknowns, and there will be more restrictions,” sums up NMA’s Coffey succinctly. Among the questions: How much money goes to which companies, on what terms, and with which requirements?

Such decisions are always knotty, contentious, and inevitably political. The financially driven consolidation of the newspaper industry (amply covered here since January 2019 as The Consolidation Games) should complicate what will already be complicated decision making.

(And hey, at least we know The Consolidation Games won’t be postponed a year because of COVID-19.)

New Gannett, the largest newspaper player by far, has been in the process of achieving $300 million in “synergies” between its former GateHouse and Old Gannett halves — largely by reducing headcount. Almost all daily newspaper companies have been laying off employees for years, as their revenues have dwindled. How will regulations take into account declining companies in a distressed industry — whose work still produces the bulk of local news that Americans get?

All these companies still supply vital journalism, but how much will a bailout support that journalism as compared to the maintenance of sometimes significant profit margins? Will it distinguish between a family-held daily that’s reduced its profit substantially to maintain a larger newsroom and a private-equity-owned daily that’s done the opposite?

Is this money for the owners, for the journalists, or for the communities they serve? That’s a major question to watch closely.

Both at the trade groups and in executive offices, newspaper people begin to try to divine what’s likely to happen with the Mnuchin money and beyond.

NMA has been in full swing on these issues ever since the severity of this crisis became clear. Why didn’t NMA try to get a specific piece of dedicated bailout money, as the airlines ($60 billion) did?

“Our lobbying was limited,” says Chavern. They were told they couldn’t, along with all other beleaguered industries. There’s “essential” and then there’s essential. (And then there’s “essential,” like germ-spreaders Michael’s and the Guitar Center.)

Instead, the trade associations began work in several areas:

• Making sure news publishing was defined as “essential.” The lockdown quickly prompted on-the-fly definitions of which businesses were sufficiently “essential” to be allowed to stay open. With the federal government taking its on-again, off-again position of leadership in this crisis, NMA worked with various jurisdictions and state publisher associations to ensure that journalists could continue working — and delivery people could throw papers.
• Outlining a “public service ad” initiative that could serve dual purposes. As the federal government communicates policy, such as the evolving CDC guidelines, it could place a steady stream of ads in newspapers — as well as other media — to get the word out. It’s a proposed twofer: (1) offer factual information more widely and (2) provide support for news media as they endure unprecedented ad revenue loss.

It’s more than an abstract idea. On Wednesday, Justin Trudeau’s administration announced that Canada would spend $30 million on such ads. “To ensure that journalists can continue to do this vital work, our government is announcing new measures to support them,” he said. (Publishers quickly cried too little, too late, pointing to the coronavirus-driven loss of as much as two-thirds of their ad revenue.) “They’ve done that in Europe, too,” says Chavern. Expect the NMA and America’s Newspapers to push for a sum in the nine-digital range.

How much should anyone be concerned about the tried-and-true American line between government and press?

“There’s a lot of apprehension about the independent press and the government getting too close,” Chavern acknowledges, but notes this would be an ad buy — not unlike the still-significant “legal ad” business that’s been in place for hundreds of years. Importantly, newsrooms themselves wouldn’t be involved in the program.

“We’re focused on the next piece of legislation,” says Dean Ridings, CEO of America’s Newspapers, which represents hundreds of newspaper companies, with more emphasis on small and medium titles. Even as the ink isn’t even dry on this bailout, business generally expects another one — and is laying plans to get a piece of that pie.

In Memphis, two newsrooms — each with about three dozen journalists — slug it out, day after day. They both know it’s possible, maybe even likely, that only one will be still standing in a few years.

What’s happening in Tennessee’s second-largest city, given our times of media high anxiety, also takes on the tone of a morality play, a quizzical dot on the landscape of ghost newspapers and deserted communities. Is Memphis an outlier, or is it a sign of what’s to come in the 2020s?

Quietly, The Daily Memphian — an ambitious local news site launched in 2018 — has shaken up the local news landscape in Tennessee’s second largest city.

“I really think that the presence of The Daily Memphian has been a good thing for the market, and it’s been a good thing for our journalists,” says Mark Russell, the executive editor of the incumbent daily newspaper, the Gannett-owned Commercial Appeal. “I think readers are benefiting from it every single day.”

The “newspaper” war even comes some good trash talk. “I think that competing with The DM has been wonderful for Memphis, wonderful for our journalists and theirs,” Russell continues. But…

“Eric Barnes, Andy Cates, and even some of their columnists have said things in the media and said things publicly that have just been, I’ll call them — call it what it is, outright lies. Because they’re describing The Commercial Appeal and our commitment to Memphis and whether we’re controlled by Nashville. And they know it’s a false narrative. And they keep repeating it. They’ve let up a little bit lately, as I’ve called them on it. But I think for almost a full year, that’s all they talked about, how the CA was ‘not committed to Memphis.'”

The Daily Memphian’s very name shows who it aims to compete with. It’s digital only, meaning of course that it publishes news around the clock. The “Daily” part? It calls out to a group of once-loyal print newspaper readers who might be willing to try out a new alternative.

The Commercial Appeal, founded in 1841, went through a decade of cuts that opened the door — and the community’s wallets — for The Daily Memphian. “We launched our online news source as a direct response to the cuts and consolidation that Gannett imposed on our local paper,” says Barnes, the Memphian’s CEO.

Across the United States, there are local newspapers in various rates of decline — some being stripped quickly for parts by hedge fund owners, some fighting fiercely against the tide through smart business strategy and commitment to their communities.

And across the United States, there are hundreds of local news news sites working to find their own niche in the news ecosystem being born.

But it’s still rare to see old and new compete at something that approximates a level playing field. The local daily, no matter how shrunken, nearly always still has a significantly larger newsroom than the biggest local digital startup. That’s one big reason the battle in Memphis is worth watching closely: If current trends continue, it’s a preview of the sort of competition we might see in lots of other American cities in the coming years.

Eric Barnes, 51, is a former president of the Tennessee Press Association who has been on both sides of the newsroom/business wall during his career. He had a hand in launching community papers in Nashville and Knoxville, led weekly papers, and ran the Nashville Ledger business-and-politics paper for 15 years before the Memphian launched.

“Before that, we did city guides and city directories and business directories and coffee table books,” he says. “Our company was based here in Memphis, but we worked around a couple hundred markets around the country. Then I was at a small business magazine up in New York and a reporter in Connecticut. I also host a show here locally on our PBS station, which I’ve done for nine years.”

While the Memphian serves a metro-sized audience, Barnes applies lessons from his experience with smaller community papers. “Being in the Press Association and getting to know a lot of community-level publishers, small-town publishers, was extremely helpful. The way in which they got hit, everybody in the industries got hit. But they often were slower to go to the web because they didn’t have the money, so they didn’t give away as much. I mean, they kept their print alive. They stayed closer to their communities. I think there are a lot of lessons.”

One lesson: “We are a paywall-driven, subscription-based news source,” says Barnes, who believes reader revenue is the absolute key to getting to break-even.

The Daily Memphian has assembled 11,600 subscribers in the 18 months since its launch in September 2018. Those subscribers initially paid $7 a month, a price now increasing. (It’s currently $10.99/month or $99/year.)

That will add up to more than $1 million in annual revenue, and it’s matched by roughly the same amount in advertising. On one hand, $2 million is a lot of revenue. On the other, the Memphian’s current budget is about $5 million.

That’s the story of this one-of-a-kind play in U.S. replacement journalism: It’s about scale. Scale of ambition. Scale of newsroom. And scale of revenue, the elusive elixir of digital news.

A controversial funding runway

The Daily Memphian has so far raised $8.2 million — $6.7 million of that before launch, the rest since. The goal is to get to break-even or better by 2023. “We’re on track,” Barnes says. “I’ve said publicly before that our goal is to get 20,000 to 25,000 people signed up by Year 5 at a [monthly] rate of around $10.”

“I get what The New York Times, Washington Post, and Wall Street Journal are doing,” says Cates, who led the Memphian’s fundraising campaign and chairs its board of directors. “We believe we are a model for how the Fourth Estate can flourish in middle America. We’re in Siberia. We don’t have national funding, Google or Facebook.”

The CEO of RVC Outdoor Destinations, Cates is a prominent civic booster who gets credit for helping bring the NBA’s Grizzlies to Memphis from Vancouver in 2001. Just as people think that metros need sports teams, they need far older civic institutions — newspapers or the digital equivalent. “For a community to be healthy, it must have a healthy newspaper,” Cates told me. “We tried to buy the CA, and thank god we failed.”

That said, The Memphian’s unorthodox and opaque fundraising strategy has been controversial among many both in the bubbling new news landscape and in Memphis. Transparency in funding has become a mantra in the nonprofit news movement, and there the Memphian is lacking.

“Give or take, the original $6.7 million was all raised anonymously, which caused some consternation with journalists and INN [Institute for Nonprofit News],” says Barnes. “I get all that. Even though I carry the CEO title, I have spent most of my life as a journalist one way or another. Locally, there were a lot of questions: Are they going to have bias? Are they going to carry an agenda?”

(At launch, Cates told Poynter that “he hopes that the [anonymity] will avoid the appearance that local high-rollers are treated with deference in Memphian stories.” Keeping the high-rollers anonymous doesn’t typically help with conflict-of-interest worries.)

Barnes says the money was all local and from “many different funders — it wasn’t one funder.” Now, he says, “I don’t ever get asked a question locally” about funders. He says he’s “felt or experienced absolutely zero donor pressure on the newsroom. The board — which is fully public — has high-level, strategic expectations of the operation, including the newsroom. But they’ve not in any way dictated stories that should — or, and this is arguably more important, should not — be written.”

Proudly paywalled

That’s not the only point of some controversy around the Memphian and money. Its paywall, powered by Piano, limits non-subscribers to three stories per month. That’s down from five at launch.

“In the middle of the summer, we started tagging roughly one story a day as subscriber-only, so you have to subscribe to read that,” says Barnes. “That’s done well for us in terms of converting and reinforcing the people that we’re a paid site.” Reducing from five to three stories a month didn’t bring “a huge impact negatively or positively. We’re not quite sure where we go from there. I mean, the business part of me would love to say it was one free or two free, but it’s a balancing act.”

Barnes says the organization plans to test Piano’s new “intelligent paywall” tech going forward. He cites both the Google News Initiative Audience Lab and the Facebook Local Subscription Accelerator as helpful. “They bring doable advice and guiding, best-practice principles. And to both their credit, they are not pushing Google or Facebook to drive traffic or subscriptions.”

Not many local news startups use paywalls — especially nonprofit ones. But for The Memphian, it’s fundamental to its strategy, even as others advocate open access as a civic good.

“We’ve gotten some pushback from some of the other nonprofit news organizations whose mission is free and open content that should be available to everyone. I love that. I mean, I’m an NPR fan. I’m a fan of local PBS, but we just looked at it and said: We don’t want to constantly fundraise. We don’t want to be a drain on the Memphis community, the philanthropic community.”

To counterbalance the paywall, the Memphian is free when accessed in schools and libraries. Those “with limited means” can apply for financial assistance. Some of the Memphian’s journalism also leaks beyond the paywall via local TV and radio partners. “Memphis has a big poverty problem, and we want to figure out how people who can’t afford it can get it,” Barnes says.

But he’s happy to defend charging. “Let’s value the news, let’s charge a fair rate for it. Let’s say our content is worthwhile and try to undo the, what, 15-year disastrous experiment of giving away local and national news for free. People have paid for news for decades, if not ever long. So why wouldn’t we find ways to have people who can afford to pay for it?” Eventually, subscribers are projected to provide about two-thirds of the Memphian’s revenue, with sponsorship and advertising making up the rest.

Are those ad sales motivated by the Memphian’s mission? “Less than 10 percent has been people saying, ‘Hey, we just want to support you to support you.’ We try not to sell that way,” Barnes says. An advertiser’s monthly spend is often in the $500 to $1,000 range. “It’s not terribly expensive to dominate one of our sections or to dominate our business coverage. They have a very strong presence on our email editions or our business coverage or sports coverage.”

So who is in the audience that those advertisers want to reach? The site’s readers do skew a bit older; “it’s traditional newspaper readers who are desperate for a local source, a locally based news publication, paper or not, a news publication,” Barnes says, getting in a few punches at the CA.

The audience also skews toward higher education levels (almost 70 percent have a college degree) and higher income (overindexing at incomes of over $100,000).

That’s in Memphis — the second-poorest large city in America, behind only Detroit. Of the 50 largest U.S. cities, Memphis ranks No. 47 in the share of its residents with at least a bachelor’s degree. And among large U.S. cities, only Detroit and Baltimore have a higher African-American share of its population.

In none of those measures is The Daily Memphian particularly representative of its city, say some critics. At launch, it faced criticism from people like Wendi C. Thomas, a former Nieman Fellow and founder of the local news site MLK50, for having a staff that’s 80 percent white in a city that’s 63 percent black. (The Memphis metro area overall is roughly 50/50 white/black.) They point to a leadership that is overwhelmingly white, and the staff diversity count of 21 percent people of color, 40 percent female. Of its four regular columnists, all are men and three are white.

The Memphian, for its part, is stands by its own record of diversity and of reaching out more widely in its first two years of existence. Its board is majority female and 33 percent African-American. Its new audience development and digital directors are both women; the new head of advertising is African-American; the new executive editor is Latino. “Since launch we’ve gotten more — not less — diverse,” says Barnes.

Beyond that, Barnes says the Memphian has made major inroads in engagement on the news product itself with its diverse communities. “We have two dedicated reporters to north and south Memphis, historically black and under-covered areas. We have a commitment to diverse stories across all reporters and beats. And we have none of the constant crime blotter coverage with the parade of mug shots and shallow, fearful coverage — coverage that has done major damage to black communities nationally. But we do cover policing, criminal justice, justice reform, the local DA, juvenile justice center, a series on the impact of childhood trauma on the brain, and more.”

In the criticism and on the ground, we can see the contentiousness of journalism change. Some may say that it’s one thing to see on-the-surface power imbalances in a decades-old institution that is struggling to adjust to new realities, it’s another to see it in an organization that’s born fresh and new in 2018.

But these are knotty questions. How much should ambitious startups be faulted for finding the early reader revenue from the often-expected sources of more affluent consumers? Further, an important question. How soon should their overall staff makeup resemble their communities covered?

It’s true that Memphis is one of the least digitally connected cities in America. As of 2018, 48 percent of residents have no broadband connection at home — the second highest rate of large U.S. cities, again behind only Detroit.  But of course, we know that, with very few exceptions, digital-only news startups are the only ones to have a chance to find new success in the 2020s. Beyond all the other challenges of reseeding the news deserts, can we rightly expect news startups themselves to deal with broadband neglect? It’s also instructive that the Memphian has already taken early and substantial initiatives, with more planned, to get free access to communities and individuals that can afford to pay for it.

So some paint this picture: anonymous wealthy funders; leadership that doesn’t look much like its community; a digital outlet in a city with limited connectivity; a hard paywall in one of the country’s poorest cities. They say new startups, eventually replacing traditional daily newspapers, are unlikely to be oriented toward a mass audience as what came before.

But it’s far too early to draw that conclusion. The Daily Memphian may be a Rorschach test in what is such a contentious start-up news movement. Critics inside Memphis, and out, can point to numbers they don’t like. The Memphian itself can rightly claim to be doing something that I haven’t seen getting done anywhere else in the country: a high-quality, at-scale, news replacement with a real business model bent on making its way forward with earned revenue.

Much as discussion about its particulars is warranted, and gets the context it deserves, we cannot lose track of that hugely important fact.

The “newspaper” war

While not much has been reported nationally on this competition, big themes emerge for all who care about future of local news in North America and beyond.

First and foremost, The Daily Memphian aims to be a replacement news company — the primary supplier of local news and information for its area.

Metro Memphis has a population of about 1.35 million, a sprawling area that spreads into Arkansas and Mississippi. Roughly half of that population resides in Memphis proper. Unlike the vast majority of hard-working news entrepreneurs planting seedlings in growing news deserts, the Memphian’s model is built on achieving a scale that can try to match the city.

It now pays a newsroom of 34 — the same number of journalists, more or less, remaining at Gannett’s incumbent Commercial Appeal. Another 12 business-side staffers join them. In addition, the Memphian pays more than a dozen regular freelance contributors.

As of December, the newsroom is led day-to-day by Ronnie Ramos, who left a job as executive editor of Gannett’s Indianapolis Star for the Memphian. That move in and of itself tells us lots about the changing momentum in Memphis.

There’s plenty of newspaper DNA in the rest of the Memphian’s staff. (It covers sports, runs restaurant reviews, even runs obituaries — a mix of content much closer to a print daily’s than what you might find at a lot of local nonprofit news sites.) It hired “10 to 15” of its staffers from the Commercial Appeal. And that hiring changed the CA a lot as well.

“We had to go out and get new players for almost every major position,” says CA executive editor Mark Russell. “And we did that and we got better.” The newspaper’s staff is now younger, more digitally savvy, and more diverse — 33 percent people of color now versus 19 percent before the Memphian began hiring people away. (Russell is black; Barnes and Cates are white.)

Memphis’ story is a lot like that of metros from coast to coast. The circulation losses of The Commercial Appeal tell quite a story, underscoring not just a loss of readers but the widening market vacuum that The Daily Memphian is rushing into.

For the third quarter of 2019, The Commercial Appeal reported a Sunday paid circulation of 52,000 and a daily circulation of 29,000. Just three years earlier, those numbers stood at 103,300 Sunday and 67,000 daily. That’s basically half of its paid base of readers gone in three years.

On digital subscriptions, the CA’s numbers have moved in the right direction. It counts 10,063 in that category now, up from 4,045 subscribers three years ago.

The major circulation declines result from changing reader habits, to be sure, but also from Gannett’s cuts to the newsroom and its pricing-over-volume circulation strategy.

By some remembrances, the Commercial Appeal counted about 200 journalists in its newsroom 20 years ago. That’s more than five times the 37 in today’s.

The Daily Memphian’s founders say its birth grew out of the regionalization of the daily press, but the Commercial Appeal disputes the degree of that regionalization. In 2015, Gannett bought the Knoxville and Memphis dailies as part of its Journal Media Group acquisition. Gannett now owns six dailies in the state, with Nashville the largest. Over time, the Tennessee Network developed, a trend we’ve seen all over the country as regional clusters of newspapers looked for headcount reduction and efficiencies.

“You could regionalize backend design — that’s one thing, fine,” Barnes says. “Centralize your accounting. Okay, that’s fine. But you can move [only] so much decision making out of the local markets before it is [no longer] really the Memphis Commercial Appeal.”

Especially since Memphis and Nashville don’t really get along. (For evidence, see this map of NFL fan bases, which shows Memphis’ Shelby County actually has more fans who root for the Dallas Cowboys than for the Tennessee Titans over in Nashville.)

“Everywhere I’ve ever lived, Tennessee, New York, Connecticut, Washington, Oregon, Alaska — I mean, Eastern Washington hates Western Washington, right? I mean, upstate New York and downstate New York are totally different,” Barnes says. “The idea that you can do these sort of regionalized papers…I’ve never lived in a place where that would work.”

Russell’s retort: “It’s a cheap, easy comparison to make when you don’t want to talk about journalism. Let’s talk about journalism. Let’s not talk about this Nashville vs. Memphis thing. It’s kind of a familiar trope though to people here because people in Memphis and people in Nashville don’t like each other.”

Russell wrote his own column in November to respond to the “centralization” charges, “setting the record straight.”

“What I say about that is that the people in Nashville have their hands full making decisions in Nashville,” he says. “And if you think about that logically for a minute, if you’ve worked in a news organization, you know it is hard to control your own organization in your own city, much less one that’s three hours away that you don’t have familiarity with the people, the places, or the issues of the context. So that’s ludicrous on its face that someone in Nashville making decisions here.

“It’s a short trip to the editors, including me, who are in the market, who know this market, who are working hard every day to produce a good report online and in print…Tell me who in Nashville is staying up late like me, reading content and up early reading content. Tell me who in Nashville is out in the community meeting with community leaders and neighborhood leaders every day. No one. They’re not here. They’re in Nashville doing the same thing I’m doing here. And that’s the way it should be.”

Its delightful to hear a bit of trash-talking by head-to-head news competitors. Reminds me of my days in the Twin Cities 20 years ago, when our Saint Paul Pioneer Press took on the larger Star Tribune.

Even with the head-to-head competition, Russell remains evenhanded in his view of the Memphian. “I talk to readers every single day,” he says. “And what I hear from readers is that they see the Memphis being stronger than it’s ever been. And that’s primarily because we now have a competing publication, and they see that the Commercial Appeal has improved since we lost those staffers. They see it every single day. And they see the DM being a really viable, strong news store.

“So you’ve got two heavyweights going at it on important issues. Readers have found the benefits of that: We’re going to have far better coverage of primary topics like government, the environment, demographics, investigative coverage. They’re going to get better coverage overall, and they have been getting it.”

The future

How long will this head-to-head competition last?

One logical question to start with: How soon could the paid readership numbers of the Commercial Appeal and Daily Memphian converge? A legacy business still transitioning from print to digital — and now owned by a megachain with lots of new debt to pay off — is competing with a debt-free, digital-only, deep-pocketed operation bent on growth.

This is no apples-to-apples comparison; there are many moving pieces and radically different cost structures. Then again, there won’t be many more apples-to-apples comparisons in local news going forward. This isn’t the New York Post vs. the Daily News, the Chicago Tribune vs. the Sun-Times, or even the more recent Times-Picayune vs. the New Orleans Advocate — recognizable battles between distinct competitors, but also between fundamentally similar businesses. But digital subscriptions — how many people in your community can you convince to hand over their credit card for digital access to your owrk — can be a common point of comparison.

How much are Memphis news readers reading one or the other or both?

“I don’t know,” the Memphian’s Barnes says. “I know anecdotally that people tell me that they have dropped the CA. I know other people continue to do both, and they do have some good journalists over there. I mean, they have many good journalists over there. I still read them — if not every day, I read them a couple of times a week. I think that’s true of a lot of people.”

(Again with the trash talk.)

One way or the other, given the tight economics of the local news business itself, no one is under any illusion that Memphis’ contrarian news war will last for a long time. “I’m not sure it can,” the CA’s Russell says. “It’s hard to imagine any community our size supporting two full-blown, news organizations. Even when full-blown doesn’t mean what it meant back 10 years ago…it’s hard to imagine that, it really is.”

The Daily Memphian is, like many of its startup brethren, a nonprofit. But it’s a nonprofit with an for-profit attitude, acting as a business-oriented enterprise.

“We are structured as a nonprofit under Memphis Fourth Estate Inc., but we are intensely focused on building a financially sustainable model that relies not on constant fundraising, but on earned revenue through our paywall subscriptions and sponsorships,” says Barnes.

What are his reader revenue takeaways so far? “We launched on September 17, 2018. Our original projection was 4,500 paid for the first year. We hit 4,500 somewhere in October. I mean, it was under full four weeks.” By year’s end, it was close to 6,000; by its first anniversary, it was at 10,000. Churn is relatively low, at about 6 percent annually. Today the Memphian has settled into a monthly net gain of about 300 subscribers. (The site now gets about 1.5 million monthly pageviews.)

The Memphian continues to test both annual and monthly offers, but generally avoided the “$1 for 6 months!!” deep discounting some other sites have used to draw in new subscribers.

The Memphian has clearly tapped into a substantial early paying audience — a cohort of the civically connected who were more than ready for the Memphian. The big question: What do the next cohorts look like? How big will they be, and will they represent a broader slice of Memphis’ population than its well-heeled early audience?

As The Memphian eyes doubling its subscriber base, Barnes knows the strategy will likely get more nuanced. “It’s a pretty high-income, high-educated audience, so, the [price] is not an issue for them. As we get from 11,000 to 22,000, we have to be more price sensitive, I think, with people. It’ll be tricky over the next few years.”

The Daily Memphian is providing a new value proposition to its readers. But in that offer we can see how in-progress the digital experience remains — especially perhaps for older readers. Take the site’s email newsletters. “We push a ton of email,” he says. “It works really well. We get really good open rates. But what we realized with many, many readers — particularly those who are older — they really don’t understand the difference between the email and the website. So they don’t get what’s in what. They’ll tell us, ‘Well, I’m a subscriber. I get your email edition.'”

Those emails are free to all, not part of a paid subscription. “They don’t go to the homepage, they don’t go to the navigation — they just use that email. Which is in some ways great, but creates a massive amount of confusion.”

In its first year of publishing, the Memphian published almost 7,000 stories, ran thousands of staff-shot photos, added nearly 10 weekly podcast series, and held Daily Memphian events almost every week.

It’s all those stories — buttressed by irrational fervor, best-practice business models, and more — that have always made local journalism work, and will someday again.

“It wasn’t local journalism that failed, it was the business behind local journalism,” Barnes says. “It’s a simple fact that gets lost…That’s been a driving issue for us: There is a lot of traditional local stuff that didn’t need to be thrown out the window. It was just that the business model got so wonky, broken. That was really where the problem was.”

That massive movement within the newspaper industry — equal parts financialization and consolidation — has so far combined the No. 1 and No. 2 chains in the United States (producing New Gannett, which controls a full 25 percent of U.S. daily print circulation), Lee’s assisted purchase of Berkshire Hathaway Media, and the in-process, common-law, unholy matrimony of Alden/MNG/Tribune.

McClatchy’s filing for bankruptcy has seemed increasingly inevitable since the fall, as I raised in November. McClatchy said then it had “going concern” issue, acknowledging it wouldn’t have the ability to make pension payments due later this year. That reality produced this bankruptcy, which in turn prompts our questions about what happens next. Here are six.

How long could McClatchy’s moment of stability last?

It’s almost a 12-step moment: a company acknowledging what had been obvious to everyone around it. McClatchy couldn’t thread its way through massive debt overhead, a pension pileup compounded over decades, and a very rocky print-to-digital transition. Bankruptcy will reduce the company’s debt by a little more than half, it seems, leaving it with a much spiffier balance sheet.

McClatchy — to the surprise of many! — still produces a lot of cash. That’s why all these financial players — Chatham Asset Management here, Alden Global Capital, Fortress Investment Group, and Apollo Global Management elsewhere — find newspapers such a hospitable environment.

Note that amid all this uncertainty and chaos, CEO Craig Forman was able to announce McClatchy’s first earnings (EBITDA) increase in eight years, in its Q3 results. That increase may have only been about $869,000, and it may not be repeated in future quarters, but it also points to a much larger number: McClatchy produces more than $70 million a year in earnings.

So in a sense, this might be a brief moment of relief. Maybe the company’s employees won’t have to worry about the next looming cut for a few months.

Does Chatham want to operate or sell the company?

The McClatchy family, descendants of the company’s founder and namesake, are relinquishing control in this bankruptcy, handing the keys to Chatham Asset Management. Does Chatham want to be an operator of a newspaper company for any period of time? Or will it try to transmute its suddenly shinier asset through the alchemy of the hour, consolidation?

Both arguments can be made. McClatchy post-bankruptcy will now produce similar levels of profit but won’t have to hand as much of it over to feed massive debt and pension obligations. In that scenario, Chatham could just…happily operate the company for a while, even though the ongoing reality of double-digit revenue declines dispel any notions of longer-term stability.

As one savvy financial observer put it to me: “Chatham doesn’t have to do anything.” It’s not under the gun of financial pressure.

That said, Chatham didn’t get into this to run local newspapers. It did so for the same reasons as its financial brethren: to make more money.

Chatham CEO Anthony Melchiorre and McClatchy CEO Craig Forman — assuming Forman stays in place — both believe in the inevitability of more consolidation. Consolidation — as in the case of Gannett/GateHouse and now the increasingly virtual Tribune/Alden/MNG combo — means substantial one-time cost savings. Those offset operating declines and buy more time. “Time to transition,” they’ll all say — but it’s also more time to extract cash flow out of a business in long-term decline.

That’s how we get to my math from December. Five once-towering U.S. newspaper chains — Gannett, GateHouse, McClatchy, Tribune, and MNG/Digital First — could in short order dwindle into two.

The McClatchy/Tribune merger that almost happened in December 2018 might saved McClatchy from bankruptcy. After it fell through, though, Tribune savored its independence a little, knowing that McClatchy’s financial reorg would someday come — and that it would make it a much more appealing catch. That moment is arriving now — but it may well now be Heath Freeman and his Alden troops-in-Tribune who sketch out a deal.

For Chatham, the main question is this: Can it make more money merging with Tribune/Alden — or maybe an again restructured Gannett/GateHouse/Apollo — than it can operating independently? Somewhere in that spreadsheet formula lies McClatchy’s future.

In the short term, most don’t expect Chatham to act like Alden. In its other newspaper investments, including Canadian consolidator Postmedia, it’s acted more like a Fortress/GateHouse — that is, it’s advocated for small but targeted investments in the digital-revenue-driven future of the business. (Alden’s haughty nihilism still stands alone, dis-investing even in a digital future, most recently seen in the single-day elimination of five Tribune execs.)

How long will Craig Forman stay as CEO?

It’s been only three years since McClatchy named Forman its CEO, but those thousand days and nights have been long ones. Forman knew financial restructuring was Job No. 1, much as he focused on his print-to-digital strategy. He executed a debt extension and came close to pulling off a merger with Tribune. But the quicksand of pension obligations sucked the company under.

Will he stick around post-bankruptcy and try to prove out his digital strategy, as laid out in Thursday’s bankruptcy announcement? “McClatchy has grown its digital-only subscriptions by almost 50 percent year over year, and is now roughly evenly balanced between total audience and advertising revenues, with digital accounting for 40 percent of those revenues and growing, a much healthier distribution for an increasingly digital era. The Company has more than 200,000 digital-only subscribers and well over 500,000 paid digital customer relationships.”

If he does, will he be able to up the company’s operating revenue performance, a metric in which it’s consistently lagged its peers by several points? For 2019, the company reports a 12 percent revenue decline, including a 14 percent drop for the fourth quarter.

With McClatchy going private, we may never know if he can pull it off. But that’s clearly a metric that Chatham will care about.

Not to mention, of course, does Chatham want to retain Forman? Will he, like one-year-Tribune-CEO Tim Knight, get caught in the revolving door of knives that is modern newspaper executive leadership?

Knight — who was “streamlined” out of Tribune’s top job on Feb. 3 — was an experienced adult in a room that had had too few. He brought a relative steadiness to Tribune for almost a year, after replacing Michael Ferro protégé Justin Dearborn as CEO. Unfortunately, in the frenetic business of dailies, that era ended abruptly when he was pushed out by Alden.

Is McClatchy better off as a private company than a public one?

Yes — potentially. Given the deepening digital displacement — not just disruption — of the print-centric local news industry, public companies have a nearly impossible task in front of them. Run to the digital future — but also keep short-term-focused shareholders satisfied, showing them profits and, in some cases, handing them dividends.

Papers now privately run by deep-pocketed owners in Boston, Los Angeles, and Minneapolis, are better positioned than their public peers. They operate away from shareholder glares, they’re more patient, and they’ve made investments with longer timelines.

But on the other hand, Alden Global Capital is a private company, too. A very private one — with no public profile, little public mission, seemingly no focus on community impact and all focus on the bottom line. And with its two-class share structure maintaining family control, McClatchy was an unusual “public” company too.

Being shielded from the markets can let you do important but difficult things. Or it can let you get away with stripping civic assets to the bare wiring.

What will happen to McClatchy’s commitment to investigative reporting?

In PR around the bankruptcy, Chatham released a statement saying it “is committed to preserving independent journalism and newsroom jobs.”

That’s the sort of thing you’d expect in any big newspaper ownership announcement (save Alden’s). We’ll soon see how operational it is.

While Craig Forman has both detractors and supporters, inside the company and beyond, he has managed to keep sounding the cri de coeur for newspapers’ civic mission. And McClatchy, though depleted in newsroom strength, keeps demonstrating its chops. Most cited has been the Miami Herald’s work keeping a spotlight on the Jeffrey Epstein story, but investigative and enterprise work from veterans’ high cancer rates to climate change tracking still distinguish the company’s journalists and its long-held, family-driven zeal for the craft of journalism.

Those journalists and those newsrooms need a lifeline.

Is there any number that might finally capture the public’s attention on the loss of a mission-oriented independent press?

Is it the possibility/likelihood of two financial companies, a Fortress and an Alden, controlling more than 40 percent of the nation’s daily print circulation — and thus much of the local digital news communities get (or don’t). Or maybe three of them, adding in Chatham as a longer-term operator, having a majority?

You’d have to be an optimist to believe that there’s any new alarm bell that will elicit a significantly different public response — but we may soon find out.

When I spoke at state newspaper conferences five or ten years ago, people would say: “It’ll come back. It’s cyclical.” No one tells me that anymore. The old business is plainly rotting away, even as I find myself still documenting the scavengers who turn detritus into gold.

The surviving — growing, even — national news business is now profoundly and proudly digital. All the wonders of the medium — extraordinary storytelling interactives and multimedia, unprecedented reader-journalist connection, infinitely searchable knowledge, manifold reader revenue — illuminate those companies’ business as much as digital disruption has darkened the wider news landscape.

What is this world we’ve created? That’s the big-picture view I’m aiming to offer here today.

Those of us who care about journalism were happy to see the 2010s go. We want a better decade ahead for a burning world, a frayed America, and a news business that many of us still believe should be at the root of solving those other crises.

I call what follows below my epiphanies — honed over time in conversations around the world, with everyone from seen-it-all execs to young reporters asking how things came to be the way they are in this business. These are principles that help me make sense of the booming, buzzing confusion that can appear to envelop us. Think of it as an update to my book Newsonomics: Twelve New Trends That Will Shape the News You Get, now a decade old.

Here I’ve distilled all my own concerns and my understandings. I’ve taken a big-picture, multiyear view, knowing that like it or not, we’re defining a new decade. You’ll see my optimism here — both as a longtime observer and as a later-stage entrepreneur trying to build out a new model for local news. (I wrote about that back in October.) I do believe that we can make the 2020s, if not quite the Soaring ’20s, something better than what we just went through. But I balance my optimism with my journalism-embued realism. In many ways, 2020 stands at the intersection of optimism and realism — a space that’s shrinking.

So much has gone off the rails in the news industry (and in the wider society) over the past decade. Amid all the fin-de-la-décennie thinking, I think Michiko Kakutani best described the country’s 10-year experience: “the indigenous American berserk,” a borrowing from Phillip Roth.

So much of what happened can be attributed to (if not too easily dismissed as) “unintended consequences.” Oops, we didn’t mean to turn over the 2016 election to Putin. Gosh, we didn’t mean to alter life on earth forever — we just really wanted that truck. We just wanted to connect up the whole world through the Internet — we didn’t mean to destroy the institutions that sort through the facts and fictions of civic life.

As billions have disappeared from the U.S. newspaper industry, the words “collateral damage” served to explain the revolution that led digital to become the leading medium for advertising. That damage is now reaching its endgame.

The Terrible Tens almost precisely match the period I’ve been writing here at Nieman Lab. In that time, I’ve written enough to fill several more books — 934,800 words before this piece. Almost a million words somehow accepted by our loyal readers, who still, remarkably, laugh and tell me: “Keep writing long.”

Let’s then start the 2020s off right. With one eye on the last decade and another on the one to come, let me put forward 20 understandings of where we are and how we build from here.

That felt like huge news — but what if it really only represents the beginning of a greater rollup? Last month, I sketched out how five of the largest chains could become two this year.

And yet there are even worse potential outcomes for those of us who care about a vibrant, independent press. What if a Sinclair, bent on regional domination and with a political agenda, were to buy a rollup, and keep rolling?

In a way, GateHouse’s builder Mike Reed has done a lot of the heavy lifting already. From a financial point of view, the CEO of New Gannett has already done a lot of rationalization. GateHouse bought up a motley collection of newspaper properties, many out of long-time family ownership, and brought some standard operating principles and efficiencies to them. We can ask whether his big gamble of borrowing $1.8 billion (at 11.5 percent interest) from Apollo Global Management will prove out over the next few years. Or we can think of that megamerger as just prologue.

After all, the same logic that drove the GateHouse/Gannett deal pervades the near-uniform thinking of executives at all of the chains. Job No. 1: Find large cost savings to maintain profitability in light of revenue declines, in the high single digits per year, that show no sign of stopping. And the easiest way to do that is merging. A merger can massively — if only once — cut out a lot of HQ and other “redundant” costs.

It buys some time. And newspaper operators are craving more time. “Ugly” is the simple description of the 2020 newspaper business offered to me by one high-ranking news executive. Revenue declines aren’t improving, so the logic remains. The only questions are: How much consolidation will there be, and how soon will it happen?

Heath Freeman, head of journalistic antihero Alden Global Capital, has already begun to answer that question. The hedge-fund barbarians aren’t just inside Tribune Publishing’s gates — they’re settled in around the corporate conference table. Alden’s cost-cutting influence drives the first drama of the year: Can Chicago Tribune employees fend off the bloodletting long enough to find a new buyer for their newspaper before it’s too late? They know that, despite a national upswell in public support for the gutted Denver Post in 2018, Alden was able to remain above the fray and stick to its oblivious-to-the-public-interest position.

Meanwhile, McClatchy is trying to thread a needle of financial reorganization. Then there’s Lee, operator of 46 largely smaller dailies. All of them are subject (and object) of the same financial logic.

While financing remains tough to get, at any price, there remains an undeniable financial propulsion to bring many more titles under fewer operations.

There’s no law preventing one company from owning half of the American daily press. And no law prevents a political player like a Sinclair — known for its noxious enforcement of company politics at its local broadcast properties — from buying or tomorrow’s MergedCo — or orchestrating the rollup itself.

After a decade where we’ve seen the rotten fruit of political fact-bending, what could be more effective than simply buying up the remaining sources of local news and shading or shilling their coverage? Purple states, beware! Further, the price would be relatively cheap: Only a couple billion dollars could buy a substantial swatch of the U.S.’s local press.

Alden is a virus in the newspaper industry.

It sometimes seems like we’ll run out of epithets — “the Thanos of the newspaper business,” “the face of bloodless strip-mining of American newspapers and their communities,” “industry vulture,” “the newspaper industry’s comic-book villain” — for Alden Global Capital. Then someone helps us out.

“Alden is a virus in the newspaper industry,” one very well-connected (and quite even-keeled) industry executive told me dispassionately. “It just destroys the story we try to tell of the great local journalism we need to preserve.”

Think about the big picture. The industry is flailing; behind closed doors, it’s throwing a Hail Mary, trying to win an antitrust exemption from Congress. It argues that in the public interest, it should be allowed to negotiate together (rather than as individual companies) with the platforms. It wants the big payoff they’ve dreamed of since the turn of the century: billions in licensing from Google, Facebook, and Co.

It pines for and makes comparison to the kinds of licensing revenue that both TV broadcasters and music publishers have been able to snag. But thus far, that’s been a heavy lift in terms of negotiation or public policy. But Alden adds more weight, letting governments or platforms say: “Wait, you want us to help them?”

Which leads to…

Can a duopoly licensing deal be the “retrans” savior of the local news business?

In 1992, local TV companies were in a bind. Cable and satellite companies had to pay the ESPNs and CNNs of the world to air their programming. But local TV stations — available for free on the public airwaves — got nothing for having their signal distributed to cable customers.

But that year, federal legislation allowed local TV stations to demand compensation from cable and satellite systems — retransmission fees. Essentially, distributors paid stations for the right to their programming, including local news — despite the fact that anyone with an antenna could get their signal for free.

What started out as a small supplemental revenue stream now amounts to about 40 percent of all local TV station revenue, according to Bob Papper, the TV industry’s keen observer and data/trend collector through his annual RTDNA survey. “Retrans money is skyrocketing, and that should continue until it levels off in 2023-24.” This year, it will likely add up to $12 billion or more.

Advertising revenue has been fairly flat for local TV companies (setting aside for a moment the two-year cycle in which election years pump them full of political cash). Digital revenue hasn’t been much better, accounting for only six or seven percent of station income, Papper says — way less than newspaper companies earn.

And yet these local TV businesses are stable, profitable, and facing nothing like what’s happened to newspaper newsrooms. Papper notes the wide variance across stations in the depth and breadth of their news products. While many still stick with the tried-and-tired formulas, his surveys of station managers list “investigative reporting” as their No. 1 priority. When it’s funded, it’s a differentiator in crowded TV markets.

It’s that retrans money that makes all the difference.

Clearly, the news industry is a major supplier of high-engagement material to the platforms — a supply that helps energizes their dominant ad businesses. While both Google and Facebook have deployed a motley fleet of news industry-supporting initiatives, they’ve steadfastly refused any large-scale “licensing” arrangements.

If there’s increased public pressures on the platforms as the society’s digital high turns part-bummer, and if the political environment were to change (a President Elizabeth Warren, for example), it’s not hard to imagine the tech giants ponying up a billion here or there for democracy-serving news, right? (Both Google and Apple count more than $100 billion in cash reserves, net of debt, with Facebook holding more than $50 billion.)

Google, when asked over the years why it doesn’t pay license fees, talks about the complexity of the news market, among other objections. Expect a new argument: You want us to pay an Alden, or a Fortress Investment Group?

The financialization of the press may indeed makes the daily newspaper “public service” argument more difficult to make. While still true — though now wildly uneven in its actual daily delivery — it might be an artifact of a bygone age. The question may turn from “Will platforms finally pay license fees?” to “Who can make a good argument that they deserve them?”

The first metric that matters is content capacity.

In our digital world, just about everything can be counted. So many numbers adding up to so few results for so many.

Look forward and we can see that content capacity is and will be among the biggest differentiators between the winners and losers of the news wars. In fact, I’d call it a gating factor. Publishers who can offer up a sufficient volume of unique, differentiated content can win, assuming they’ve figured out ways for their business to benefit from it.

People aren’t the problem, no matter what the headcount-chopping Aldens of the world have preached. People — the right journalists and the right digital-savvy business people — are the solution.

In models as diverse as The Wall Street Journal, The Washington Post, The New York Times, The Guardian, The Athletic, The Information, the Star Tribune, and The Boston Globe, we see this truism play out.

Certainly, having more skilled journalists better serves the public’s news needs. But the logic here is fundamentally a business one. In businesses increasingly dependent on reader revenue, content capacity drives the value proposition itself.

Rather than reducing headcount — and thus spinning the downward spiral more swiftly — increasing headcount can lead to a magic word: growth.

The news business will only rebound when it seeks growth.

Across America’s widening expanse of news deserts, we don’t hear many whispers of that word, growth. The conversation among owners and executives is pretty consistent: Where do we cut? How do we hold on?

That’s meant more M&A. More cutting print days. More cutting of business operations. More cutting of newsrooms. All in an effort to preserve a diminishing business — whether the underlying mission is to maintain even a semblance of a news mission or just to milk the remaining profits of an obsolescent industry.

Of course, local news publishers poke at new revenue streams to try to make up for print ad revenues that will likely drop in the high single digits for the fourth year in a row. But the digital ad wars have been lost to Google and Facebook. Marketing services, a revenue stream pursued with much optimism a few years ago, has proven to be a tough, low-margin business. Digital subscription sales are stalled around the country, not least because of all that cutting’s impact on the product. Most see no path to a real “replacement” revenue stream. (Maybe CBD-infused newsprint?)

Cutting ain’t working. Decline feeds decline.

Only an orientation toward growth — with strategies that grab the future optimistically and are funded appropriately — can awaken us from this nightmare. Replace “replacement” strategies with growth strategies and these businesses look different.

Happily, we do have growth models to look at. Take, most essentially to the current republic, our two leading “newspapers.”

Today, The New York Times pays 1,700 journalists. That’s almost twice as many as a decade ago. The Washington Post pays 850, up from 580 when Jeff Bezos bought it in 2013.

The result: More unique, high-quality content has driven both publishers to new heights of subscription success, the Times how with three times as many paying customers as it had at its print apex. Readers have rewarded the investment, and those rewards have in turn allowed further investment.

It’s a flywheel of growth — recognizable to anyone who’s ever built a business, large or small. What it requires is a long-term view and patience. And, of course, capital in some form — which shouldn’t be a problem in a rich country awash in cash. But what it also demands is a belief in the mission of the business, an in-part seemingly irrational belief that the future of the news business can, and must, be robust.

Some big numbers tell the big story.

• We may have underestimated the dominance of the New Gannett. According to Dirks, Van Essen, Murray & April, the leading newspaper broker, the new Gannett now owns:
  • 20.4 percent of all U.S. daily newspapers
  • 26.3 percent of all U.S. daily print circulation
  • 24.8 percent of all U.S. Sunday print circulation

  So in rough terms, it controls a quarter of our daily press. The chart below, produced by the brokerage, compares the megamerger to the industry’s previous big deals on the basis of percentage of newspapers owned and percentage of circulation controlled. It should send a chill down every American spine.



• There are probably fewer than 20,000 journalists working in U.S. daily newspaper newsrooms. There’s not even a semi-official tally anymore, but that’s a good extrapolation from years past, given all the cutting since. That compares to 56,900 in 1990 — when the country had 77 million fewer people than today.
• The daily press still depends on the print newspaper for 70 percent or more of its revenue. That’s after 20 years of “digital transition.”
• The daily newspaper industry today takes in more than $30 billion less per year than it did at its height.
• $1 trillion: The market value reached by Alphabet (Google) last week.

The brain drain is real.

What’s the biggest problem in the news business? The collapse of ad revenue? Facebook? Dis- and misinformation? Aging print subscribers?

Surprisingly, over the last year numerous publishers and CEOs have confided what troubles them most: talent.

It’s hard enough to take on all the issues of business and social disruption with a staff that can meet the challenge. Increasingly, though, it’s hard for news companies to attract and retain the talent they need, especially in the business, product, and technology areas that will determine their very survival.

Who wants to work in an industry on its deathbed? Especially in an already tight job market.

What do the people who could make a difference in the future of news want? Fair compensation, for sure, and local news companies often pay below-market wages, on the TV side as much as in newspapers. Perhaps more important, they want a sense of a positive future — one their bosses believe in and act on every day. That’s a commodity scarcer than money in this business.

No industry has a future without a pipeline of vital, young, diverse talent eager to shape the future. And that’s especially true in the live-or-die arts of digital business. As the just-released Reuters Institute for Journalism 2020 trends report notes, “Lack of diversity may also be a factor in bringing new talent into the industry. Publishers have very low confidence that they can attract and retain talent in technology (24%) and data science (24%) as well as product management (39%). There was more confidence in editorial areas (76%).”

At the same time, we’ll be watching the flow of experienced talent as it moves around the industry. As Atlantic Media continues to grow and morph under the Emerson Collective, a number of its top alumni are moving into new positions elsewhere. Longtime Atlantic president Bob Cohn now takes over as president of The Economist — an early digital subscription leader, the storied “newspaper” now seeks growth. Meanwhile, Kevin Delaney, co-founder of Atlantic Media’s innovative Quartz, has taken on a so-far-unannounced big project at The New York Times’ Opinion section, where the appetite for impact has grown appreciably.

Finally, as The Guardian ended the decade with happy reader revenue success, Annette Thomas becomes CEO. Thomas has earned accolades for her innovative work in science publishing. These three, plus numerous others moving into new jobs as 2020 begins, can now bring their decades of digital experience to the job of getting news right in the ’20s.

Print is a growing sore spot; expect more daycutting.

Just for a moment, forget the thinned-out newsrooms and consider a fundamental truth: The physical distribution system that long supported the daily business is falling apart.

The paperboys and papergirls of mid-20th-century America have faded into Norman Rockwell canvases. As Amazon’s distribution machine and Uber and Lyft suck up available delivery people across the country, publishers say it’s increasingly hard to find paper throwers. (And why not? Paper-throwing sounds like a sport from another age.)

Why not just throw in with the logistics geniuses of the day, and partner with them to deliver the papers? The newspaper industry has indeed had talks with Amazon, buyer of 30,000 last-mile delivery trucks over the past two years. We’ll probably see some local efforts to converge delivery. But think about who still gets that package of increasingly day-old news delivered to their doorstep? Seniors — who want the paper bright and early, complicating delivery partnerships.

Not to mention that, with print subscribers declining in the high single digits every year, deliverers now need to cover a wider geography to deliver the same number of papers — and that problem will only get worse.

To add an almost comic complication to the challenge of dead-tree delivery: California’s AB5 just went into effect. Its admirable aim is to bring fairer benefits to those in the gig economy. But its many unintended consequences are now cascading throughout the state — spelling millions more in costs to daily publishers while wreaking havoc among freelancers.

Is seven-day home delivery now a luxury good? Or just a profit-squeezing artifact? Either way, it’s become clear that publishers’ years of price increases for seven-day aren’t sustainable. One of my trusty correspondents reported this last week that he’s now paying $900 a year for the Gannett-owned Louisville Courier-Journal. There are Alden-owned papers charging more than $600 a year for ghost titles, produced by a bare handful — sometimes two — journalists.

As print subscriptions have declined, publishers have continued to price up. That’s death-spiral pricing, with a clear end in sight and boatloads of money to be made on the way out the door.

Earlier this year, I wrote about “the end of seven-day print” and how publishers have been modeling and noodling its timeline. There’s been lots of trimming around the edges, mainly at smaller papers; McClatchy’s decision to fully end Saturday print is a harbinger of what’s to come. The company planned the end of Saturdays meticulously, with a keen eye toward customer communication, and proved to both itself and the industry that it can be done.

(Let’s allow time here for a brief chuckle by European publishers who have been successfully publishing “weekend” papers for decades.)

But cutting Saturday alone doesn’t save you a lot of money. Those twin pressures — on one hand, needing ever-larger cost savings, on the other, the collapsing distribution system — mean we’ll see more ambitious and adventurous cutting in the year to come. They’ll do while swallowing the existential fear one CEO shared: “They are scared to death this will end the habit.”

How big a deal is all this — the declining mechanics of print distribution? Very big.

Consider that The New York Times — the most successfully transitioned of newspaper companies — still only earns only 43 percent of its revenue from digital. Most regional dailies still rely on print for 75 to 90 percent of their overall revenue. If the physical distribution system starts failing faster, how much of that print-based revenue — circulation and advertising — can be converted to digital?

At a national level, the direct connection between readers and journalists has never been stronger.

Listen to the commercial breaks of The New York Times’ breakaway hit The Daily. A lot of them aren’t commercial spots, but what we used to call house ads in the print business. Maggie Haberman talking about Times’ reporting in the era of press vilification; Rukmini Callimachi sharing the danger and cost of reporting from terror-stricken parts of the world.

These ads aren’t about making the newsroom feel better — they work. The Times now has more than three times the total paying customers than it did at the height of print, with 3.9 million digital news subscribers paying the Times. Why? The journalists and the journalism.

In the halcyon days of print, advertising drove 75 percent of the Times’ revenue, a number that often hit 80 percent for local dailies. Now the digital world has forced — but also enabled — the Times to forge a very direct connection between its journalists and readers. Readers understand much more clearly that they are paying for high-quality news and analysis. They value expertise and increasingly get to know these journalists individually, whether through podcasts or other digital extensions.

Journalists believe more than ever that they are working for the reader, with the Times the trustworthy intermediary. The new more direct relationship between reader and journalist fosters growth. And the same is true similarly for The Washington Post, The Athletic, and The Information, in different forms.

If the local news world had followed suit, we’d say that the age of digital disruption has been a boon for journalism overall. Clearly, it hasn’t. This lesson is a guidepost for the decade ahead.

Advertising remains a vital — but secondary — source of revenue for news publishers.

The war’s over; the platforms won. With Google and Facebook maintaining a 60 percent share of the digital ad market (and 70 percent of local digital ads), publishers no longer expect to grab a bigger slice of the pie. The drama drawing the most attention: How much will Amazon eat into The Duopoly, as Mediaocean CEO Bill Wise summed up “the five trends that threaten the Google/Facebook duopoly” at AdAge.

Contrary to some of the conventional wisdom of the moment, that doesn’t mean advertising is no longer a part of publishers’ diversified revenue streams. Yes, reader revenue is clearly the driver for successful publishers of the ’20s, but advertising — best when sold and presented in ways that don’t compete directly with the platforms — will be in the passenger seat.

The evolving formula of the early ’20s is a mix of 65 to 70 percent reader revenue, 20 to 30 percent in advertising, and then an “other” that includes things like events. While this model may be more diversified, it’s not made of discrete parts. The better publishers get at profiling their reader-revenue-paying customers, with increasingly better-used first-party data, the better they can help advertisers sell. At this point, it’s a wobbly virtuous circle of money and data, and the successful publishers will find ways to round it.

A local news-less 2030 America is a fright beyond comprehension.

The word of the moment in almost every conversation about local news is “nonprofit.” At so many conferences and un-conferences about the news emergency, the notion that there’s a commercial answer to rebuilding the local business seems almost out of bounds.

What created this anti-profit sensibility? Acknowledging the power of the duopoly, to be sure. But that’s not the only rationale. For generations, many journalists considered themselves proudly unaware or uncaring about the business. Now the ascendance of Google and Facebook has given too many permission to eschew advertising as a significant, if secondary, support of reporting.

Secondly, the industry’s Heath Freemans and Michael Ferros, among too many others, have stained a local news business that was once both proudly profitable and mission-driven. Profiteering is now associated by many with local news.

Nonprofit news, too, though requires capital — just like any kind of growing service or product. Somebody has to actually pay journalists. So those advocating nonprofit news as the new future have turned to philanthropy. They look to foundations, national and local, to finance this vision. Nationally, more than $40 million has now flowed into the American Journalism Project, headed by Elizabeth Green and John Thornton. Most of that’s come from national foundations. The AJP announced its first grants in December, a down payment on what it envisions as a fund of up to $1 billion.

Now we’ll see if AJP can significantly move the needle on what is plainly needed: replacement journalism. As it tries to catalyze a movement, it hopes to multiply the philanthropic response to the news crisis. It’s a hope we can share. AJP’s pitch is straightforward: Communities should support news the same way they support public goods like the ballet and the opera, things that in many cities plainly couldn’t sustain themselves as creatures of the market.

That’s a worthy thought, but with two big issues attached.

One: There’s not much of a tradition of such support. Newspapers made so much money for so many years that they were the ones who started foundations, not the ones asking them for money. Relatively few communities’ foundations are oriented in that direction — and foundations don’t change direction or priorities speedily.

Two: Scale. So much local news coverage has been lost that it would take substantial and ongoing philanthropy to even begin to resupply community news. There’s not a lot of evidence yet of a readiness to do that.

To be sure, hundreds of dedicated journalists have build smaller operations in cities across the country. LION Publishers and the Institute for Nonprofit News are looking for new and better ways to support and nurture them. But the old world is disappearing far faster than a new one is being created.

Ace industry researchers Elizabeth Hansen and Jesse Holcomb recently laid out their thinking, which should serve as a reality check for all who care about the next decade of local news.

Yet even with a game-changing funding renaissance in local news (which would require the significant participation of community foundations), it probably won’t be fast enough or big enough to refill the bucket as local newspaper talent and jobs continue to drain away. There may not be enough philanthropic capital, even on the sidelines, to support the scope and depth of local news-gathering that our democracy requires.

But it was the concluding paragraph of their Nieman Lab prediction that really best summed up this epiphany looking ahead to the end of this decade.

A New(s) Deal for the 21st century: If all forms of philanthropic support for local news are truly not enough, we predict that by the end of 2030, we’ll be seeing large-scale policy changes to publicly support more sources of local news. It may not seem like we’re that close on this one, but trust us, it could happen.

I know Hansen and Holcomb are trying to spark a note of optimism, but their realistic reading of the landscape should strike terror: A local news-less 2030 America is a fright beyond comprehension. Imagine this struggling country 10 years from now if the news vacuum has become the new normal and our communities are democratically impoverished.

My own view: All good journalism is good. Support it by philanthropy, advertising, events, reader revenue, or by winning lottery ticket. Given the peril, we all need to look more widely for support, not more narrowly.

The free press needs to be a better advocate of free peoples in the 21st century.

The Wall Street Journal has long proclaimed itself the paper of free people and free markets. That formulation has made a lot of sense over time in the face of state-run economies of various flavors. But it’s insufficient to meet the demands of today.

Free peoples — those able to speak, write, assemble, vote, and retain some dignity of privacy — make up an uneasy minority of the world’s population. Now the twin dangers of growing strongman despotism and tech-based surveillance societies threaten us all.

Most recently, The New York Times’ investigative report on facial recognition painted a deeply disturbing dystopian portrait. The piece came on the heels of many beginning to describe China’s “surveillance state,” an ominous system intend to enable lifelong tracking and rewarding of state-approved citizen behavior.

We’re moving from a decade of cookies gone wild to what until recently seemed to be Orwellian fiction.

Combine the tech with the spreading rash of authoritarianism afflicting the globe. From Russia to Hungary to Turkey to Brazil to the Philippines to, yes, our current White House, the 2010s produced strongmen who we thought had been relegated to the history books.

Who best to represent free people in the coverage of would-be despots and in the tech-driven threats to several centuries of hard-earned Western rights? A free and strong press.

“The struggle of man against power is the struggle of memory against forgetting,” Czech novelist Milan Kundera memorably told us in his 1980 book The Book of Laughter and Forgetting. (John Updike’s masterful review of it is here).

Memory. Our job as journalists is to remember. To connect yesterday to today to tomorrow.

Like the climate crisis, the threat of a surveillance society registers only haphazardly among the American populace, even as California’s government and others begin to take it on.

We’ve seen the beginnings of a backlash against tech run amok, with Facebook’s role in the 2016 election a seeming turning point. But here we are again, as Emily Bell points out, going into another election with the same issues — and huge questions that go well beyond the social behemoth.

If news companies are, at their base, advocates for the public good, news companies must lead in securing a free society in the face of technological adventurism. Media needs to get beyond its self-interest — ah, first-party data! — and focus on the bigger picture.

Who better to take that stand than those who’ve long advocated free peoples and free thinking? Who better to do that — and perhaps be rewarded for it in reader support — than mission-oriented news media?

The press’ business revival is part and parcel of its advocacy for the people it serves.

Australia is burning, and Murdoch’s newsprint provided the kindling.

For years, Australian press watchers have pointed to the dangerous slanting of environmental news by much of the nation’s press. A majority of that press is controlled by Rupert Murdoch’s empire. And those papers, joined too often by other media, have long skewed the facts of climate change. The result is a society ill-prepared for the nightmare that’s befallen it.

While this month has seen more complaints about Murdoch publications’ coverage, they’re in line with what that coverage has looked like for years. Now even scion James Murdoch has spoken out, as have some of Murdoch’s employees, seeing the heartbreaking, country-changing toll the fires have taken on Australia.

History will record Rupert Murdoch’s three-continent toll on Western civilization. The Foxification of U.S. news, Brexit support, and Australia’s inferno serve as only three of the major impacts Murdoch’s press power has had around the world. It is a press power weaponized and then turned on the very societies it is supposed to serve.

And don’t let the whirl of events let you forget the odious phone hacking scandal. “The BBC reported last year that the Murdoch titles had paid out an astonishing £400m in damages and calculated that the total bill for the two companies could eventually reach £1bn,” former Guardian editor Alan Rusbridger reminded us this week in discussing the British press’ tawdry history with the royals.

Disney, for one, has recognized the toxicity of Murdoch’s remaining brand. Fox Corporation now owns the Fox broadcast network, Fox News, and 28 local Fox television stations, among other media assets. But “Fox” is no longer part of Twentieth Century Fox, the storied studio, and related assets that Disney bought from Murdoch last year. Now it’s only out of sync when it comes to time: 20th Century Studios. (Nieman Lab’s Joshua Benton offered up a wonderful history of the Fox brand in the U.S., beginning with a third of a Brooklyn nickleodeon 115 years ago, on Twitter.)

The Murdoch empire has generated plenty of good entertainment outside of its own brands — witness the Emmy-winning “Succession” and last month’s Bombshell. But we haven’t yet come to grips with how his publications’ fact-slanting has literally changed the faces of free societies.

Expertise rises to the top.

The end of the print era is killing off the generalist. Every daily newsroom has its legend of the reporter who could cover anything. Wake him up from a drunken stupor, point him (almost always him) out the door, and you’d get your story.

Great stories there sometimes were, but the legend exceeded the truth: Too much news reporting was a mile wide and an inch deep.

Flash forward to today: Ruthless digital disruption — of both reading and advertising — means that inch-deep stories have less and less value. (Remember back at the start of the last decade, the content farms — Demand Media, Contently, Associated Content — that were going to revolutionize journalism?)

If commodity journalism and sheer volume are out, one the most refreshing trends into the 2020s is single-subject journalism. It needs a better name, but the results have been profound. In topic after topic, the focus on expertise — in reporting, writing and increasingly presentation and storytelling — have produced their own revolution.

In health, we see Kaiser Health News excelling and expanding. In education, Chalkbeat (with its new five-year plan) and the Hechinger Report drill into the real issues of the field. They’re now being joined by the university/college-focused OpenCampus.org, seeking to bring the same level of experienced, knowledgeable journalism to the often-cloistered academy.

The Marshall Project squarely meets the many mushrooming questions around criminal justice in our society. InsideClimate News is growing to try to meet the interest, and panic, around a warming earth. More-than-single-subject-oriented ProPublica’s investigations, often done with partners, have done what great work is supposed to do: set and reset agendas. There are many more, including at the regional and state level, led by The Texas Tribune and CALmatters.

All together, they may add up to fewer than a thousand journalists at this point. But their impact is great, and I believe it will become greater as awareness and distribution increase.

As Google and Facebook have won the ad wars, pageview-thirsty commodity journalism has largely (and thankfully) met its demise. Now we’ll see how much the market — not just those foundations — will support real expertise in reporting.

Free media has better tech skills than state media.

While Iran’s state media was spending days denying any possibility its military had shot down the Ukranian airliner, The New York Times found the likely truth early on. It assembled its own small group of experts. It used the best tech available. And it could report (under an increasingly common four-person byline) that an Iranian missile had in fact likely done the deed.

It wasn’t about suspicions, guesses, or bombast. It was about finding a truth in plain sight — given the human and technological resources to do it.

At first, Iranians believed their own media, as NPR’s Mary Louise Kelly reported from Tehran, that the downing was U.S. propaganda. But then, amazingly and overnight, Iranian citizens responded to the American-driven truth. They piled into the streets, seeing the mistake and its coverup for what it was: another sign that their government, without its own checks and balances, couldn’t be trusted.

Watch what privately owned newspapers do.

By necessity, we pay a lot of attention to the industry’s M&A mating games. These largely involve the dwindling number of publicly owned newspaper companies, which struggle both with operating realities and the need to convince shareholders to hang on through short-term earnings and dividends. They’re the biggest players, the most riddled by financialization, and the ones who have to report numbers publicly.

But given today’s realities, the stock market really isn’t the place for newspaper companies to be. Only long-term, strategic, capital-backed, and for the most part private or family-controlled businesses can make it successfully to 2030.

In the middle part of the 2010s, those papers got more focus. John Henry with The Boston Globe. The Taylor family with the Star Tribune. Frank Blethen, fighting the long fight in Seattle. And then they were joined by Patrick Soon-Shiong with the L.A. Times and San Diego Union-Tribune.

For the most part, we don’t hear much news out of these enterprises. They don’t have to report to markets quarterly, and they’ve taken more of a no-drama-Obama approach to the tough business. They are also, not incidentally, the leaders in digital subscription among local dailies. They remain important to watch.

Just as importantly, consider two newspaper chains that keep their heads down: Hearst and Advance. In the early 2010s, Advance made lots of news by cutting print days at its papers in New Orleans, Portland, Cleveland, and elsewhere. It will likely soon get a fresher look: Long-time Advance Local CEO Randy Siegel announced last week that he’s stepping down. No successor has yet been named.

Hearst also remains intriguing. A very private company — and one now that now generates less than 10 percent of its revenue from newspapers — its very name bespeaks a long commitment. But the top two executives of what now is a profoundly diversified media company both grew outside of the news trade. Will it stand pat in its markets? Will it look for acquisitions? (The old GateHouse was its nemesis outbidding Hearst for the Austin and Palm Beach papers in 2018, but the Gannett deal should keep it out of the buying game for a while.) With antitrust enforcement apparently on the wane, will it try to build a cluster in the Bay Area around its San Francisco Chronicle? Or complete a Texas big-city triangle by adding The Dallas Morning News to its Houston Chronicle and San Antonio Express-News?

Bankruptcy is nothing new in the newspaper industry.

McClatchy’s pension-led financial crisis in November surprised many. The words “potential bankruptcy” tend to focus the mind.

But consider this: By one close observer’s account, more than 20 daily newspaper companies have visited the bankruptcy courts since the Great Recession a decade ago.

Ironically, two of the ones that emerged became acquisitive consolidators. Today’s MNG Enterprises, driven by Alden’s in-court and out-of-court strategy, in fact declared bankruptcy twice in its various corporate iterations. GateHouse, re-birthed by Fortress Investment Group in 2013, was able to restructure debt totalling $1.4 billion — double what McClatchy now owes — and has gone to become the biggest newspaper company in the land, even able to buy the better-known Gannett name in the process.

So if McClatchy does indeed go into a pre-pack bankruptcy, the news won’t be that filing. It’ll be what the company does — as a business and journalistically — afterward.

We have to find a way to keep trillion-dollar stories in the public eye.

Through a year full of remarkable stories, perhaps the most remarkable was one that’s gotten little continuing attention.

In December, The Washington Post published “At War With The Truth.” It took the paper three years to pry loose the trove of documents through Freedom of Information requests. It is remarkable reporting, and one that put a price tag on our ignorance.

Here’s the lede: “A confidential trove of government documents obtained by The Washington Post reveals that senior U.S. officials failed to tell the truth about the war in Afghanistan throughout the 18-year campaign, making rosy pronouncements they knew to be false and hiding unmistakable evidence the war had become unwinnable.”

The eerie parallels to the Pentagon Papers — a previous generation’s documentation of enormous waste, financial and human — were obvious. And yet it seems to have caused only small ripples in public discourse.

Politicians drive the daily news cycle, wielding wedge attacks on those — disabled, immigrant, poor — already falling through the now-purposely cut safety net. They say they do this in the name of saving taxpayer dollars. And yet this literal waste of $1 trillion pops in and out of the news in a politician’s second. This isn’t a question of politics; it’s a question of the public purse, and performing that watchdog role is our birthright as journalists.

As we reform and rebuild the journalism of the 2020s, we need to use the digital and moral tools of the day to hold power accountable and keep big stories alive over time. So far, we’ve barely touched the surface in connecting the latest happening to its deep historical context, making readers realize how a story connects to a larger issue or narrative, in ways both intuitive and knowledge-building.

I have confidence we’ll figure out how to do that in the 2020s.

“Mediatech” may be the new “convergence.”

There’s a new word taking hold out there: “mediatech”.

That’s how German behemoth Axel Springer is rebranding itself. CEO Mathias Dopfner and his team have rigorously pursued a transition away from print for more than a decade. “Mediatech” tells us both what they’ve learned and where they are going. In August, Dopfner’s new partner KKR bought out a minority interest in the company, taking it private and preparing it to be a bigger player this decade.

Springer, like its sometime partner Schibsted, will be one the big survivors in the brutal media game. Both have learned that modern journalism is now driven by both journalists and by technology. It’s the melding of the two — in audience definition, targeting, and service, and in product creation and delivery — that will determine the winners ahead.

Springer’s question for the ’20s: How much will the company keep investing in journalism itself, as it also pursues other digital business byways? Dopfner laid out the strategy, in friendly but direct sparring with Mark Zuckerberg, here.

Ah, life remains better in Perugia!

Travel coincidentally brought me to the doorstep of the most you-gotta-go-there journalism conference a couple of years ago. The name says most of it: the Perugia International Journalism Festival. Not a conference, or even an un- one, but a festival, inviting, of course, allusions to Nero fiddling. The truffled pasta and the views can’t be beat. The Sagrantino was magnificent.

The conference’s agenda and its exhibitor halls said it all. Walk into the main hall and Google and Facebook offered dueling expanses, with many enthusiastic company-clad representatives touting their latest and greatest. And half the agenda seemed to be, in apparently unintentional self-parody, sessions on how to work with…Facebook and Google. It’s the very best setting for platformitis.

In the time since, we’ve seen an even greater proliferation of news-aiding initiatives out of both companies. The new Reuters Institute study corroborates my own reporting, among publishers, of how that work is going and how it’s seen:

Google’s higher score [in the Institute’s own surveying] reflects the large number of publishers in our survey who are current or past recipients of Google’s innovation funds (DNI or GNI), and who collaborate with the company on various news-related products. Facebook’s lower score may reflect historic distrust from publishers after a series of changes of product strategy which left some publishers financially exposed.

The overall sense from our survey, however, is that publishers do not want hand-outs from platforms but would prefer a level playing field where they can compete fairly and get proper compensation for the value their content brings.

Short of that business-changing historic payout — see above — it’s unlikely that platform aid to publishers will itself significantly alter any of the trendlines in place.

There’s no natural ceiling to digital subscriptions.

Imagine if Reed Hastings has gone with advice of management consultants in the early 2000s, who might have “sized” the market for “on-demand” video and likely found it negligible. Netflix, nurtured on red envelopes, instead created a whole new category of customer demand — and willingness to pay.

As the company has grown, analysts have consistently undershot its growth potential, in the U.S. and globally. The company that was once asked “Will people really subscribe to on-demand movies?” reported on Tuesday that it now counts 167.1 million subscribers, and added 8.8 million in Q4 2019.

Upstart Disney (two words that don’t seem to pair) has already had its Disney+ app downloaded 40 million times. Hulu, Amazon Prime, HBO Max, Apple TV+, CBS All Access, Peacock, and more are all opening wallets.

What’s instructive to the future of the news business here? There’s no natural ceiling to digital subscription, though media reporters love to ask me that question. Create a value proposition that works and consumers will pay. Obviously, national and global scale — what the Internet provides — are hugely helpful. It is though the product proposition that drives payment.

For a moment, consider all the digital subscription success stories in news: The New York Times, the Financial Times, The Wall Street Journal, The Washington Post, The New Yorker, The Athletic, The Boston Globe, the Star Tribune, and more. What if this is just prologue? Could better products — with more and more useful content, priced, sliced, and diced smartly — reproduce some of the scale success of streaming?

In a word, yes. And that’s our best hope for the decade ahead. Into the 2020s, bravely!

The first half of 2020 “will be the final dance of the newspaper industry,” one of my savviest financial sources told me Thursday — someone who’s been right on the money for years. “Everything will get resolved in the first half of 2020.”

By “everything,” he means the consolidation of ownership and control of the United States’ major newspaper companies. What as recently as three weeks ago were five big chains — Gannett, GateHouse, McClatchy, Tribune, and Alden Global Capital’s MNG Enterprises — could well, by the middle of 2020, be two. In sight is the big industry-wide rollup I first pointed to way back in 2011.

Because of their origins in local communities, the newspaper business historically lacked the centralization and scale of other industries. Even the “big” chains that developed as family owners cashed out in the 1970s and 1980s weren’t really that big. When Al Neuharth — “the brash and blustery media mogul who built the Gannett Company into a communications Leviathan,” according to his New York Times obit — died in 2013, Gannett owned 93 daily newspapers. That was still less than 7 percent of the nation’s total.

Why rollup now? It’s just seems so logical to executives in other industries: McDonald’s can make burgers a lot more efficiently than mom-and-pop joints in every town can.

One acid-tongued analogy has stayed with me for years. “You guys think you’re special in the newspaper business — it’s just like any other industry,” one experienced financial analyst told me mid-decade. “But it’s a distressed industry, and distressed industries get consolidated. In that way, news is just like waste management.”

Another industry insider I spoke with recently pointed forward a few years, to the middle of the 2020s: “These guys look out at their revenue projections for the next three to four years and they know what they have do.” That means consolidation is now Job One. Newspapers have all been cutting expenses, including deeply into newsrooms, for more than a decade now, especially since The Great Recession wiped out 20 percent of their revenue and ushered in a decade of red numbers on their balance sheets.

Much of the industry’s attention this week, on Twitter and elsewhere, has focused on the rumors and then news of massive Gannett layoffs, coming weeks after Old Gannett was acquired by the then-rebranded GateHouse.

We’re hearing that “thousands” of Gannett employees will be getting pre-holiday pink slips — but that’s no surprise. With $400 million or more in cost reductions to deliver, it was clear that the company would be cutting more than 2,500 jobs — likely 3,500 or more. Reports also indicate that much of Old Gannett leadership in high-ranking sales position was surprised to get the quick axe this week. A crowdsourced Google Doc is tracking the layoffs by newspaper; it currently shows more than 160 jobs lost, 33 of them in the company’s newsrooms.

But there’s a lot happening deeper in the background too. Back in January, I called the coming year’s round of tie-ups and acquisitions the 2019 Consolidation Games, and now its sequel is coming into shape. GateHouse buying Gannett seemed like the big play — and in raw tonnage, it was, combining the No. 1 and No. 2 chains. But look farther ahead.

On Monday, Alden’s pursuit of Tribune Publishing became crystal clear. The two companies publicly entered into a “Cooperation Agreement.” Cooperation is too kumbaya of a word for it; it’s really a kind of non-aggression pact, and we all know those always work out great.

In corporate parlance, it’s called a standstill. In this case, the always aggressive Alden agreed to retract its fangs — for the time being.

Alden president Heath Freeman had surprised everyone (including Tribune’s board and execs) by buying a 25 percent stake of Tribune stock from the group led by one-time Tronc chairman Michael Ferro on November 19. Then, just six days later, Alden told the SEC it had upped its stake to 32 percent.

The standstill prevents Alden from increasing its stake past 33 percent until June 30, 2020. It also, for the same period, bans Alden from launching a proxy fight — an attempt to replace current Tribune board members with its own, a tactic it tried (unsuccessfully) in its own attempt to takeover Gannett in May.

In return for that pause, Tribune enlarged its board to eight from six, letting Alden handpick the two new directors. Crain’s Chicago Business columnist Joe Cahill decried the giveaway as indefensible. His indignation is well-placed; the hometown Chicago Tribune — which has found a little stability over the last year or so after the Ferro/Tronc years — could suddenly face the same fate as the Alden-eviscerated Denver Post or (formerly San Jose) Mercury News. For Tribune, though — with its corporate life suddenly upended — it seemed like the best deal possible at the moment.

Alden, the newspaper industry’s comic-book villain, is now firmly inside the tent of one of the few big public newspaper chains not yet controlled by financial players. Not coincidentally, Tribune also carries the least debt of those chains — making it ripe for the sort of debt-piling-on that is the M.O. of players like Alden.

The 2020 Consolidation Games

So what kind of scenarios are now likely, or at least imaginable, in 2020?

While none of the companies involved in all of this intrigue will comment on the record, there’s broad agreement about what the would-be deal landscape of early 2020 looks like.

The most salient facts: Two standstills and that June 30 date.

We know about Alden’s standstill. What’s the other? Patrick Soon-Shiong, who bought the L.A. Times and San Diego Union-Tribune from Tribune in February 2018, is also standing still. Like Ferro’s bunch, he also owns about a quarter of Tribune — a stake he initially took when he was interested in acquiring the Times, but which he held onto even after he did. Back in January, he agreed to a standstill that prevents him from acting independently of Tribune’s board in most ways.

That standstill expires…on June 30, 2020, same as Alden’s.

So when the clock hits midnight, both Alden, with its 32 or 33 percent, and Soon-Shiong, with his 24 percent, will be free to vote their holdings as they wish, as well as to buy or sell more. Even the most math-averse journalist can see that, combined, Alden and Soon-Shiong will hold a majority of Tribune shares. That’s real control.

Is Alden, then, lying in wait for June 30?

It might not even have to wait that long. While its two new directors would have to recuse themselves from any Tribune/MNG merger negotiations, the Tribune board doesn’t have to wait for mid-year. Its board could appoint a special committee made up of its independent directors. That committee could then assess what’s in the best interest of Tribune’s shareholders and move to join the rollup party sooner rather than later.

In fact, don’t think of that June 30 date as the starting gun for M&A — think of it as the finish line. Or, in more newspaper-appropriate terms, a deadline. If Tribune can strike a deal with a merger partner before then, it can do so on whatever terms that it sees as most favorable. If it can’t, well, all bets are off on what happens when those standstills expire.

Who might that merger partner be? Two recent events have rearranged that chessboard.

New Gannett, absorbed into GateHouse, is fully occupied with its own big lifts: integrating two big companies, cutting everything that can be cut, and paying down the $1.8 billion in high-interest debt it took on to do the deal. New Gannett is off the rollup board — for now.

Then Tribune’s likeliest dance partner, McClatchy, stepped off the board, at least for the time being. As it focuses its attention on the financial reorganization of its capital structure and negotiates with the feds for a takeover of its pension plan, McClatchy’s appeal as a merger partner has greatly diminished. It sees the same logic in the large-scale cost-cutting a merger could provide. But it can’t do much until its own reorg is done.

How long might that take? Well, McClatchy will likely need most of the first half of the year to clear its position through voluntary reorg or bankruptcy. So, say, maybe sometime around June 30? That date will be circled on every newspaper exec’s calendar before long.

Add it up and the first two quarters of 2020 could mark the major reordering of newspaper ownership, control and management that’s been in the cards for years.

What’s likeliest? Observers put a Tribune/MNG deal at the top of the list. The biggest reason? Just the big cost cutting allowed by putting two big companies together. In recent years, there have been various non-financial roadblocks getting in the way of various tie-ups. (Do the geographic footprints fit together? How about the corporate cultures? Do they agree on strategy going forward?) But now, the imperative is cost-cutting, and that trumps all else.

A combined Tribune/MNG would become the No. 2 U.S. newspaper chain, behind Gannett. It would include Tribune’s small-in-number but metro-heavy roster, which includes the Chicago Tribune, The Baltimore Sun, the Orlando Sentinel, the South Florida Sun-Sentinel, the New York Daily News, and the Hartford Courant. MNG would add bulk, with 97 dailies and weeklies in total, including such once major properties as The Mercury News, The Denver Post and the St. Paul Pioneer Press. It has big footprints in both northern and southern California.

Most important: Who would control that combined company?

That begins a parlor game. What does Alden’s Heath Freeman really want at this point? He has milked and milked MNG through its Digital First years, making sure that when it comes to investment in the product, it’s Digital Last. Does he see a Tribune merger as a way to cash out, as further profits became harder to obtain? Or does he smell even more dairy refreshment in subjecting Tribune — already drained, yes, but not yet emaciated to Alden’s standards — to his cost-cutting discipline?

That’s one big question. Another is valuation, the fundamental question of most mergers. We know what the market thinks the publicly traded Tribune is worth — its current market cap is $444 million. MNG is a private company controlled by Alden, its majority shareholder. Observers guesstimate its value somewhere around $300 million, but it’s truly impossible to know from the outside.

A number of those who’ve been able to looked at Digital First/MNG books over the years have found some of the accounting questionable. Further, Alden has shown itself able to shift and move money between its various affiliates with the skill of a veteran three-card monte dealer — and has been sued and investigated for doing so.

Then there’s the big question of what value these newspaper brands will hold in the future if they’re shrunk even further. Or, as one company CEO put it, “How much life is left in the asset?” And how much of any deal would be cash and how much stock?

But despite all those questions, yes, Tribune could “buy” MNG. Or vice versa — recall that it was the smaller GateHouse that swallowed the larger Gannett. And one thing is clear: There’s a reasonable chance that Heath Freeman and Alden will get the opportunity to slice and dice Tribune’s papers as he has MNG’s.

McClatchy aims to mid-year

If the Tribune/MNG combo happens, that would bring those five newspaper chains we had a month ago down to three.

How might we get to two? That comes down to McClatchy. After a Tribune/MNG merger, McClatchy would again be the third-largest U.S. newspaper company — the position it held before adding Gannett to GateHouse promoted it to No. 2.

And as a standalone No. 3, struggling with the same operating economics as its peers, it would certainly like a dance partner as well. Except the dance floor is looking pretty sparse this late in the night. Not many options left. So it’s possible McClatchy’s play would be to join up with the new Tribune/MNG — or maybe even New Gannett. Either would be a level of consolidation almost unimaginable in the industry not long ago.

Of course, McClatchy would like to be an acquirer, as it almost was a year ago when it came close to buying Tribune. But its financial and strategic positions have weakened since then.

On Wednesday, Bloomberg’s Joe Nocera wrote an excellent piece on McClatchy’s challenges and CEO Craig Forman’s continued public focus on community difference-making journalism that matters.

Internally, McClatchy has its share of detractors who’ll argue that, while some of its journalism remains top drawer, the cuts its newspapers have seen aren’t that far off from those of its peers. But it’s nonetheless true that McClatchy seems like an industry outlier. It’s a publicly traded company, but its two-class share structure still gives the founding (1857) McClatchy family some control. While financial player Chatham Asset Management, its largest shareholder and debtholder, circumscribes management’s decision-making, the company stands out as an advocate of traditional journalistic values in the widening sea of hedge fund and private equity owners.

Forman, in Nocera’s piece and elsewhere, makes the case that McClatchy is leading the pack in terms of digital transition, especially in well-priced digital subscription selling.

But none of that will save McClatchy — by the time it finishes getting its internal financial house in order — from facing a vastly altered industry landscape. What choices might it still have by summer?

Five major companies could become two. Those could well both be run by investment companies with little real affection for or attachment to the newspaper business — Alden, whose sins are well known, and Fortress Investment Group, which has a management contract to run Gannett through the end of 2021. Though Fortress and Alden differ significantly in their management practices, the fact remains that both companies’ interest in the bottom line crowds out most thoughts of journalism’s role in serving its communities.

Those two companies would own probably close to a third of the daily press; New Gannett already holds a 18 percent share. Then there’s Lee Enterprises — in 50 markets, with mostly smaller properties — and the two big private companies, Hearst and Advance. Following them are a fair number of smaller chains, most of them focused on smaller newspaper properties.

So is this more Armageddon or doomsday, asks the New York Post?

We’ve got ghost newspapers, news deserts, and now an assortment of Biblical references to choose from. What sounds like Hollywood summer fare, though, comes down to one sobering word: reality.

Those are the internal numbers in the air as America’s two largest newspaper chains, Gannett and GateHouse, try to land their megamerger, first announced in August.

Follow the money: When I first wrote about this potential union back in July, the estimated annual cost savings — “synergy” — to be derived from a merger was “something like $200 million.” By August, it was “$200 to 300 million.” Then it was “$275–300 million.” Now, talk has gone to $400 million and beyond, into the range of nearly half a billion dollars.

What does that mean? Almost certainly, even more reduction in headcount than had been anticipated. (Executives declined to comment on the amount the synergies they’re now eyeing.)

How much? In any room of eight people at a current GateHouse or Gannett operation, one is likely to see her job gone in 2020. One in eight would add up to 3,450 of the combined companies’ 27,600 jobs. Some observers expect that the final total to be higher than that. And the company won’t wait for the first of the year to begin layoffs: With immediate savings a priority, expect those anxiety-inducing conversations to begin right after Thanksgiving.

Those layoffs may well be on top of those already going forward in current Gannett newsrooms. As Gannett finishes its regular budgeting for 2020, its newsrooms can expect 3 to 5 percent cuts in their budgets, sources tell me.

This morning marked the penultimate go-ahead in what has been a yearlong process. Shareholders of both Gannett and GateHouse voted this morning on the merger, which will create a giant (for newspapers) company that will retain the Gannett name. (The shareholders voting for GateHouse are owners of New Media Investment Group, a.k.a. NEWM, GateHouse’s holding company.)

Both said yes. NEWM’s board went first: “Precise vote totals were not immediately available, but New Media CEO Mike Reed said that about 99% of the 75% of shareholders who voted approved the deal.” Then the results of Gannett’s vote was announced at 10 a.m.

They approved the deal despite the value of the deal plummeting since it was first announced. On that day in August, NEWM shares stood at $10.70. At market close yesterday, they’d dropped to $6.68, including a six percent decline on Wednesday alone. The deal originally valued at $1.38 billion is now worth $1.13 billion.

Why the drop? Some investors looking at the deal had hoped it would fail and thought they could catch a NEWM bounce; perhaps some abandoned the stock as the merger became a near-certainty. Perhaps you can blame McClatchy, the next largest newspaper chain, for souring the market; its stock dropped 12 percent yesterday after it announced that the IRS had denied its request for pension fund funding relief. (It’s down 22 percent since Friday.)

Or maybe it was just the accumulated toll of poor earnings reports from both GateHouse and Gannett. Or did major NEWM investor Leon Cooperman’s pooh-poohing of New Gannett’s projections — “nobody believes any of the numbers coming out” — convince others to get out? (Cooperman’s been in the news lately for other reasons.) Gannett’s USA Today reported that some “large investors in New Media appear to have sold off shares earlier this week.”

Figure that some combination of all those explanations is at play.

Anyway, life, such as it is in the daily industry, goes on. Following today’s votes, expect the deal to formally close — and New Gannett to become a corporate reality — on November 19.

Industry watchers, then, will have their eyes on the next announcement, expected on or around the next day, November 20. That’s when CEO Mike Reed and Gannett operating head Paul Bascobert will name their new executive team. Today I can offer a likely preview of who’ll ascend in the new Gannett order. Before that, though, let’s break down this megamerger as it concludes — and then take a look at what’s likely for the company that will operate 18 percent of America’s daily newspapers.

Actually, let’s start with some news: the next big newspaper M&A deal, which I can now report is (once again) in progress. McClatchy and Tribune executives are talking about merging their two companies, I’ve confirmed with several sources. While I don’t expect any imminent announcements, both companies’ executives agree that, in this rapidly deteriorating operating environment, a merger that buys time by massively cutting costs is a first order of 2020 business.

While the companies decline comment on what would be the next largest — and most logical — remaining combination, it’s clear what obstacles will need to be cleared to pull it off. Let’s call them the two Fs.

The first F: Financing. McClatchy and Tribune will argue that adding the two companies together, likely creating synergies in the $200 million-plus range, will create a less leveraged, financially healthier company. But can they get the financing to get the deal done, given the limited interest most banks are showing in the industry? And if they do, can get they get it at an interest rate of lower than the 11.5 percent that New Gannett is paying Apollo Global Capital for its $1.8 billion in financing. (Remember, the need to pay back that loan quickly is a big driver of New Gannett’s ever-increasing cuts.)

The second F: Ferro. Michael Ferro, the former Tronc/Tribune board chair, nixed the last attempt at a McClatchy/Tribune combo last December. His group still holds 25 percent of Tribune, and they could once again stand in the way of a deal.

On the ground — that gyrating retail ground in all the 38 McClatchy and Tribune markets, — revenue declines worsen, and the worries about 2020 deepen. Tribune, in last week’s quarterly earnings report, said ad revenues were down 15 percent — in both print and digital — with total revenues down 7.7 percent. McClatchy, in its earnings report Wednesday, said ad revenues were down 19.3 percent, with total revenues down 12 percent.

Worse, McClatchy has to deal with its ongoing pension plan problems, now negotiating “a distressed termination” with the federal Pension Benefit Guaranty Corporation. Though it was able to report in first gain in quarterly EBITDA in eight years, the stress on the company is clearly intensifying. It reported that the money it owes the pension “greatly exceeds the company’s anticipated cash balances and cash flow given the size of its operations relative to the obligations due, and creates a significant liquidity challenge in 2020.”

Meanwhile, Tribune announced this morning that it would begin issuing a quarterly cash dividend for shareholders. And not a cheap one: $0.25 per share, per quarter. With 36.02 million shares of stock outstanding, that adds up to about $36 million per year going to shareholders — despite the company being in the red by $9.1 million for the first three quarters of 2019. As MarketWatch notes, that’s “a dividend yield of 10.47%, compared with the implied yield for the S&P 500 of 1.92%.” That might attract cashflow-hungry investors but it also removes $36 million a year that could go toward investing in the future.

“The ability to hire and retain top talent remains one of our top priorities.”

My colleagues have to chose between keeping their job & having health care because they literally cannot afford the increases.

But yes, please, tell me about how our work is benefiting shareholders. pic.twitter.com/zrOCwEq0Tp

— Danielle Ohl (@DTOhl) November 14, 2019

Put it all together and the 2019 Consolidation Games, first previewed here in January, are set to extend into the new decade.

The megamerger will win headlines with the vote today and then the closing next week, but the focus will likely shift to the substantial head-rolling. That’s understandable, as these employees sadly find themselves joining tens of thousands of others who have departed the newspaper industry in the last decade.

The biggest question, though, is what the deal will come to mean for American local journalism, and that’s the big picture we’ll be looking out for.

We already know that the deal of Mike Reed’s career will focus first on both rapid reduction of his huge debt and the maintenance/improvement of the dividend that has sustained NEWM investment over the years. A lot of New Gannett’s cashflow will be exiting through one of those two doors. How much will remain to pay journalists and essential product people in 2020, 2021 and into 2022 — to invest in the product — is the big unknown.

How did we get here?

Last December, Gannett CEO Bob Dickey surprised his colleagues by announcing his retirement. The company was caught unprepared, with no likely internal successor in view.

Smelling opportunity, Alden Global Capital president Heath Freeman — proprietor of the shapeshifting chain MNG, successor in various ways to MediaNews Group, Digital First Media, Journal Register, and 21st Century Media — made his move. He offered to buy Gannett. Though both his intentions and access to financing remained suspect, the Gannett board and management edged toward panic. Could storied Gannett — founded 1923, the largest U.S. newspaper publisher, second to News Corp globally — be swallowed up by a hedge fund that had become the poster child for milking the U.S. press on its way toward oblivion?

As Gannett pondered its options in fighting Alden — resulting in a later board battle and more — Mike Reed smelled both opportunity and the whiff of panic. He called Gannett, offering GateHouse as a friendlier merger partner. Reed looked great compared to Heath Freeman, Gannett executives said to each other.

Lots of valuing, negotiating, and comfort-seeking followed through the year. In the end, though, that’s how private equity Fortress Investment Group has come to control and manage the biggest daily newspaper chain in U.S. history.

Now let’s consider the numbers, the people, and the decisions ahead.

The numbers

The big number is that synergy number, now sitting at $400 million or more.

Though Reed has said editorial cuts would be minimal, “there’s no way they can get that number without significant newsroom cuts,” one person very close to the deal told me. Other sources have echoed that belief. With headcount amounting to about 50 percent of total expense, most are placing the overall number of FTE cuts at more than 3,000. Some believe the number, over the next year, will come in at somewhere between 3,500 and 4,000. It’s unlikely we’ll know the actual number for awhile, and then only through extrapolation.

For a sense of scale, when this deal closes, McClatchy will be the second largest U.S. newspaper company by circulation, behind New Gannett. It has fewer than 2,800 employees in total. So New Gannett will cut more jobs — perhaps substantially more — than its biggest competitor even has.

Why has the number grown from the $275 million to $300 million first cited by Reed?

First, undoubtedly: Operating revenue keeps getting worse, quarter by quarter. And it may be that even Reed doesn’t want to bet on the highly optimistic revenue forecasts he has offered investors in his merger prospectus.

It was on GateHouse’s earning call last week that Leon Cooperman made mincemeat of Reed’s numbers. In colorful language rarely seen on the by-the-book quarterly financial result conference calls, Cooperman laid into those forecasts:

When I listen to you, Mike, on the call, I’m reminded of the deceased comedian, Rodney Dangerfield, who used to complain he gets no respect. And, so I look at page 88 of the S4, the proxy statement that came out and connects with the merger. And if I take the numbers there, the stock is presently trading at 2.7× EBITDA. And this assumption, so nobody believes the numbers, no, on the resized dividend, the stock gives 9%, you’re 2.7× EBITDA. In 2021, you’re going to fix the financing.

Nobody believes it. And I think part of the problem is Gannett’s total revenues have been declining at over 9% over the past few quarters. New Media’s revenues have been declining at around 7%. In fact, I think the Q3 was 7.9%. Post-merger, you’re projecting declines 3.5% in 2020, 1.5% in 2021 and down 0.4% in 2022. As regards margins, they’re running 11% to 12% currently. Post-merger, you’re expecting 15.6%, 18.6%, 21.3%, ’20, ’21, ’22.

Now I can understand the margin expansion stemming from the synergies, but I don’t understand how we go from revenue declines that are 7% or 8% to 3% or 4%. What is behind that and how confident they are that this is going to be the case?

(Ouch. Elizabeth Warren isn’t the only one getting Cooperman’s toughest these days.)

In response, Reed emphasized the minimizing of the part of the business going south the fastest — print advertising — and the increased focus on growth areas. He also highlighted the events production business GateHouse Live, a fast-growing, high-margin unit that will be brought as quickly as possible to Gannett markets. (“So 85% of our revenues will be driven by categories that we feel we can have either stable or growing,” he said. “So we feel very confident over the three-year period that the biggest driver of declines, print advertising, will be a very small portion of our overall business.”)

But a simple truism applies here. If you have a number to hit, it’s far easier to get there by cutting expenses than to really rely on improved revenues. Cutting big and cutting deep at the outset offers Reed some insurance. That way, he knows he’ll be able to pay off the Apollo debt and maintain investor dividends.

Despite Cooperman’s astute skepticism, he’s maintained his support of the merger.

Why? The same reason I’ve repeated throughout the year: No one loves this deal, but it is probably the best that can done now to possibly salvage investors’ stakes. That’s what I hear from those in and around it. For publicly traded, single-class newspaper companies — a species that night not survive the 2020s — it’s all about the art of the imminently possible.

We’ll learn more about this merger as numbers tumble out through 2020, in quarterly reports and SEC filings. How much will the company pay out early in the year to some of the passed-over Gannett and GateHouse executives, who’ll be deploying their golden parachutes? How many tens of millions will be paid out in severance to generate those huge cost savings?

And how does the combined company actually perform? It will take as long as 15 months to get a true apples-to-apples comparison on revenues and profits. In the interim, it’s a lot of extrapolation.

For the numbers junkies out there, the NewsGuild’s Tony Daley, a research economist, has written an exhaustive account of the GateHouse/Fortress timeline, with lots of data. The guild, newly energized by the wave of unionization spreading across digital media, issued its own denunciation of the megamerger last week, saying “journalism will suffer.”

The people

There’s the figures and facts, and then there’s the people — and the gnarlier question of culture. GateHousers pride themselves on moving fast, breaking things, and getting things done. Gannetteers point to the greater sophistication of their systems and processes and their deeper benches of talent. Expect those benches to thin quickly, given the cuts.

Already within Gannett, sources say, business managers have gotten the message and are picking up the pace. Soon they’ll see how many of them survive to work on the always-tough process of merging two companies.

Top executives will try to do what they can to reduce how long that process takes, but everyone expects it to take something like 18 to 24 months to unwind, rewind, and combine how things work. All that is an opportunity cost — potentially productive time and resources that are devoted more to internal change than external business management.

That brings us to the new top management. Sources tell me the new lineup is fairly clear, but it could still change before announcement.

We’ve already known that Paul Bascobert would become New Gannett’s operating CEO, reporting to Reed. Accepting Bascobert, who was just hired by Gannett this summer, was part of the deal to which Reed agreed. That meant that Reed’s longtime business partner, Kirk Davis, would not move into the same No. 2 post at the new company. Davis, well-liked by his management troops and respected as a leading operator in revenue performance in the industry, has decided to leave the company rather than take on a lesser position.

Surprisingly, perhaps, in a merger driven by GateHouse, a number of Gannett executives appear positioned to take big roles at the merged company. In fact, some in GateHouse find the amount of Gannett influence in the new company disappointing.

Several top Gannett executives are expected to assume similar positions in the new company, say several sources. Current Gannett CFO Alison Engel is one. (New Media currently lists its CFO as “TBD.”) In the all-important revenue leadership position, Gannett chief revenue officer/ USA Today Network Marketing Solutions head Kevin Gentzel will move into that bigger job with the new company. Similarly, Maribel Wadsworth, currently president of USA Today Network and publisher of USA Today, “oversee[ing] the company’s consumer business,” will take on a similar role at New Gannett.

From GateHouse, Denise Robbins, SVP of consumer marketing, is expected to take a similar job. Jason Taylor, who heads up GateHouse’s new ventures unit, including GateHouse Live, will maintain a similar portfolio, sources tell me.

The decisions

Given all the pressures on the companies and the industry, lots is on the table.

Early in 2020, the company will decide which of its newspaper properties to sell or swap. “Asset sales” are a key part of the Q1 agenda — though I don’t expect major sales, just some one-offs. Reed will also get cash for some of the remaining real estate that Gannett brings into the deal, much of which came with its own acquisitions over the past several years.

We do know something about what the parties have valued as they put the deal together. Gannett’s national digital ad network is one of those, bringing in plus revenue for the company, sources say. Adding GateHouse’s digital audience to that network will add scale, and scale is good. Likewise, expect to see that USA Today’s branding extended across all the sites.

Will USA Today the newspaper continue publication? At Poynter, Rick Edmonds has detailed the likely approach of its end of print. How long that’ll take will likely be the question. In the meantime, its branding, ironically, will be ascendant. And that leaves big questions about Gannett’s national journalism staff. With a large Washington bureau and USA Today’s staff, where do those journalists fit in the new company’s strategy?

We also know, as noted above, that GateHouse Live is highly valued and will be extended to Gannett properties.

But how will the various digital marketing companies of both Gannett and GateHouse be combined? And can the company find ways to improve margins in this once-highly-touted growth business that has produced disappointing cashflow for many publishers?

Bascobert has outlined a “marketplaces” strategy in his early visits to company cities. Bascobert, previously of The Knot/XO Group, has told staffers he sees such marketplaces as a new central point of rebuilding the local commercial advertising business. In the months ahead, we’ll see what kinds of marketplaces New Gannett will test.

Finally, there are the regional design centers. Gannett has operated several of them; GateHouse has largely centralized its page makeup and production work in Austin. Those centers have already eliminated lots of news production jobs at local papers. How much more can their work be rationalized, squeezed, or made “more efficient”?

In fact, that’s the all-encompassing question here. Neither of these two companies are known for excess or big spending, in their journalism or elsewhere. They’ve both already been well squeezed, for many years.

How much juice is left to extract? And when the juicing is done, what’s left for the readers? Money for journalism: That’s still the root question here.

Tens of millions have gone out to Fortress Investment over the years, and there are still tens of millions left to go, as Fortress serves out its final two-year management contract and then exits with a new package of shares worth tens of millions more. That’s money that, like GateHouse’s dividends, hasn’t paid and won’t pay for journalism.

How questionable are those payments, even within the traditional private equity world?

Take it from Leon Cooperman — as hard-boiled a capitalist as they come — who had his own comment on the matter on GateHouse’s earnings call:

I know we’re happy to get rid of Fortress, but I got to tell you, and I probably shouldn’t say this but I will say it, because that’s my nature of speaking what’s on my mind.

Basically, I was in the hedge fund business for 26 years. I only got paid when I made money for investors.

The kind of money that Fortress is walking away here with, and I know it’s not your doing. They brought this public in 2014 at $16 a share. The stock is $8.50, and they’re going to walk away with hundreds of millions of dollars. It’s just morally wrong, and they shouldn’t even take the money, given what they’ve done here.

Everyone in the subscription business decries friction, putting too many steps between the would-be buyer and the buy itself. Enter your credit card number; type in your address; pick a username and password; sorry, your password must have at least 3 uppercase characters, 2 lowercase characters, a number greater than 6, and any two of %, &, and #. Too many words, pages, clicks.

Some of that is hard to avoid. But as news consumers, we run into stupid friction all the time. You follow a link to a news site you’ve already subscribed to, but up pops a login screen. “Ugh, don’t you know me by now?” we scream, silently or otherwise.

Confronting (and shaping) all that that friction is one part of The New York Times’ plan for world digital news subscription domination. Times CEO Mark Thompson described that part of the Times’ strategy to me in an interview after the company reported its third-quarter financials last week.

The Times has decided to force non-subscribers to register in order to sample even a couple articles. But the move has an impact on subscribers, too — they’re often logged in on some devices or within some apps but not in others, making them appear anonymous. It’s “confusing to consumers and confusing to us. Someone who is a very loyal, 10-year subscriber turns into an anonymous user.”

What does the Times gain? Better information about potential subscribers, yes, but also better knowledge of subscribers’ activity across devices, unlocking more accurate personalization. That deepens the relationship while providing value in both directions.

That new emphasis on registration serves an overarching goal: Thompson’s goal to hit 10 million subscribers by 2025, which I’ve covered since he outlined it three years ago.

The Times is now more than 40 percent of the way there, amazingly to many, and Thompson says they’re on track to reach or exceed it in five years. When he offered the 10 million number to financial analysts, the Times had 1.6 million digital subscriptions to its news and niche products. 10 million seemed like an outsized stretch. Today, it has nearly 5 million. Here are the key numbers:

4.9 million. That’s the total number of New York Times subscribers overall, between print and digital. That’s already three times its peak in the good old days of print.

4.1 million. That’s roughly how many paying news customers the Times has across digital (3,197,000 subscriptions) and print (869,599 average Sunday circulation).

856,000. That’s the number of subscribers to its non-news products, Crosswords and Cooking.

10 million. That remains the Times’ goal for 2025 for digital subscribers. Its growth curve, says CEO Mark Thompson, will get it there in time.

500,000: That’s the number of Times subscribers outside the United States. They may pay less for their subscriptions than do U.S. customers, but their importance to the Times is increasing. Today, they make up 16 percent of all Times subscribers; by 2025, the Times forecasts that 20 percent of them — or 2 million in total — will.

Thompson and I discussed those numbers, as well as why and how the Times has changed its paywalls — and will soon be charging its most loyal readers more. Along the way, Churchill, Netflix, and the 1960s rock-pop duo Zager and Evans each enter the conversation, which is edited for length and clarity.

Why now? Why do that now? We just published interviews with [Financial Times CEO] John Ridding and Tsuneo Kita, the chairman of Nikkei. John talked about going narrower and narrower and narrower to drive value, decrease churn, and increase pricing over time. This is a whole value journey, right?

Certainly, the FT was a leader, maybe the leader, within the mostly bedraggled pack of newspapers moving through the industry’s titanic disruptions. But it was still mid-transition. Revenue growth was still a major challenge, and as a result profits were slim. So, what did Nikkei see that made it outbid its peers, including the innovative European giant Axel Springer?

Tsuneo Kita saw the future. And he made a big, bold bet.

A giant in Japanese media and longtime executive at Nikkei — its chairman since 2015 — Kita gave me a rare interview on a recent trip to the United States. In our hour-long conversation, conducted through an interpreter in San Francisco, the affable and accessible Kita spoke about that big buy and what it has meant to the transformation of Nikkei itself. We cover partnerships, culture, the technological imperative, and Japan’s unique digital disruption trajectory in the interview, which has been edited for length and clarity.

This should be read as a companion to yesterday’s interview with FT CEO John Ridding, in which we get his view of what the new ownership has meant to his company and talk about its remarkable, industry-leading success in digital transformation.

Nikkei’s place in journalism and in an anxious world

Lessons from the FT buy

As he approaches his 14th year as FT CEO, he’s also grown comfortable that the bet he made in 2015 — engineering a sale to Japanese business news giant Nikkei — was the right one. His new boss, Nikkei chairman Tsuneo Kita, thinks so too. (You can read an interview with him tomorrow here at Nieman Lab.)

The FT’s business is profitably enough for now, and more importantly, its key metrics are moving in the right direction. The prime driver of that is its success selling digital subscriptions — going from 517,000 four years ago to 840,000 today. That’s more digital subscribers than the FT ever had print subscribers.

As at nearly every newspaper around the world, print advertising and print subscriptions at the FT have long both been shrinking, but digital subscriptions have made up that gap and then some — leading to actual year-over-year growth. In 2012, advertising drove 50 percent of all FT revenue; now it’s at about 35 percent. (Make no mistake: Advertising remains a vital driver of substantial revenue for news companies. But for the ones who’ve gone furthest in the transition to digital, it’s become a secondary one.) “Other” revenue — mostly driven by conferences and events — now makes up nearly 10 percent of the FT’s revenue, double what it was a few years ago.

In our interview, Ridding emphasized how the FT’s ever-deepening customer knowledge drives how it builds its products and its business. He’s got an enviable audience to serve, to be sure: FT readers spend an average of $5,000 a year just on clothes and $6,500 on jewelry. Average net worth? £1.3 million. Average income? £206,000, or $266,000 at the current Brexit-depressed rate. Still, publishers still have to work hard to convince them to part with their money.

The FT’s customer understanding has driven it to focus investment on serving particular segments of its readership better than its competitors. To do that, it’s focused on engagement, as many do these days, but with its own formula.

The key is something called RFV. That stands for recency, frequency, and volume, a measure of a reader’s habit and loyalty with the FT. More specifically, it’s made up of three variables: time since last visit (recency), number of visits in the last 90 days (frequency), and amount of counted content read in the past 90 days (volume). An algorithm uses those variables to score engagement. “We’ve seen double-digit growth in engaged subscribers for the last three years,” the company says.

And what those readers want, the FT believes, is tailored content — much of it delivered by newsletter.

“Over the course of 2019, we refined our approach to newsletter strategy,” says Renée Kaplan, the FT’s head of audience and new content. “We have a more focused strategy to deliver and derive the most value possible from our newsletters as editorial products.”

Many publishers use newsletters as fishing lures, drawing readers into their pond, then hoping to convert then to subscribers. The FT uses them first and foremost to better serve current subscribers.

Kaplan sums up the FT’s strategy simply: “Number one, subscriber engagement. Number two, revenue. Much of our business’s monetization is through engagement, and the retention and LTV benefits that accrue to growing RFV and premium content consumption.”

There’s ongoing change in the newsletter portfolio. The FT has dropped or merged four newsletters and created new ones. This year, the FT has launched Tech Scroll Asia (leveraging the Nikkei connection) and the four-day-a-week Trade Secrets, responding to all the volatility in world commerce.

At this point, 26 percent of FT subscribers have signed up for a newsletter, and that number is “our primary growth target,” Kaplan says. Consequently, the company continues to work through internal dynamics to reduce friction in the signup process and increase subscriber awareness of the offerings.

In our talk, John Ridding — an FT lifer, having joined the company 32 years ago as international news desk journalist — talks about those business priorities and the broader news landscape — disrupted as much by Trump and Brexit as by Google and Facebook. He’s concerned about the widening polarization he sees and he believes that provides the FT a wider opening. And the U.S. market — already bigger than the U.K. for the FT — is his prime target.

“I think our opportunity there is to be an independent voice, a balanced voice, and a global voice at a time when a lot of media is becoming more domestically focused,” he said. “Certainly, that’s the feedback we’ve had from readers and research.” (For some, that will echo a certain uneasiness with The New York Times’ presentation of its stories in the Trump age.)

In this interview, edited for clarity, Ridding both shares some of the FT’s playbook and makes an analogy involving the movie Meet the Fockers.

The early conventional wisdom was that Nikkei had way overpaid (roughly $1.3 billion) for the prestigious but modestly earning FT — and that the new marriage would suffer through some major cultural headaches.

But today, four years later, both Nikkei and FT seem remarkably…happy. This corporate mix, both CEOs say, is working out even better than hoped. And word from inside the FT newsroom is one of satisfaction. Editorial integrity has been maintained. The new owners, replacing a struggling Pearson, have demonstrated a willingness to make targeted new investments in the newsroom and in product development.

“Basically, these [Nikkei] guys all come from a journalistic background, and they really believe in the value and importance of quality journalism, in reader revenues and transformation,” FT CEO John Ridding tells me. “So in a sense, culturally, they would do it the same way.”

I recently had the opportunity to speak with both Ridding and Nikkei chairman Tsuneo Kita, who doesn’t often give interviews. Over the next two days, we’ll publish excerpts of those conversations here at Nieman Lab.

It’s a check-in on a M&A deal that’s all about long-term strategy — not the sort of shorter-term, cost-cutting-driven deals we’ve seen in the United States, most notably in the pending combination of Gannett and GateHouse Media.

That deal will end up having roughly the same price tag as Nikkei/FT. But the differences between the two show the different fortunes facing the local and national/global newspaper businesses. The biggest players still face challenges, of course. (The New York Times reported a 6.7 percent drop in ad revenue this morning, for instance, tarnishing its latest good digital subscription news.) But by and large, they have the digital talent, experience, data capabilities, and products to let them enter the new decade with confidence. For local press, the questions are growing rapidly existential.

The Financial Times has seized global opportunities from its London base. We’ve been writing about it as a global leader in data-driven reader revenue for the past decade. I still recall when then-FT managing director Rob Grimshaw told me years ago that his emerging goal was to become “Amazon of newspapering.” In many areas, we can trace how the FT’s customer-centric and data-driven strategies have acted on that impulse. We can also see how much of the publishing world has come to accept such strategy as fundamental to their own futures. (The FT was the first major publisher to launch a metered paywall, all the way back in 2007 — four years before The New York Times followed suit, followed by much of the rest of the industry.)

That’s one reason everyone in news publishing should watch the FT. Whether your company can afford a fleet of data analysts or only one, or a small fleet, it’s the transformational thinking here that demands attention.

John Ridding has long been more measured in his public ambitions than the more expansive Mark Thompson, the New York Times CEO who publicly announced a 10 million subscriber goal three years ago. (It’s on pace to hit it by 2025.)

Nonetheless, Ridding’s company reached a true milestone in the spring, joining the small 1 Million Subscribers Club — 80 percent of them in digital.

Likewise, Nikkei is a major global player, focused primarily on Asia overall and increasingly driven by the same kinds of customer-centric and data-driven strategies.

While little understood in the U.S. or Europe, Nikkei is dominant in Japanese business journalism and now aims to be the business and tech news leader in Asia. Just this year, it’s bought stakes in startups in Singapore and India. As a Tokyo-based company, it deals both with Japan’s own population decline and difficult economy, and the wider digital disruption trends suffered by all the world’s press.

As New York City-based Jacob Margolies, who has long represented the Japanese daily Yomiuri Shimbun in the U.S., puts it: “All trends in Japan are in the same direction — except slower.” To put that in perspective, consider that Yomiuri — the world’s biggest newspaper with a daily circulation of 8.9 million — could count 10 million not long ago. It’s a decline, but still from a high, high start.

Long-time business journalism veteran Gordon Crovitz, former publisher of The Wall Street Journal and co-founder of NewsGuard, puts Nikkei in perspective. “Nikkei does world-class journalism, but differs from The Wall Street Journal in its good fortune to operate in a country with a culture of deep engagement with news,” he says. “Nikkei’s circulation in print is much larger than that of any U.S. news publisher, even though the population of Japan is well under half the population of the U.S. When Nikkei launched its digital subscription program several years ago, it was a quick success, at digital subscription prices that were the highest in the world.”

Overall, the Nikkei purchase of the FT stands out as strength buying strength, and an aim to make the combination more than the sum of its parts. These are two of the very few news brands that we can be confident will survive and likely prosper well into the 2020s. We can’t say that with much certainty about many other publishers. As Tsuneo Kita put it in 2016, Nikkei will judge the success of the deal over the next 10 to 20 years — not the next 3 or 4 quarters.

Take a look at a few of the top-line numbers at these two significant (if not discussed enough) global news players.

Most noteworthy here is the explosive growth of (expensive) digital subscriptions. The FT, given its global opportunity, has managed significant overall growth, with digital subscriptions now far outpacing its print numbers at their peak. (It sold 504,000 copies a day back in 2001.) Nikkei has largely offset its print losses, doubling its digital subscriber rolls in four years. Both companies have retained their sizable and experienced teams of journalists, considering them the lifeblood of their businesses.

Notably, the FT has begun to find the profitability bonus that should await publishers that become more fully digital. (After all, the marginal cost of 1,000 new print subscribers is real, in terms of paper, printing, and distribution. The marginal cost of 1,000 new digital subscribers is negligible.) In 2018, the FT made a profit of £25 million, up only £500,000 on 2017 — but double what it made in 2016.

In both of the interviews we’ll publish this week, there’s a strong emphasis on technology as a business driver and as a force multiplier. The FT is plainly farther along in most of these areas, but as Nikkei’s Kita told me, as a point of pride, “Probably in the field of AI, we are ahead of them [the FT]. We are doing research and developing AI in Tokyo. So, this is something that we will be able to share with FT.”

Or…both? We’ve got a new breakout of platformitis, as news companies try to figure out their complicated relationships with the dominant digital companies of our day.

As Mark Zuckerberg and News Corp CEO Robert Thomson finished up their conversation at New York City’s Paley Center Friday afternoon, announcing the new Facebook News tab, we can take five big points out of this week in Facebookology. For Zuckerberg, it was the culmination of a week from hell. Just within the past week, he had to juggle: (1) advancing its controversial cryptocurrency, (2) taking down “fake” editorial content, and (3) allowing politicians’ ads with falsehoods to remain. As Thomson said to him in what came across as a fairly softball on-stage talk, “It’s unusual when the amuse-bouche comes at the end of the meal.”

This is a milestone in publishers’ quest to get paid for content.

No doubt, the numbers in this deal get attention.  News Corp, of course, most likely does the best (see “Rupert always rises to the top,” below), with millions in new revenue. These two- and three-year deals (guaranteed, I understand, even if Facebook nixes the program earlier) will send low millions to some national publishers, maybe half a million a year to a relative few local ones, but only the promise of traffic-generating links to many of the 200 or so other (almost all U.S.) publishers in the initial rollout.

Only the Facebook Live payments are at all comparable in terms of cash payments to publishers for content. And those required lots of original work by publishers; these deals don’t.

And that’s potentially a big milestone here. News publishers will now say that when it comes to paying for content, it’s no longer “whether” but “how much.” (Of course they’d like hundreds of millions or billions to soothe their advertising losses to digital disruption.) They also like doing deals where the dollar amounts are relatively transparent, in which the platforms don’t have to bet on revenue shares of subscriptions or ads sold. This is the big story to watch into the next couple of years.

Zuckerberg is already trying to get out ahead of that in multiple ways. “I don’t pretend that any of these steps will be enough,” he told Thomson, saying Facebook itself couldn’t solve publishers’ problem. But with more than $7 billion in profit, that may be a bit of an overstatement. “Can” may be the wrong verb here.

Curiously, though, Facebook isn’t actually “licensing content.” The experience, as we so far understand it, includes a headline and precis linking back to publishers’ sites, all presented in a stream in Facebook’s new News tab. Isn’t that fair use, what aggregators and platforms have been claiming for two decades?

It’s fairly clear that it’s the currency that motivates the publishers, but what’s the value here for Facebook? It may be more than meets the immediate eye. There’s an engagement value, to be sure; news comes from that simple root “new,” and it drives lots of eyeballs. That’s why Facebook and its platform peers all keep taking new tries at the news biz. Eyeballs are good and lead to monetization.

Then, there’s the softer, behind-the-scenes reasons. “It strikes me that they are front-running the European ‘snippet’ idea,” says one savvy newspaper insider.  “We all know that most people are only going to consume the headlines and the snippets, and they’re buying the goodwill of the publishers to participate in the effort.”

Yes, the EU’s taking on of the platforms’ power is starting to inform U.S. behavior. That takes into the political dimension of this agreement, one that somehow got little mention in the Zuckerberg/Thomson conversation.

What looks like an oasis could be political quicksand for Facebook.

Call it a shotgun marriage of convenience, perhaps. The news industry needs money — badly. Facebook needs a better story.

It’s under the gun across the U.S. and in Europe. It just agreed to pay a $5 billion fine for its data privacy violations, and it’s just about impossible to even list all the other fronts of questions. And Elizabeth Warren’s break-them-up campaign has sent a new chill through Silicon Valley.  All the big platforms, the GAFA (Google, Apple, Facebook, Amazon) named years ago,  find themselves in the crosshairs. But given Facebook’s role in the 2016 election and its more complicated “social” nature, Zuckerberg’s company has gotten a greater share of attack.

So this is part PR. Don’t look at the cesspool over there, which we’re cleaning up, says Facebook. Look at all the high-quality news we now proudly pay for. Here’s the new shiny object.

Of course, there could also be this calculation: Publishers may be less inclined to focus on reporting Facebook’s bad side if they see its good one up close and personal. Editors and reporters, of course, would recoil at such a thought, but we can see how Facebook could see it that way — and how it might be right around the edges.

But does Facebook risk marching into new political quicksand Facebook? Remember just three years ago, when Facebook fired its editors who, guess what, curated the news, after Republican House members went ape on them in hearings?

“200 publishers” sounds good. But which 200? The inclusion of Breitbart as a partner (along with the much larger and Murdoch-owned Fox News) has already gotten some on the left fuming. What about preference and placement in the feed? Who decides? Human editors? Algos? Who trains the algos? Round and round we go. It’s a question that a Facebook or any other aggregator can’t answer — unless it’s a journalism company. Which it isn’t.

This is a battle for phone-centric news.

Swipe right? Tap the G icon? Find the new Facebook news tab and touch it? Launch a news app, scroll through Twitter, wait for a news alert? The options for news on our phones can be dizzying. Whose story is this again? How did I get here? Whatever, we think — let’s just read.

That’s the attention battle newly joined by Facebook. Google and Apple both have led with different flavors of news aggregation. While Facebook’s two major competitors here both own most of the hardware, they must still fight their way into readers’ attention. Will the News tab do it, or will it go the way of other Facebook news products, fading away slowly or quickly?

To the degree that any or all of the newest news aggregators — a practice that goes back to Yahoo at the end of the last century — succeed, to what degree are publishers trading their destination businesses for distribution businesses? That’s much more than a monetary question; it’s an existential one. If reader relationship is the gold into the 2020s, what does this new phone-centric aggregation world really portend?

Local remains a stepchild, but a taller one.

“I do think local news has been hit the hardest by these changes,” Zuckerberg said, acknowledging reality. A number of local providers — McClatchy and broadcaster Graham Holdings among them — are in the new News Tab program. Those are largely in Top 10 markets. “Working with the top 200 news organizations in the world” has been Facebook’s first priority. “Figuring out how to work with all the little ones is going to be critical.”

That’s been true for a while and is universally true among platforms. Executing many small agreements does take a lot of time; integrating more feeds of lesser volumes of content is less economical. Especially for companies who like to start their counting of anything — money, metrics — in the billions. Local content may be high value, but it’s low reach. An alert out of D.C. these days can catch everyone’s attention, but local stories are useful to far fewer. That’s where personalization will come in, hopefully.

Rupert always rises to the top.

Rupert Murdoch and Robert Thomson deserve credit for their early and continued drumbeat calling for platforms and aggregators to pay for the valuable journalistic content they use.  And Murdoch, as always, manages to combine wider objectives — like helping lead the industry to get money out of those who have more of it than even he does — with enriching his own company. By most reckoning, his News Corp and Wall Street Journal are receiving the sweetest deal, the greatest payment, from Facebook for this news tab deal. (And the Journal secured one of two top spots in the earlier launched Apple News+.)

Who else are Rupert and Robert talking to, and what may those conversations yield — for them and the industry?

After months of work, I’m happy to begin introducing the new company that I’m heading, named Lookout. It’s a wide-reaching new model for local news; we’ll launch next year.

After 15 years providing analysis of the global news industry, the last 10 of them here, I felt compelled to meld together the best of what I’ve seen and heard — the best of the best practices of the trade — in a way we haven’t seen yet. It’s my opportunity, and my calling at this moment, to take the lessons I’ve learned from many of you who lead and work in the news industry and combine them anew. It’s recombinant news DNA for the 2020s.

As John Davidow, managing director for digital at Boston’s WBUR, recently put it after reviewing Lookout’s plans: “It’s like you got in the cafeteria line, but only took the good stuff.”

We are building a city-embracing mobile experience, delivering knowledgeable topical reporting paired with national content partnerships. We’ll meet our audience where they are, via audio, newsletters, and mobile. We’ll connect journalists and readers in multiple ways. Our reader revenue strategy allows for growing customization. In short, Lookout aims to become a true platform, bringing a national standard of digital execution to local news.

Overall, we believe the successful local news outlets of the 2020s will be the ones that authentically embed themselves into the life of the communities they serve. That’s got to be done both digitally and in the real physical world — you know, those humans around you — so the experience is really shared. And those two worlds have to be connected, through news, city guides, community groups, commerce, reader-driven story creation, and more. Facebook, for all that it does, is just an early way-station on the road to authentic community-driven social activity.

The decade now coming to a close has taught us well that the global internet economy values scale. With Lookout, we believe we can prove out a new truism The internet, locally, can uniquely generate and support new valuable individual, group, and advertiser relationships.

So why am I trying to create a new model and company? I could have just written a book about my ideas — Newsonomics 2020, 10 years after my book Newsonomics: Twelve New Trends That Will Shape The News You Get was published (and excerpted here at Nieman Lab). But the limits of writing and the need for doing have become all too apparent.

I’ve exhorted, cajoled, beseeched, pleaded, and lectured at times, preaching the best practices that I’ve found from the smallest of startups to the global news giants. But the diminishment of local news continues to speed up, the incumbents hobbled by legacy structures. And most of the efforts to fill the yawning local gap — powered by talented and caring journalists — are simply below the scale necessary to replace what’s been lost. One key to Lookout’s model is sufficient editorial and business resources to both make and fulfill a promise to readers in the marketplace.

Nieman Lab director Joshua Benton tells me I’ve written 419 pieces here since 2010. And I’m getting uncomfortably close to a million words here — 903,547 of them before today. I do write long, though usually backed up by ample reporting. Here I ask your indulgence for me to explain a bit about Lookout — based not on reporting, but on months of work.

Digital economics, local focus, necessary scale

“You have to do this,” Walker Lundy, the editor I worked for in the 1990s at the St. Paul Pioneer Press, told me over lunch this summer. Walker usually advises his friends to take early retirement, so I was surprised by the statement. I’ve taken on this mission spurred in part by my unusual constellation of work experience. Lookout will be my fifth career in journalism. At the tender age of 25, I became editor and then publisher of an alternative weekly in Eugene, Oregon. Through city magazine work, years with Knight Ridder newspapers in print and digital, and then as a media analyst, I’ve been able to learn so much from so many news organizations.

Lookout is still a work in progress, and I’ll tell you more as we move toward announcing a launch city, date, and who else is involved. We may well chronicle what we’re doing and learning here at Nieman Lab along the way. In short, though, we intend to offer a local news vision for the 2020s. We want to be part of changing the conversation about what’s possible — and what’s necessary — in the reinvention and revival of new local news institutions.

Lookout recognizes how we consume news today — on demand, at home, at work, in the car, on our phones, in audio, text, and video. Many of us believe that local is as meaningful now as in the heyday of print — but that how we write, present, and deliver local news and information requires a blank-slate start. This isn’t a matter of replicating newspapers digitally.

In fact, we should be able to do more and better local journalism now than we ever have. Consider that a digital-only operation like Lookout will be able to devote about 70 percent of its resources to content creation. The print-based daily model — with presses, newsprint, trucks, big office buildings, and more to pay for — can only afford 12 to 20 percent on content. The digital economics can work if we smartly and appropriately apply the lessons of successful national/global media companies to local ones.

Without the burden of legacy costs and public-company pressures, Lookout can harness the attractive math of digital-only business and the increasingly powerful but inexpensive technologies of our time. Earning our way forward is fundamental to the model.

We believe that new news institutions must stand on their own, earning and growing their own reader and local advertiser revenue. We don’t believe that many local news institutions — as compared to national, state, or regional ones — can do the scale of high-quality work required if they are dependent on ongoing philanthropy.

As a for-profit, public-benefit corporation, Lookout will act with the scale and scope necessary to make readers and sponsors a proposition worth paying for. Our public-benefit structure codifies the centrality of our community service mission. Our for-profit structure allows us to endorse candidates, access capital, and become part of local business communities.

We’re truly digital native, respecting our readers’ intelligence and time to earn a primary place on their home screens. Civic engagement — and betterment — is built into our very fabric. We believe the phone should become a primary tool of democracy, and democracy-building, into what history may someday tell us were the Soaring ’20s.

Everyday democracy

Soaring? That might be hard to believe now, in the final coughs of this exhausted decade, but the means of renewal are in front of us.

I’m not usually at the front of the line in citing popes. However, as Pope Francis described Europe’s malaise in 2014, we suffer from a “weariness” to solve problems. Can citizens, in the midst of messy democracy, find common ground to solve their own problems? Some believe that the wave of nationalism and polarization we see across the world’s democracies is a permanent feature of our societies.

There is plenty reason for pessimism. Our ability to tackle the issues of climate change, affordable housing, education equity, and food security, among many others, seems limited. And yet we’ve never had more knowledge and technologies to address them. What we need to do is activate the democracy, and in that, a vibrant, involved, fair, nonpartisan local “press” is essential.

That need is global. I’ve been fortunate enough to work on the problems of media on four continents. The trajectory of digital disruption differs from place to place, but the loss of local journalism — and its resulting effect on self-governance — is universal.

Back in the 1990s, I invited a young NYU professor named Jay Rosen to Saint Paul. We then practiced, in partnership with Jay, “public journalism.” A substantial part of the newsroom had its doubts, but a crew of dozen or so Pioneer Press staffers seized an opportunity: Do great in-depth series journalism on key topics (crime and safety, intergenerational relations, and more), and then hold public forums to involve the now-better-informed citizenry in seeking solutions.

That’s solutions journalism as we’ve come to know it, done in fits and starts across the country. It’s not new, but like the Internet of yore, it’s very unevenly distributed. What Lookout will ask: How do we build everyday democracy into the very fabric of an everyday news source that readers will check into frequently?

Will it work? Certainly, I’ve run across a lot of skeptics. “Nobody cares much about local news anymore.” “There’s simply no business model for local news.” “Why do you think you can make this work when nobody has?” Indeed, the muscle memory of robust local news is atrophying.

Can it be revived? Yes, if you give it a chance — and enough runway to prove the skeptics wrong.

“It’s amazing how people come up to me on the street, and say: ‘You’re publishing stories about things I never knew about,” Eric Barnes, CEO of the year-old Daily Memphian, told me last week.

We’re appreciative of having the support of the Knight Foundation, Google’s GNI Innovation Challenge, and supportive individuals both national and local as we continue to develop our model and build that runway. In the end, it’s a model, made of digital clay. We intend to get more of it right than wrong.

As we do, we’ll figure out where Lookout, goes from there. How might we expand? Where? How quickly? All that is to be determined. The first job is proving out the ambitious model. Lookout Local, the formal name of the public benefit company, will do what it can to enlarge the notion of what is practical in providing robust modern local news.

Talent + technology

One great lesson of our time: Great companies require talent plus technology.

We’ve seen a remarkable brain drain in the news industry, as digital disruption depleted its workforce, its sense of purpose, and its attractiveness to both journalists and business-side professionals. Talent — hiring it at livable, professional rates — will be one key to Lookout. We must find a way to create a new pipeline of agile, diverse, digital-native journalists serving local communities from coast to coast.

How that talent uses technology will distinguish our successes. There is no question that the 2020s will be a time of unprecedented mixing and matching for humans and tech. It must be talent, with clear journalistic and community purpose, that applies the best tools of the day.

We know what doesn’t work. In this age of fast-expanding news deserts and ghost newspapers, we’re — amazingly — moving back to pre-press times when people largely got their news by word of mouth. And the town criers have a lot of problems telling fact from rumor.

David Rousseau, who heads the impressive and fast-growing Kaiser Health News, offered the phrase “misery index” when we discussed how to parse the worse and worst instances of local news. We agreed that while we could spend time writing that algorithm — deciding what and how we should measure — it’s much better to simply reduce the misery. Rousseau, among many others in the industry, has helped me sculpt Lookout this year, and I thank you all.

The extent of that misery is mind-bending, of course, but sometimes it takes a single phrase to stop us. Retired Guardian editor Alan Rusbridger summed it up most jaw-droppingly: “We are, for the first time in modern history, facing the prospect of how modern societies would exist without reliable news.” We must face down that prospect.

So that’s a preview. You’ll hear more as we can report it, here at the Lab and elsewhere. While I’ll be devoting most of my time to Lookout, I will continue to write on other topics. Both Josh and I are keenly mindful of potential conflicts, so we’ll clearly remind readers about Lookout with disclosure whenever relevant. Certainly, there may also be topics that become off-limits, and we’ll take the high road on those.

Early in my current career as an analyst, Michael Wolff, now famous for his Trump work, acidly defined my role in the news industry. “You’re the necrologist for the news business,” he told me, speaking of the ancients who read the scroll of the dead. Or, in more familiar news terms, a writer of obits.

Like much of what Wolff opines, it had the aroma of truth. He had a point, but I hope I’ve performed other duties as well. As I look to the 2020s, I come not to bury journalism but to praise what it can — and must — do for all of us.

Both companies, the country’s No. 1 and No. 2 newspaper publishers, say it’s full speed ahead. Independent financial analysts tell me that their data-driven analysis shows a 90-percent-plus chance the merger completes. The deal has already gotten the blessing of the Department of Justice’s antitrust division; that approval flashes a very green light to all the other newspaper chains eyeing various mergers and recombinations.

So by New Year’s Day 2020, all the companies’ news products across 265 markets will move under one giant umbrella. Never before in U.S. history have we seen a single company own and manage so much of the American newspaper business — about one of every six dailies. (Both companies are declining comment on the merger’s details at this juncture.)

In other words, it’s been a boffo opening season of The Consolidation Games, the newspaper-industry drama that’s played out in corporate offices, bank meeting rooms, and the stock market since the beginning of 2019 — and which is certain to be picked up for a second series in 2020.

Readers, advertisers, and journalists will feel the reverberations of the Gannett–GateHouse merger for years to come:

• Expect aggressive early moves to begin achieving the $300 million in cost-cutting synergies the dealmakers have claimed to justify the deal.
• More than 10 percent of the chains’ combined workforce — about 25,000 in the United States — will likely get the dreaded call from HR that their services will no longer be needed. How big a cut will that be? If the headcount reduction reaches 3,000 — which would be 12 percent of the workforce — that’s the equivalent of McClatchy’s entire employee count. And McClatchy will be the second-largest newspaper chain in America after this merger is complete.

  New Gannett CEO Mike Reed has emphasized that the coming cuts will come almost entirely outside the newsrooms. Business-side functions — from advertising to production to finance to circulation — will take the brunt of the cuts. Most of the headcount cuts will come in the merged company’s first year, but some will bleed into Year 2.

• Fundamental to those cuts is the adoption of single, uniform systems across the enterprise. Think back to the year-plus of pain that one paper, the Los Angeles Times, went through to untangle itself from Tribune/Tronc’s centralized tech platforms. Now think of how time- and money-consuming it will be to do that across those 265 markets, and you get a sense of the multiyear synergy headache upcoming.

  Gannett and GateHouse each have largely centralized their newsroom tech stacks, with each relying largely on a singular content management system. Those will merge onto one CMS. Merging the companies’ much-touted digital marketing services businesses shouldn’t be particularly difficult, several sources tell me.

  But in most other business functions, a truly motley array of systems still abound. Worse yet, few are cloud-based and run centrally, meaning that even papers using the same software for the same functions are often using different locally installed versions of it.

The calendar ahead

The date to circle on your Consolidation Games calendar is November 14. That’s the day both Gannett and GateHouse shareholders are scheduled to vote on the deal.

GateHouse’s NEWM stock got clobbered soon after the merger announcement, GateHouse down 33 percent over the next three trading sessions. It’s recovered some, but it’s still down 32 percent from the start of 2019. No one is wowed by this deal. It is a marriage of the possible, two partners without many other prospects. Given the ongoing pace of deterioration in newspapers’ operating numbers, that’s the best face even the dealmakers can put on it.

That’s also the pitch to shareholders: You’ll make more money with New Gannett than with either the old Gannett and old GateHouse. Or to put it in the financial speak of the roadshows conducted by the principals to reassure anxious investors: “Nobody has a better path to create value.” That’s shareholder value, of course.

These are two struggling companies seeking short-term salvation — enough oxygen to get a few more years down the road. Taking a $300 million whack at all the “redundancies” in day-to-day operation seems a better choice than going it alone. Sure, it’ll cost $100 million or so to cut all those jobs and rationalize all that tech — most of it in severance. But that’s far preferable, both Gannett and GateHouse believe, than a thousand smaller cuts, atop the thousands both have already made.

Will shareholders buy that argument? The share prices say yes. While there have been several shareholder lawsuits, they look like the sort of attorney-cash-ins common in these kinds of mergers. Experienced financial observers tell me they shouldn’t hold up the deal.

Both Gannett and GateHouse shareholders will get the usual independent advice. Most likely before Halloween, the two major shareholder advisory companies will weigh in with their recommendations on how shareholders should look at the transaction.

ISS and Glass Lewis are now assessing the deal, though they haven’t yet approached the principals with questions. Their recommendations can be somewhat unpredictable; recall the odd call in May to put one of Alden Global Capital’s slate on the Gannett board, a bizarre ISS recommendation during Alden’s failed acquisition try. But both are likely to see the deal logic and say, at some length and in finance-speak, “Uh…okay.”

The companies can close the transaction within just a few days of shareholder approval. Expect that to happen in November, just before or after Thanksgiving.

That’s also when we’ll see the shape of the New Gannett’s new exec team. We know that Paul Bascobert, announced as CEO by (Old) Gannett at the time of the merger announcement has been touring the company’s offices. He touts the value of the deal and the company to come, while of course spending lots of time reassuring workers who see the ax hanging overhead. At the same time, Bascobert is doing his own assessment. Together with Reed, Bascobert’s first order of business will be a profound reorganization of the company.

A new slimmer structure — much more GateHouse-thin than Gannett-like — is on the way. Streamlining is the name of the game. Heads will roll, though a few of the highly placed Gannett ones will be attached smartly to golden parachutes. Gannett CFO Alison Engel will join Bascobert’s operating team, but the guessing game is on at both companies as to which other execs will ascend — and which won’t. The biggest question: the fate of current GateHouse (operating) CEO Kirk Davis, Mike Reed’s long-time business partner in building the company.

The new company’s priorities

All eyes will be on the New Gannett, but it’s tough to say what anyone will actually see.

CEO Mike Reed says he intends to maintain the cohort of journalists now working in both companies. Still, expect some cuts, likely small, in areas like statehouse coverage or regional/statewide sports, due to new regional clustering caused when nearby papers become New Gannett siblings. We can watch whether the company reinvests such resources in the enterprise/investigative teams both companies have built and publicly promoted.

But will there be any new investment? In the product? In the newsrooms? That’s one of the big questions here. The marketplace has not rewarded either company’s products; revenues keep sliding, and subscriptions — print or digital — haven’t nearly filled the gap caused by the great print ad decline.

But the financials in this deal cry out: Repay the debt first.

As I’ve reported, Apollo Global Management may have been the only financier ready to put in the $1.8 billion it took to put this deal together. And in doing so, Apollo was able to demand an 11.5 percent interest rate — an indication of both the risk in the deal and the cold shoulder other financiers gave it.

The impact: On Day 1, the New Gannett will have a mountain of debt to pay off. And the language of the loan allow it to repay it faster than its five-year term without penalty. The faster New Gannett pays off the debt, the less interest it pays, just like any working stiff with a credit card bill. The incentives to make debt payments Priority 1 are clear.

But! Also consider that New Gannett is also promising its shareholders lots of earnings. In its filed financials, the company has painted a rather rosy picture of how it will improve those earnings — despite continuing deep ad decline and the threat of a recession that would likely further pressure revenue.

After they feed debt repayment and earnings, Reed and Bascobert will get to decide where to invest in their new company. How much will they have to work with?

The magic words here are “excess cash flow” — that’s the money the new company will have after it meets its basic obligations. If Reed’s projections will bear out, then perhaps substantial investments can be made. The history of the last few years, though, says there are significant odds against the company having enough cash to transform the business for the next decade — even if there is a strategic vision in place for how to spend it.

Mix-and-match

So where does this outsized deal leave the prospects for others mergers and acquisitions?

Everyone I’ve spoken with close to that question say to expect very little to happen between now and the end of the year.

Looking into 2020, it’s noteworthy how relatively quickly this megamerger got the DOJ green light. The department’s antitrusters could have decried the big regional domination the New Gannett will have in states like Ohio and Florida. (Both pretty important places politically.) But they didn’t.

These same regulators had objected to what was then Tronc’s attempts to buy, separately, the Orange County Register in 2016 and the Chicago Sun-Times in 2017. In each case, DOJ didn’t want one company to own two big properties in a single market (alongside Tronc’s L.A. Times and Chicago Tribune).

In Gannett–GateHouse, there is no single city that hosts papers from each company. (There aren’t that many two-paper markets left, after all.) The clusters this merger will create are more regional. So the DOJ’s Tronc-era standard didn’t apply.

(In Florida, New Gannett will own dailies in Jacksonville, West Palm Beach, Sarasota, St. Augustine, Naples, Brevard County, Fort Myers, Pensacola, Tallahassee, Gainesville, Lakeland, Daytona Beach, Ocala, Winter Haven, Panama City, the Treasure Coast, the Space Coast, and more. In Ohio, it will own Columbus, Cincinnati, Akron, Canton, and more — three of the state’s four largest papers by weekday circulation.)

The pitch to regulators by Gannett and GateHouse attorneys came down to one word: “duopoly.” As in the Duopoly, Google and Facebook, which dominate digital advertising at a scale multiples beyond what even the most mega- of newspaper megamergers could dream of. They made the case that newspapers really can’t control ad pricing in any market, even if they owned clusters of papers adjacent to each other.

It appears DOJ bought that argument. If so, as the next waves of M&A conversations roll forth, would-be buyers and sellers believe they can remove the DOJ review concern (triggered by the Hart Scott Rodino Act) from the table.

(Of course, the DOJ isn’t exactly the same animal today as it was in previous administrations. Makan Delrahim is a former Trump White House deputy counsel who was confirmed as head of the antitrust division in September 2017. In an interview with The New York Times, he “emphasized that antitrust is intended to support free markets and that the government should intervene only when necessary. A monopoly is perfectly legal until it abuses its monopoly power, he said.”)

But it’ll take more than regulatory openness to get more mergers moving quickly. Every other newspaper company sees the same kind of cost-cutting synergies Gannett and GateHouse do. But they also learned a harder lesson from their tie-up: Deal financing, when it’s even possible, is really expensive. Apollo’s 11.5 percent rate is three or more points higher than the refinanced debt other companies such as McClatchy have negotiated recently. With tight cash flow and even tighter cash flow projections, every extra point of interest has a real impact — mostly in accelerated cutting of jobs, including in newsrooms.

Right when Gannett and GateHouse shareholders are voting next month, each of the publicly owned newspaper companies will be reporting its 3rd-quarter financials. There’s little evidence any of those will meaningfully revise the narrative of unending decline. When talk turns to M&A in 2020, the warts of all prospective mates will be front of mind.

So expect that McClatchy and Tribune (which last tried to pair off in December) will dance anew. Lee Enterprises — recently challenged by activist hedge fund Cannell Capital, now the company’s largest shareholder — wants to rationalize its debt; it may welcome a partner. And then there’s always MNG Enterprises — the former Digital First Media and MediaNews Group, controlled by Alden Global Capital, run by Heath Freeman. Like the Joker, it can appear when least expected.

It’s Freeman who Mike Reed can thank for putting Old Gannett into play by pursuing it back in January. As Gannett’s board and leadership anxiously searched for an anybody-but-Heath alternative, GateHouse arrived at their doorstep bearing with flowers of friendship. It took most of the year to conquer the largest newspaper company in America — but what Freeman started, Reed is finishing.

Freeman, of course, probably still found a way to make money along the way. As of June 30, Alden owned 3.7 percent of Gannett. The best guess, say number crunchers, is that Alden made or could make (its current Gannett holdings aren’t yet public) at least a dollar a share. So figure that the Alden will take in somewhere around $4 million to 8 million on the deal — without all the hassle of buying Gannett or figuring out a future for it.

The Medill News Leaders Project, part of Northwestern’s Local News Initiative and supported by the McCormick Foundation, surveyed 54 people working alongside the trenches of local news “with the goal that all will better understand the challenges we face by listening to these expert voices.” (Disclosure: Nieman Foundation curator Ann Marie Lipinski and Nieman Lab contributor Ken Doctor were two of the 54.) Medill faculty and staff conducted the interviews from fall 2018 through this summer on topics from the state of local TV news to the rise of the nonprofit model. Here’s some of the project’s oral history on the future of local news:

What does it mean to be local nowadays?

“To me, local means you’re serving a community. A community of people with a shared identity. And in that regard, the Texas Tribune absolutely qualifies. I mean, maybe we’re more like a regional news organization than we are a hyperlocal news organization, but it works in Texas because Texans have really this sort of shared, deep identity. They have an obsession with Texas. And that’s not something that every state has, obviously. So, to me, it’s about a shared community.” — Emily Ramshaw, Texas Tribune editor

“To me, local has always been the people who know what it’s like to live in my community. There’s a connection to the person on screen to the type of reporting that’s happening. Like I’m not tuning in to find out what’s happening around the world; I’m tuning in to find out what’s happening down the street from me.” — Christine Portela, Univision’s local media director of news operations

“I think there’s something about localization that changes the dynamic around what local news is. We used to throw a newspaper on the front doorstep and it covered the whole area. Now, you may actually be much more interested in the things that are happening more local than that, and we have to figure out what are the right ways to deliver that.” — Andrew Pergam, Facebook’s director of global affairs and former vice president at McClatchy

“I think about really what brings a community together. It doesn’t have to be where you live. I guess it’s kind of like where your heart is, to some extent.” — Mandy Jenkins, general manager of McClatchy/Google’s local news Compass Experiment

What will local news look like?

“Being all things to all people is not really possible right now, if it ever was.” — Ann Marie Lipinski, Nieman Foundation curator and previous Chicago Tribune executive editor

“We’re approaching what I would probably characterize as the death of the 15-inch story. Because if it can’t prove itself to be really worth the investment of time and then you create a really great, rich narrative experience with the interactive graphics and the videos as well as the narrative writing, if the story doesn’t merit that, it really then needs to be in that bucket of being much more utilitarian and much more scannable.” — Randy Lovely, former VP of community news at Gannett

“What I think you’re starting to see is the profound tension between having to produce a printed newspaper, which was designed around advertising, was meant to be relatively shallow, very broad, encompassing lots of different topics, and be of general interest to a community, versus an emerging business model that is geared to developing strong lasting relationships with members and subscribers.” — Kinsey Wilson, WordPress.com president

“If you are not making, especially on a local level, the important news interesting, like if you say the city council is important coverage to have but you can’t find a way to make that coverage interesting, that’s a failure on the news staff. It’s not a failure of the audience.” — Jeremy Gilbert, director of strategic initiatives at the Washington Post

Regionalization cometh — but what’s the model?

“We actually encourage the differentiation in a market-by-market level, because that’s the sweet spot. But what’s happened over the past few years as GateHouse has grown, we have come across areas of common interests. For instance, we were pleasantly surprised when we did a recent audience engagement survey that moved 57,000 responses, and the No. 1 interest among those email subscribers was regional and state news, even above local news.” — Bill Church, senior vice president of news at Gatehouse

“If you look at small dailies and large weeklies, they have done better than metros for the last 15 years. They have more sense of community connection. It’s less about digital. It’s about simply having the kind of content that people want and can’t get any other place.” — Ken Doctor

“Everybody has made digital subscriptions their top priority. And we say the jury is out on whether that’s a sustainable business model for small-size newspapers. We don’t have a model to point to yet that says it is. We think it’s a no-brainer for the national players like The New York Times, The Wall Street Journal, and The Washington Post. We think the large regionals, as we call them, the Boston Globe, Seattle Times, no-brainer. Beyond the top 10, we don’t know….If you run the numbers, and the price of the subscription, and how many they would need to get, and how much work it is to get those, it’s really hard.” — Nancy Lane, president of the Local Media Association

The full report is available here.

There’s the megamerger, and then there are the numbers: $1.8 billion, 11.5 percent interest, 5 years, $300 million, 18 percent…and many more.

Investors, industry observers and wags have picked through the pieces of the Gatehouse/Gannett megamerger this week, and obsessed over those numbers. All to the question: Will this deal work?

That’s the financial/operational question here, easier to prophesize than the democratic one: What will be the impact in the hundreds of communities that are used to having one major (if flagging) daily serve their basic news and information needs?

The two — financial success and journalistic capacity — should tie together, of course. How they do is one of the great mysteries of this merger. How much money exactly will be saved, and what exactly will it be spent on?

That’s where these big numbers drive the conversation, occupying all the oxygen in the room, and obviously caused great palpitations on Wall Street.

Gannett’s and Gatehouse’s (ticker symbol NEWM) share prices both stabilized somewhat on Thursday, after the latter took a 30-percent-plus dive after the merger announcement. Both companies’ shareholders — and the same top institutional shareholders own lots of both companies — continue to reckon with the reality of the deal.

That led to some apparently premature alarm that the deal would go quickly south, but it had appeared through this week that the investors who bought in as the price took a dive supported the deal and wouldn’t oppose seeing it completed. Among the big players: Leon Cooperman, chair of Omega Advisors, continues to increase his NEWM stake, as others have sold.

On Friday morning, though, this drama took a new turn.

The dealmakers face a new — though known — fear: Alden Global president Heath Freeman. On Friday morning, Alden, through its MNG Enterprises newspaper chain, filed with the SEC, announcing a 9.4 percent stake in NEWM. The stated reason for its large purchase: “The Reporting Persons are evaluating the terms of the Merger Agreement and believe that the consummation of the Merger may not be in the best interest of the Issuer’s shareholders.”

What might Alden — which saw its hostile bid for Gannett defeated in the spring — now do?

The filing hints at loose threat: “Accordingly, the Reporting Persons reserve the right to take certain actions with respect to the Merger including, but not limited to, undertaking to vote against or campaign against the Merger and to propose or suggest strategic alternatives other than the Merger.”

What’s Alden’s real play here? It’s likely more than the spurned Heath Freeman spitting in the soup of the megamerger.

Will he come back with a new all-cash offer, if this deal continues to be met with skepticism from investors, who drove down NEWM stock by more than 10 percent again on Friday? Is he just trying to force the hand of Softbank, the parent of NEWM manager Fortress, to invest, raising the share price, and profiting Alden in the short term? Does he sense that if this megamerger goes through, his MNG Enterprises will be left lonely on the sidelines of the Consolidation Games dance hall, unable to find a suitor?

Softbank may indeed be entering the fray and supporting the deal, word on the street says. Expect numerous other moves in this chess game, which could go for months. Remember, shareholders won’t vote on the deal until late in the year, pending regulatory approval, so the jockeying could well intensify.

Meanwhile, NEWM CEO Mike Reed will be doing everything he can to save the deal. Five days after the deal was announced, a consensus has evolved: He could have done a better job to sell the story of the business synergies of the deal — and to justify the huge, high-priced debt burden the megamergered New Gannett would take on.

The question, then again, of the moment: Is this the best future for these companies?

“Look, it’s the best deal we could get,” one insider told me this week. And that, in a nutshell, sums it up. This current deal is far from ideal for either company, or its shareholders, or its employees, or its readers. And for Gannett, it’s better than being captured by Freeman.

For Gatehouse, it’s the best available alternative as the company has hit a strategic wall, its $1.1 billion-fueled acquisition-heavy strategy and good dividend no longer wowing investors. Fortress Investment Group, the money and strategy behind Gatehouse’s gargantuan growth, saw its next opportunity. It seized it — and now the private equity company will continue to manage the big merged company for the next two years, through CEO Mike Reed, its key employee (more details on that arrangement below).

As the newsprint dust settles, let’s take a quick look at the numbers and a couple of other points that now populate the industry conversation.

The Numbers

$1.792 billion: That’s the immediate financing in this deal. Led by Apollo Global Management, consider this huge sum of money a “bridge loan,” say those involved in the deal. As a bridge, it’s a costly one, set at 11.5 percent interest. Significantly, there’s no penalty for paying off the five-year note early refinancing it.

That’s a key part of the financial logic here. Apollo supplies the massive financing of this deal at 3.5 times or so the companies’ earnings; that’s a deal that doesn’t come cheap, so 11.5 percent is the best rate Gatehouse could get to get the deal done now. One reason that bigger Gannett isn’t the acquirer: it didn’t have the juice to get the financing.

That means that for the next couple of years, the New Gannett will be driven to pay off as much of that debt as possible. If it can get the debt down to two times earnings, then it can refinance at a more palatable interest rate of 8 percent or less. (That’s what McClatchy is paying in its latest refinancing.)  That would save the company millions in annual costs.

Apollo is is no stranger to the newspaper industry, and is described by those who know it as the keenest follower of the trade. While in its 2015 failed bid to buy Digital First Media, it intended to launch an aggressive digital-first strategy, its role here is simpler: financier. With its senior position in the deal, it could come to own the New Gannett if it defaults. For now, though, it will just rake in short-term dollars.

The other link to remember: Apollo and Fortress Investment Group.

“Remember, lots of banks were in on the reviewing deal,” says one significant holder of Gannett shares. “And no one would finance it.  It took Apollo and that high rate to get the deal done.”

Another said, “Without Fortress and its influence on Wall Street with the money it spreads around, this deal wouldn’t have worked.”

That’s pivotal to understand in this megamerger and to remember as we contemplate a McClatchy/Tribune merger or others. It’s really tough to get financing for an industry in such structural decline.

$300 million: That’s the annual cost savings synergy number that CEO Mike Reed is aiming for, as he announced $275–300 million as a target. Subtract $100 million or so the first year, due to lots of severance costs in reducing business side headcount and buying out of duplicative vendor contracts. Reed has emphasized that the $300 million is “only” 7.5 percent of the combined companies’ expenses, a lesser percentage than other merged companies’ executives have claimed.

That’s the big key to this deal: massive savings in combining two big companies, which then buys time for the digital transition solutions.

The savings, most observers believe, are real. The question is where do these savings go? Think Let’s Make a Deal’s three doors:

• Debt repayment. A must, of course, with that added incentive of getting the principal down for a cost-saving refi.
• Dividend: New Media Investment knows it needs its dividend to keep shareholders happy.
• Reinvestment in the business.

For a company whose revenue is only about 25 percent digital, the massive heavy lifting of “digital transformation” lies ahead. Witness the expense of those who are farther along nationally, led by the New York Times, Washington Post and Wall Street Journal. Major reinvestment in both technology and talent have led the way. The new Gannett is much closer to the beginning of the digital transformation process than the end. That’s expensive.

So, the big question: With the major savings, especially after the first year (given the cost of getting those savings), how much money will go to each door? There’s already tension between the two companies on that question, as the deal proceeds with regulators, with Reed more focused on debt reduction and old Gannett on transition, say sources.

And the bigger question behind that: What’s the New Gannett’s theory of the case? What will the largest local news company need to do and be to be successful in the 2020s? Neither Gannett nor Gatehouse has offered any big vision of what that is, or could be, even fueled by new money. We know Heath Freeman’s theory: Local newspaper companies are a lost cause, so milk them ‘til the cows are dry.  What is the New Gannett’s theory?

Is there a plan to broadly embrace cutting of print days, as much of the industry models that idea? Is the combined digital marketing services business of New Gannett its primary commercial strategy? Can it make a bigger revenue stream out of Gatehouse’s industry-leading events business? Will the USA Today Network find stronger legs — in both digital ad revenue and shared national and investigative reporting — as Gatehouse properties are added to it?

We’ve heard no grand pronouncement about reinventing local news in the 2020s. If, say, The New York Times or Washington Post were the party bringing these two companies together and offering a grand turnaround future, we’d see a story that would capture imagination.  This story, one of economy, mainly registers shrugs.

18.5 percent: That’s how much print advertising was down, year over year, in this week’s announced second-quarter financial reporting at Gannett, with overall revenues down 9.9 percent. That number multiplies the difficulty of the math of this deal. If revenue were at least flattish, CEO Mike Reed could allocate those savings more easily through the three doors.  But it’s not.

The Monopoly board on which this strategy is being executed is shrinking as the game is played.  (Even Gatehouse, usually the best performer on a same-store basis the last couple of years was down 15.3 percent in print ads and 6.9 percent overall in the second quarter. McClatchy followed the same trend on Thursday, down 18.7 percent in print ads and 12.6 percent overall.)

In a deal that is all about cash flow, the merger partners face the fact that, on an operating basis, too much cash is flowing … backward.

263: That’s the total number of current daily operations now reported by the combined companies, but expect that number to change in 2020. First, the companies have to see what they must do to win the Department of Justice antitrust division’s approval of the deal. They’ve hired attorneys with DOJ experience to expedite the process and don’t expect big issues, given that they don’t own titles that go head-to-head in the same market. The antitrusters could take a wider view of regional price domination, but aren’t unexpected to.

At least for appearance’s sake, Gannett and Gatehouse might offer to sell some properties in areas that may seem monopolistic.

There’s one more good reason for the new Gannett to sell some properties: Cash, to repay that Apollo loan. The new Gannett will focus heavily on areas where it has great geographic domination — Florida, Ohio, and Wisconsin. After those, look for possible sales of properties that stand alone in their areas and may be prized by other publishers, who can themselves “cluster” newspapers together. That’s one arena in which the 2019 Consolidation Games may play on.

One thing Mike Reed will certainly do: Sell some of the surviving real estate sitting under Gannett properties. That, too, will bring quick cash.

Beyond the intriguing numbers, here are a few more questions:

Why the two-company structure? Observers of the Seussian corporate structure outlined in the merger announcement wonder why it’s being constructed that way. A set-up for further acquisitions, perhaps?

The reality is simpler. The new Gannett’s new corporate structure looks strikingly similar to New Media Investment Group/Gatehouse’s current one, and for a good reason: Fortress Investment Group, which bred the big Gatehouse, remains in the driver’s seat of the new Gannett. It’s no accident that NEWM shareholders retain 50.5 percent of the new company’s shares, with Gannett getting the minority 49.5 percent. That enables Fortress to maintain control of the board and the company.

Fortress, which brought Gatehouse through bankruptcy and assembled pools of acquisition capital in a market hungry to sell, gets to stay in charge of the new Gannett through 2021. Fortress, now owned by Japanese conglomerate Softbank, negotiated through last weekend to get its due in this deal.

Back in 2013, Fortress began taking hold of Gatehouse Media, out of bankruptcy. Its management contract to run the new company through CEO Mike Reed, a Fortress employee who became its Grand Acquisitor, enabled it to run the table, spending more than a billion dollars buying dailies and weeklies from usually long-time newspaper owners, many of them families, increasingly desperate to get out of the business.

Then, Fortress, seeing the business run into a wall within the last 18 months, and unlikely to find new money to make smaller acquisitions, smelled money in the chaos of Gannett. Though it only owns 1.1 percent of Gatehouse, through this deal, it protects its position quite well.

In documents filed with the Securities and Exchange Commission, Fortress’s continuing role is clarified. Essentially, the new Gannett, like the old Gatehouse, operates under the parent company — operated by Fortress, with Mike Reed, the new combined company’s CEO, still an employee of Fortress through the end of 2021.

“It’s extraordinarily odd,” said one significant investor in the company, speaking of the CEO of a public company being employed by a PE firm.

Fortress took in $21.8 million for its management of Gatehouse in 2018, and stands to make a similar sum for 2019. The merger agreement adjusts Fortress’s role and finally ends it in December 2021. We can see some of the financial/contractual adjustments in the filing, but it doesn’t provide a complete picture.

We can estimate that Fortress will earn at least its $20 million annually, if not more, for the next two years. In exchange for ending the agreement, Fortress gets 4,205,607 shares of the new Gannett stock, sellable at the end of 2021. Further, it is granted options to buy 3,163,264 shares of new Gannett stock. (“These options will have an exercise price of $15.50 and become exercisable upon the first trading day immediately following the first 20 consecutive trading day period in which the closing price of the Company Common Stock [on its principal U.S. national securities exchange] is at or above $20 per share [subject to adjustment], and also upon a change in control and certain other extraordinary events.”)

“Let no one ever say that you can’t make money in the newspaper business,” one industry veteran observed this week.

And, yes, this reality: It is a private equity company that will manage — through newspaper veteran executive Mike Reed — one-sixth of the U.S.’s daily newspapers for the next two years.

How much smaller will the New Gannett be in a year? By the end of 2020, it will be likely be significantly smaller. Consider that about $75 million could be paid out in severance funds, as headcount — the big cuttable cost center of newspaper companies — gets reduced.

As we’ve noted, most of those cuts will focus on the business and production part of the enterprise. Two corporate headquarters become one at Gannett’s McLean, Virginia, location. Every division and process will be under scrutiny as surviving managers aim to cut $300 million. Fewer printing presses, fewer middle managers, elimination of redundant technologies.

Speculation has begun, of course, about who and what will survive in this process. Some think that Gannett, even though it was acquired, may exert more staying power than one might expect.

Undoubtedly, it’s going to be complex. Gannett has invested multiples of millions more than Gatehouse over the years in systems of every kind, from content management to ad serving to subscriptions management — and has more middle managers supporting them, though those ranks have seen lots of cutting in recent years. Already, some key Gatehouse managers are rankled at the perception they may lose out.

The top two executives in this new company will set the tone for all the coming cuts, and CEO Mike Reed is no stranger to efficiency management. He’s got a new partner, Paul Bascobert. Gannett named Bascobert its new CEO at the same time it made the merger announcement. The company had been courting him for awhile, and Reed agreed to take him as a #2 as the deal solidified. Alison Engel, Gannett’s CFO, will move to that job at the merged company.

Bascobert isn’t the household name that Gannett had hinted at in the long months of its search after CEO Bob Dickey announced his retirement in December. But former associates describe him as a solid, experienced executive. At Dow Jones, one of his key positions was streamlining the company, and that talent will come in handy as the next year is consumed by the most judicious cutting the company can accomplish.

Second, he’s got experience in one key area of company growth: digital marketing services. Both companies have touted their services (LocaliQ for Gannett and Upcurve and ThriveHive for Gatehouse) as routes to a turnaround future. Bascobert led Yodle, an early market services independent that competed with ReachLocal and was later bought by Gannett.

Putting together those marketing services businesses will be complex but it’s clearly in Bascobert’s comfort zone.

The big name missing from the merger announcement: Kirk Davis. CEO of Gatehouse Media and the clear #2 to Reed, Davis is his boss’ long-time business partner. Many read the absence of his name in merger announcement as a sign he’s out, though that may be premature.

(Of course, scale is relative. The merged company would control an unprecedentedly large share of American newspapers. But those newspapers, even when bought in bulk, are far weaker than they were in the industry’s glory days, with shrunken revenues, circulation, and influence. And no matter how big its combined digital audience, the new company’s share of attention will still be no match for Google, Facebook, and the lesser nobility of digital advertising. It’s a very big slice of a much smaller pie.)

As the company that has achieved the long-sought rollup of the daily press, the new Gannett will exert a profound impact on the news industry itself, hundreds of communities, millions of readers and on the very future of the craft of journalism.

This merger produces a new cascade of questions. The first: What are the next dominoes this transaction sets up in the consolidation of the newspaper industry this transaction? Eyes are focused squarely on McClatchy and Tribune, though both Lee Enterprises and MNG Enterprises — the latest name for the collection of papers owned by Alden Global Capital — are also drawing attention. Back in January, I dubbed the industry-wide urge to merge the 2019 Consolidation Games, and this deal certainly sits atop the medal podium just past mid-year.

The deal itself still looks to be along the lines I outlined two weeks ago — designed to generate $200 to 300 million in annual cost savings in an effort to give them more time to “figure out their digital transition,” as they like to say.

GateHouse, through its New Media Investment Group (NEWM) holding company, is the acquirer. That’s surprised many observers, given Gannett’s greater circulation, cash flow, revenue, and market cap. But New Media — led by the industry’s grand acquisitor, CEO Mike Reed, and having the deal energy and resources to bring the financing together — is squarely in the driver’s seat.

Gannett’s shareholders (with 114 million shares outstanding) will receive $6 or more per share in cash, plus shares in the new company, adding up to a price in the $12 range. That’s a little more than a dollar over Gannett’s Friday closing price of $10.75, but it’s four dollars a share more than the $7.90 Gannett was at before investors learned the deal was likely and speculated the price up.

(My efforts to reach both companies for official comment this weekend were unsuccessful.)

But there is one new big player in this story: Apollo Global Management, the private equity firm which will lead the financing of the merger, sources tell me. Apollo’s name had been heard around the industry for a while, most prominently four years ago when it came close to buying what was then branded as Digital First Media from Alden. That deal fell apart at the last minute over price. (If you’ve seen Apollo in the news lately, it was likely in the context of its founder distancing himself from the sexual predator Jeffrey Epstein after a financial relationship spanning more than a decade.)

In this deal, Apollo is supplying much of the money to get the deal done, with financing that sources tell me could approach $2 billion and a major debt service to match in 2020 and beyond — limiting how much any cost savings can be invested into newspapers’ future. Financing in the merger must both pay off Gannett shareholders partly in cash and essentially refinance both companies’ debt. That debt, after cash on hand is subtracted, amounts to about another $1 billion. In its would-be DFM deal in 2015, Apollo saw itself as a strategic consolidator with a game plan throw the switch from print to digital more rapidly. (It’s worth re-reading my story Thursday on newspaper companies’ increasing plans to stop printing their products seven days a week.)

Mike Reed will be at the reins of the new company as New Media acquires Gannett. (“Acquisition” and “merger” are roughly synonymous terms in this transaction.) This deal represents his ascension to the top of the trade, reinforcing what he told Nieman Lab readers last year in lengthy interview: The rollup of the newspaper industry is inevitable. Reed built the GateHouse behemoth out of bankruptcy with strong financial backing, including lower-cost access to capital from the Fortress Investment Group. For its efforts, Fortress has already been rewarded well, taking in $21.8 million in management fees and incentive payments alone in 2018. Dealmakers in this merger face the financial reckoning of buying out Fortress’ contract; that’s been one of the last sticking points in final valuation talks, say sources.

So what will this new company, a supersized Gannett, look like? Don’t expect an unveiling of the daily operating head of the company (presumably someone reporting to Reed) when the deal is announced. Instead, sources tell me they’ll point to further announcements down the road as it moves through the regulatory approval process.

Will the feds quickly approve the deal?

The agreement does indeed require federal approval, with a HSR (Hart–Scott–Rodino) review for antitrust purposes ahead. Department of Justice antitrust review is unlikely to prevent the completion of the deal, but it could take it through some unanticipated turns. Tronc/Tribune found itself stymied by DOJ’s antitrust division in two deals — one for the Orange County Register, the other for the Chicago Sun-Times — a couple of years ago. Those two cases focused on claimed monopolistic limitation in regard to advertisers and/or subscribers in a single market. (In these cases, from uniting the L.A. Times with the Register or the Chicago Tribune with the Sun-Times.)

But GateHouse and Gannett’s holdings, as numerous as they are, may not be considered as competing head-to-head in any single market. The big question is how DOJ will look at the substantial regional clustering of properties this deal would bring. In south Florida and in Ohio, for instance, the regional clustering of Gannett/GateHouse papers would be profound. But it’s that sort of clustering there in many places across the country that drives the cost-saving synergies that form the entire financial purpose of the deal.

(In Florida, a combined company would own dailies in Jacksonville, West Palm Beach, Sarasota, St. Augustine, Naples, Brevard County, Fort Myers, Pensacola, Tallahassee, Gainesville, Lakeland, Daytona Beach, Ocala, Winter Haven, Panama City, the Treasure Coast, the Space Coast, and more. In Ohio, it would own Columbus, Cincinnati, Akron, Canton, and more — three of the state’s four largest papers by weekday circulation.)

Will DOJ take a stand on such regional clustering? Will it find that print advertisers could be priced unfairly? Will it make an argument that the continuing spikes in the price of a print subscription is unfair to those print readers who remain? One fundamental determination: Do weakened newspapers, even if merged, really still have the ability to dominate a market to an extent that would be unfair?

Also: Since this is the first deal to create a truly national newspaper company footprint, might DOJ consider national market domination along the same lines?

Neither GateHouse nor Gannett expect such review to be a major stumbling block. Failing that kind of unexpected outcome, expect the new company to be ready to set up shop by January.

If DOJ expresses concern within its first 30-day review period, the new Gannett could agree to sell off a few titles in contested locations. It’s also quite possible that Reed has already anticipated such sales, both to satisfy DOJ and/or to reduce the debt necessary to get this deal done. Other newspaper chains would likely be interested in buying individual properties that could help them cluster.

Watch the dominoes

Will this announcement push others back to the merger table?

Close observers of the industry now expect the Tribune board to feel more pressure to make a deal. Tribune, along with its past pursuer McClatchy, is one of several companies set to report earnings this week. With the GateHouse/Gannett deal, Tribune loses a potential dance partner. Tribune/Tronc had a long and often bitter battle to tie up with Gannett (a deal semi-negotiated last summer). That presumably leaves it turning its eyes back to Sacramento, where McClatchy will likely be prepared to pitch another iteration of a deal.

McClatchy may well be able to shave a dollar or two off of its rejected December offer and get a deal done. The continuing stumbling block, sources say: Michael Ferro, whose group still controls a quarter of Tribune and who nixed the December deal. Both companies’ need consolidation for the same reasons Gannett and GateHouse do: cost savings to buy time.

(Observers noted McClatchy’s recent filing of a “waiver” request with the IRS to put off payments into its underfunded pension fund and wondered whether it is a sign of financial weakness. That filing indeed indicates tight liquidity, though that barely counts as news for McClatchy, which has been managing down/deferring its still-substantial debt pile of $816 million. While these tight finances do point to the short-term value of merger, they don’t likely indicate an imminent issue. History will note that McClatchy, unlike GateHouse and Tribune, never declared bankruptcy in the aftermath of the Great Recession. Neither did Gannett.)

Then there’s Alden. As I wrote earlier in the year, it probably stands to make some money off its supposed hostile takeover attempt of Gannett in January, depending on how much Gannett stock it retains. Alden president Heath Freeman, vilified as he is in the press, appears to have worked a successful strategy. Did he ever really intend to buy Gannett, as clumsy as his effort ended up being? Or did he just want to put it in play — as he clearly succeeded in doing — to make some money on the Gannett share holdings he had?

So what does Alden do now with its MNG papers — especially in California, where it owns more than 20 papers, including in San Jose, Oakland, Orange County, Long Beach, and Riverside? Will it find a new partner, or some other way to exit the struggling business? And then there’s Lee Enterprises, itself dealing with debt-refinancing issues and maybe another company to add to the would-be consolidation mix.

Where will the $200 to $300 million in synergies come from?

For the journalists inside what will become the new Gannett, and for their readers, the immediate future is hard to chart. Financial realities drive this deal — and that means cutting. We’ll hear the two companies talk about synergies in that $200 to 300 million range. How do those numbers work?

At the low end, “figure $200 million minus $100 million the first year,” explains one savvy financial insider. “It will cost them about $100 million in severance-plus to get the savings they want. Then there’s a savings of $200 million net a year.”

But wait: That might sound good if newspaper revenues were stable. They’re not, expected to drop another 5-plus percent in 2020 and likely continued decline after that. That could add up to another $100 million vanished from top-line revenues in 2020.

Where will the synergistic efficiencies come from? In order, consider these the sources:

• Corporate and shared services. Two big public companies turned into one can save tens of millions in costs. Finance, HR, technology, and more offer lots of cost savings as two systems become one.
• Old iron, the rationalization of printing, production, and distribution facilities. Already underway all across the industry, this deal enables the next efficient mapping of the old means of production. (And, yes, that means still earlier deadlines for those print readers, with 36-hour-old news becoming a front-page standard.)
• Ad and digital marketing services combinations. Expect cuts and a combination of both traditional ad sales forces and those in the companies’ newer digital marketing services (Gannett’s LOCALiQ and GateHouse’s ThriveHive and UpCurve) that both companies have pointed to as growth drivers.
• Vendor savings. Gannett is already the industry’s savviest buyer of newsprint and ink. More scale means even better materials pricing.
• And yes, newsrooms. Both companies understand how thin their editorial staffing has become and how that complicates the sale of digital subscriptions. But expect more editorial consolidation as well. Regional clustering — another big movement I’ve covered — will mean more consolidation of top regional editorial management positions, and the companies have two major shared design/editing operations to combine in some form.

Let’s remember: These synergies are the point of the deal. But the financing required to put the deal together means paying off a lot of debt — up to that $2 billion number. That could cost the new company something in the neighborhood of $150 million or more in annual debt service, given the high rate of interest Apollo has likely extracted in its term sheet. That annual payment will significantly constrain the new company’s ability to invest in its future — remember, that “digital transition” they keep talking about.

As this deal get finalized and then dissected — by the market and by those who care about local journalism — we’re left with this point from one in-the-fray source to ponder: “If executed well, this company will be much more likely to lead to the further rollup of the industry.” The further rollup.

The merger of GateHouse and Gannett is not the checkered flag at the end of the race. It’s more of a starting gun.

That’s now more than an academic question. Many publishers — if not most — are now seriously modeling and planning for the transformation of their businesses from seven-day newspapers to something…less, numerous industry sources tell me. And not just a little less — significantly less.

Blame Google and Facebook, blame tariffs and newsprint costs, blame Amazon and Uber for hiring away would-be early-morning newspaper deliverers — it makes little difference. We are on the brink of seeing major cutbacks in daily delivery and daily printing of newspapers, as soon as 2020.

“It is one of the top topics of discussion in the boardroom,” says Peter Doucette, managing director of the Technology & Media Practice for well-used news industry consultant FTI. “The current operating model is under duress like we’ve never seen before. Our point of view is that the daily morning distribution model is no longer going to work in a three- to five-year timeline. That’s broad, of course, and dependent on market.”

“Publishers have been focusing on growing net new digital subscribers” — see Nieman Lab director Joshua Benton’s piece on the difficulty doing so at the L.A. Times — “but they need to think of the transformation event — cutting distribution days — and the effect of moving print subscribers to digital subscribers.”

In essence, Doucette — who joined FTI a year ago after leaving a high-profile role as chief consumer revenue officer for The Boston Globe’s industry-leading digital subscription initiative — is urging publishers to think bigger. That’s the drama playing out in almost every city large and small: timing that inevitable “transformation event” when the seven-day daily moves into a museum somewhere.

What can publishers — under great financial pressure to make shorter-term decisions — do to make this dramatic move from print to digital something more just the next stage of decline for the business?

While dozens of newspaper titles have cut Saturdays (creating a single weekend paper, something the Europeans have done for decades) or Mondays, this next cut would be far more impactful. The big question now on many corporate tables is whether the right number of days to kill is five or six.

There’s the 7/1 model. That’s basically the Sunday print paper — where most of the ad revenue is still generated — plus digital the rest of the week. Newspapers have been pushing “Sunday + Digital” offers to readers hitting paywalls for years now, and you’re going to see it a lot more — except often as the only home delivery option, not the skimpiest one.

There’s the 7/2 model. That’s Sunday plus one weekday — maybe a food-heavy Wednesday stuffed with supermarket ads. (That’s a phenomenon that remains in some markets but has vanished in others.)

And, more conservatively, there’s 7/6. That’s what McClatchy piloted this spring at its South Carolina paper the Myrtle Beach Sun News, which I detail below. 7/6 saves a lot less in the physical costs — newsprint, printing, trucks, delivery — but it’s a way to take one step into the transformation process rather than jumping in all at once. And it’s a test: If you break the longstanding bond between the sun rising in the east and papers hitting doorsteps, will enough advertisers and subscribers accept it to make the economics work?

These are the key metrics publishers are modeling to see if they can get from here to there:

• Can they retain 80 percent of more of print ad revenue by moving weekday advertisers into Sunday and/or one other day?
• Can they keep circulation revenue roughly flat while substantially reducing costs? In these models, subscribers typically pay a little less for fewer days than they paid for seven — but not a lot less. Publishers are aiming to keep between 70 and 90 percent of their seven-day circulation revenue.
• Can they improve their earnings/EBITDA by some multiple of a million dollars per market?

A movement away from daily print, of course, isn’t unexpected. With all the high-level speculation about “the end of print,” it’s been clear for years that we’re heading toward a weekly-plus model. The big weekend paper — on a day when people have time to sit and read — has had much more staying power than the thin weekday editions that people struggle to squeeze into their busy mornings before work.

But the important questions remain (1) timing, (2) execution, and (3) what these newspaper companies, their readers, and their communities will gain and lose in the transition. Rush into the transition with only haphazard prep and it could be a death knell. Get it right and publishers can at least buy some more time to try and stabilize their businesses.

Smiling at all this are the companies that have been publishing weekly newspapers for decades. They’ve long argued that weekly print is a better match for a world gone mostly digital. There’s little doubt that the economics tend to reinforce that view. But at the same time, the impact of a local daily paper on American communities cannot be overestimated.

So how fast is this going to happen?

Doucette says he “would expect some publishers to start experimenting in 2020. The time horizon is 6 to 18 months. You are going to see publishers trying ‘less than daily.'”

If this is mostly about cutting Mondays and Saturdays — the thinnest and least profitable days for the vast majority of newspapers — the disruption may be kept to a minimum. Seeing a lot of well-known titles drop all the way to 1 or 2 print days would be different. After talking with multiple sources, I believe we’ll see that “transformation event” coming sooner than later — but the more incremental cutting will probably be the main early trend.

The economics of habit

Publishers’ biggest fear is that there’s something holy about the seven-day habit that has long bound together newspaper companies and their most loyal subscribers. Once you tell readers they have to live without a newspaper some days, will they decide they can live without it everyday?

Can you rely on establishing a new print-some-days, digital-some-days habit in a subscriber base heavy on older readers? Newspapers still depend on an incredibly loyal set of septuagenarians who have been asked to pay as much as $1,000 a year for the privilege of reading what has often become a very thin product. Will forcing them out of their daily habit just speed up the industry’s downward spiral?

At least part of the response will be driven by how the move is viewed by those customers, which comes down to how the newspaper is viewed. Is it a group of civic-minded business people working to maintain some semblance of a free local press in a time of great national duress? Is it just a bunch of blood-sucking, hedge-fund-backed operators with no interest in the community and whose eventual departure from the scene will let something better take its place?

Is it part of an industry truly teetering on the edge of existence? (Several sources estimate that as many as 100 of the more than 1,200 daily newspaper titles in the country have fallen into unprofitability but have kept it hidden. Consider the overnight demise of The Vindicator in Youngstown, Ohio, whose owners acknowledged only two profitable years out of the last 22!) Many publishers figure that as many as five or six days in their current publishing week are unprofitable on a standalone basis.

Of course, reality is nuanced. There are indeed a few black-hatted villains, happy to bathe in their villainy; there are a few (too few) white hats too. And there are a lot of people trying on various shades of gray headgear, having a hard time finding a workable fit.

Profits have shrunk dramatically, but by most confidential estimates, the earnings that remain still add up to well over a billion dollars a year. That’s a humbling number for an industry that once took in many multiples of it. But it is, nonetheless, profit, which in business usually can fuel sustainability and at least the possibility of growth. (In any event, a lot of those earnings still go to pay down the debt load accumulated by a previous generation of executives.)

Ken Herts — the director of operations at the Lenfest Institute and a newspaper veteran who talked to many in the industry about day-cutting models — sums it up colorfully: “Many newspapers are like boats at the top of Niagara Falls. Some have more power to pull away than others, and some are closer to the edge. But the strong currents of print decline affect them all, and they need to move before it’s too late.”

The business-model changes required for this print-to-digital transition have befuddled newspaper publishers for more than a decade. Print is still where most of their money comes from; how can they preserve all those great print ad and circulation dollars and build a digital business big enough to support any semblance of truly community-serving newsroom?

Thus far, nothing’s worked. Instead of any radical shifts, perhaps understandably given human nature, we’ve seen straddle after straddle. Some admixture of maintaining what might be enough of print while investing what might be enough in “digital.”

That straddle is what’s coming to an end. Here’s how one industry executive who has day-cutting modeling sums up the arithmetic: “”Everybody knows that print costs don’t come down linearly with volume [the decline in number of copies sold, printed and delivered.] They come down in stair steps when you close press lines, remove truck routes, and take out big cost elements.”

And that’s where a ledger full of logistics kick in — and where you’re reminded that newspapers have always fundamentally been an industrial business, one that buys dead trees and ink by the barrel, one that uses big iron to assemble and trucks to deliver packages of content, at a large scale and on a regimented schedule.

Take the printing press, to start. If a newspaper publisher still owns one, it has pay for an at-least-close-to-full-time staff to operate it. Justifying that requires volume — either a publisher’s own paper, lots of contract printing, or both. (Those still operating presses may have developed a rich in-sourcing business that’s worth maintaining.) That’s why killing one or two print days doesn’t save that publisher much money; the fixed costs will remain stubborn.

If a publisher has already outsourced printing — and can get the external printer to offer a good price on what will be less business — it has more flexibility to cut.

Beyond the presses themselves, contingencies abound. In a Twitter exchange this week, Nieman Lab director Joshua Benton and Community Impact Newspaper publisher John Garrett got into a discussion on day-cutting.

I wish daily newspapers could skip over the "three weirdly spaced print editions a week" stage and go straight to the "one kickass weekly print edition" stage they'll need to get to to make it

— Joshua Benton (@jbenton) July 29, 2019

Sounds simple enough. But its impossible. Even the @nytimes has 40% of their revenues tied to print. The legacy infrastructure is too deep. Salaries, production, time value to their core advertisers, circ revenues, real estate costs. Love to see @kdoctor do the analysis.

— John P Garrett (@johnpgarrett) July 29, 2019

Not really. You would lose way more revenues than you would think. It’s a legacy model problem. Their best chance is a strong, daily print product.

— John P Garrett (@johnpgarrett) July 29, 2019

Many publishers still struggle to get their print-based and digital-based subscription CRM systems to play well together. A radical change like this will put pressure on the capacity of a lot of papers.

Other hard questions: How does this change your business-side staffing? How about the infrastructure you have built up for daily distribution? (Doucette notes one very practical consideration: It’s harder to find people in a good economy willing to get up before dawn to pick up and deliver papers. The growing logistics economy — driving for Uber or Lyft, delivering for Amazon — both pays better and allows a more flexible workday.)

Do you have the right skills in your newsroom to do this sort of split in digital/print well? What should your newsroom org chart look like now? How do you maintain your community presence and impact when you’re printing only once or twice a week?

Here’s another one: What do you do with your digital “replica edition” products, which still form a significant part of the paid circulation you report to advertisers? Should you still lay out an imaginary print newspaper every night — for “electronic printing” only — and then just not send it to the press? Does the replica become an even more important transitional product to serve aging readers who still love the print format? Or is it a weird remnant of the past you’re trying to leave behind that will slow down the organizational change you need?

In the end, it’s a lot of calculation and reorganization — and then a roll of the dice.

If breaking the daily habit is what keeps CEOs and publishers up at day, their second biggest fear is execution. Even if the model is right — are newspapers ready to execute the transition successfully?

That’s why there are confidential studies going on right now and why “almost everyone is doing the modeling” for cutting days, one well-connected publisher told me. In fact, the industry — which historically has liked to sing from the same song sheet — would like this movement to be adopted by a number of companies at the same time.

As the preparations continue, the questions about industrial cost savings are balanced with ones on how they’d sell this new proposition. That may seem like Sales 101 — marketing and pricing and a customer journey — but it too requires a lot of decisions.

How much do you charge for Sunday + Digital? How long in advance of throwing the switch do you test the appetite for the new product and new pricing?

How many of your print subscribers actually use any of the digital products you offer today — and how do you try to make reader comfortable with them, quickly, before the switch is thrown?

The argument they’re rehearsing: We’ve told you what Google and Facebook have done to our businesses, and the pile-on damage from unfair newsprint tariffs. Now we’re moving to preserve local news itself. Some will present it to their communities as an existential question; others will be more demure.

In the end, an industry now well versed in “Mathering” — popular price-modeling strategies via industry standard Mather Economics — will need to test.

“You could say: ‘I can lose 20 percent of my subscribers — but if I lower the price 5 percent, then I then only lose 15 percent of my subscribers,'” one industry player well versed in the testing told me. “You can start testing those offers in the marketplace and see if you have reason to believe that you can do that.” Or before you drop a day of print, “you can start selling six-day-a-week subscriptions for your 90 percent of the price. See what your take-up rate is on those. Maybe people are happy to not get the Saturday paper, or at least can be convinced through marketing.”

What did we learn from the debacle in New Orleans?

Wait, is any of this really new? Indeed, way back in 2012, the Newhouse family’s Advance Publications shocked the industry by cutting the New Orleans Times-Picayune from seven days a week to three. Protestors took to the streets, creating the delicious scene of placard carriers demanding more news!

Seven years later this spring, Advance sold off the Times-Picayune to the competitor that it had let invade its market by becoming less than daily in print — the paper in Baton Rouge 80 miles up I-10, The Advocate. That is one worry fellow publishers take from Advance’s New Orleans experience: Are we risking our local monopoly, albeit if it now stands on wobbly stilts?

Newspaper CEOs across the nation would like to learn a lot more about Advance’s experience across the country; along with New Orleans, it has cut print days at papers from Syracuse to Cleveland to Portland. But many complain that Advance, privately owned, remains its usual tight-lipped self. With seven years of experience moving advertisers to fewer days and to digital, at creating digital products meant to engage readers seven days a week and with cost-saving metrics known to the penny, what Advance has learned could be hugely valuable to the rest of the industry, they tell me.

As Advance proceeded with its plan — notably, without a paywall or any kind of charge for its digital news content, which I decried early on — the fundamental flaws in execution were well documented. Over the years, the company moved to remedy as many of those as it could, improving a digital product that would have been weak even for a still-print-focused company. But continued layoffs at Advance papers don’t seem to speak to success — or at least any massive edge over the fate of the rest of the industry. Advance’s strategy didn’t do much to limit the continued shrinkage of its news products, and there’s no indication it’s figured out a sustainable new business model. Its sale of the Times-Picayune — even if you consider it a one-off case unlikely to be replicated in other markets — has caused even more doubt in the trade.

All that said, Advance’s early apparent success in maintaining a high percentage of its print ad business despite day-cutting has encouraged fellow publishers.

There’s also that timing question again. How is cutting print days in 2020 different from doing it in 2012 was?

Advance isn’t the only place to look for experience; we’ve seen daily cuts in Detroit (now a decade old), in Pittsburgh, and in dozens of smaller cities. But their shared experience is hard to know very deeply or to extrapolate from. To paraphrase Tolstoy: Happy newspaper companies are all alike; every unhappy newspaper company is unhappy in its own way.

In any event, audiences’ comfort with changing habits may be radically different from community to community. We don’t know. But we may soon find out.

McClatchy’s little experiment

McClatchy is among the current testers. While like its peers it has its eyes on maximizing print savings, it’s beginning its journey cautiously. McClatchy decided to pick off Saturdays — in general a weak day for both readership and advertising — and then moved through a protocol to see how dropping that day could best (and most profitably) be handled.

In April, the company’s Myrtle Beach Sun News replaced its Saturday paper with “expanded newspapers on Fridays and Sundays.” It then extended the initiative to North Carolina’s Durham Herald-Sun and Washington’s Bellingham Herald. On Tuesday, it announced Saturday print would go away at The Tribune in San Luis Obispo and the Belleville News-Democrat outside St. Louis in Illinois. It’s evaluating its other non-metro markets.

The idea: Do everything possible to reasonably gain some cost efficiencies while absolutely minimizing subscriber loss.

“We’ve lost 18 subscribers, but won back all but two of those,” Sara Glines, the company’s regional publisher for the Carolinas and East Region, told me Wednesday about the experience in Myrtle Beach. With those numbers, the test is a major success. Glines reports results were similar in both Bellingham and Durham.

“This is a win-win-win,” she said. “Costs are down. We lost no ad dollars and digital activations are going up.” Before Myrtle Beach dropped Saturday, only 43 percent of its print subscribers had activated — meaning they had connected their print subscription to a digital account. Today, 53 percent of print subscribers have activated.

Those digital activations are a key metric: How do you get long-time print subscribers to turn to digital more often? A first step has to be getting them attached to a digital account. The next big frontier: getting them to use the digital products more frequently.

That’s part of the playbook of tactics Glines prepared to make the transition work. Another key one: Communicate, communicate, communicate. Glines says the News gave its readers plenty of notice of the change, encouraged them to “activate” digitally, and both anticipated and accommodated the kinds of Saturday content readers might most miss, like crosswords and comics.

All those preparations seem to have worked. But would do they tell us about a potentially more radical switch 7/1 or 7/2?

Even Glines sounds a cautionary, conservative note: “I don’t know that the test tells us anything about other days of the week.” In its early tests, McClatchy’s savings are small, but it is plainly looking at ways to multiply that number.

Collateral damage?

If the longstanding seven-day, early-morning newspaper delivery business across America collapses, what might happen to the nation’s two biggest home-delivered papers — The New York Times and The Wall Street Journal? Both papers still deliver hundreds of thousands of print papers a day, most of them outside New York, and they often contract with local newspapers to handle last-mile delivery.

(When the Pittsburgh Post-Gazette announced it was cutting from five print days to three last month, it said that the change would mean it would no longer be able to distribute the Times, the Journal, or USA Today in its circulation area.)

If the Times and Journal see large-scale disruption in their distribution networks, one option might be good old snail mail. Fewer and fewer of their readers depend on the daily print paper for breaking news; same-day mail delivery (via USPS, likely with earlier deadlines) thus might be a possibility.

The Times says it hasn’t yet seen any impact from the limited cuts we’ve seen so far and believes it has a range of options should newspaper delivery network fall apart. “We will handle things as they come up,” says Mark Weitzel, the Times’ VP of circulation operations.

Vindication or…?

There are so many practical questions pervading this latest change apparently poised to move across the U.S. newspaper industry.

But there’s also a less tangible one lurking in the shadows of all those darkened newsrooms: the standing of the newspaper brand itself.

It’s easy to dismiss what remains of that value — given the extent to which deep cuts in newsrooms, weaker editorial products, and often even the sale of prominent downtown real estate have diminished those brands’ standing. But newspapers, often the oldest businesses in their communities and a bridge from each generation to the next, may be surprisingly stubborn in their public value and awareness.

Will the end of the “daily paper,” as we know it, be a deep blow to that brand value? It’s possible, certainly, that a new, more truly hybrid print/digital brand can create new meaning and value. But that will take reinvestment in more and smarter news coverage and in mobile products that deliver it all well. But “reinvestment,” though, isn’t a word I hear in these day-cutting discussions. “Cost cutting” is still top of mind. If there isn’t at some point a renewed emphasis on building, all the day-cutting you can model might not be able to save the next wave of Vindicators.