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.

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?

“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.

In a week of newspaper industry drama — GateHouse’s expected takeover of Gannett and McClatchy’s unexpected move in the direction of bankruptcy — who could write a better next act than that old newspaper vaudeville duo of Michael Ferro and Heath Freeman — the two most hated figures in the business?

Just as the ink was drying on New Gannett’s birth certificate, we learned that — really? could it be true? — Michael Ferro was exiting the industry. Rumors of his departure (and my own satire) had always come up as premature. But there it was, in his company’s own Chicago Tribune: Tribune Publishing’s largest shareholder Michael Ferro sells 25% stake to hedge fund Alden Capital. So much encapsulated in so few words.

Ferro — who had enthralled the industry in his relatively brief tenure heading Tribune, and who had brought such laughter into the world through his gift of Tronc — had pulled off a magnificent disappearing act. To his would-be peers in the industry, frequent targets of his disdain, he’s departing appropriately enough, with a signature fuck-you. Who better to sell his Tribune stake — the one his group of Chicago investors had bought at bargain-basement prices, and which, ridiculously, gave him effective control of Tribune — to than the only man in the industry more reviled: Freeman, whose Alden has become the face of bloodless strip-mining of American newspapers and their communities.

This man, once known to enjoy a trip to the Oscars, really does deserve some sort of award for theatricality.

Before we look at the implications of this transaction, let’s put it in the context of the wildest week in recent daily newspaper history.

The past few days have marked a major turning point in the fast-collapsing U.S. daily newspaper business. As this woeful decade comes to a close, financial players have taken control of much of the daily press. GateHouse, via its holding company New Media Investment Group, closed on its acquisition of Gannett, taking its prey’s name and creating a single company of 260 dailies, 18 percent of the country’s total. Who controls this New Gannett? Private equity, in the form of Fortress Investment Group. McClatchy, staring at a potential default on its pension obligations, faces either financial restructuring or a structured bankruptcy — and its primary shareholder/debtholder Chatham Asset Management is in the driver’s seat.

The Ferro-sells-to-Alden news drew the picture even more clearly. Almost four years ago, I warned of the financialization of the press — but the speed and sweep of that control by private equity and hedge funds is now breathtaking. (And of course it’s not just the newspaper world that suffers in this shift. Consider the recent Deadspin debacle, created by private equity owners who’d bought an ornery, spirited property they clearly didn’t understand.)

The impact is obvious. As America has moved from jokey indulgences in truthiness to a point where fact fights for its very life, it’s the bankers who are deciding what will be defined as news, and who and how many will people will be employed to report it.

For the Alden news, let’s start with what we know this morning:

• Alden Global Capital, led by president Heath Freeman, paid Michael Ferro’s Chicago business group its 25.2 percent stake in Tribune Publishing.
• It’s a private transaction between Ferro’s group, Merrick Ventures, and Alden. Tribune Publishing itself was not involved.
• The price: $13 a share, or about $117.9 million in total. With Tribune Publishing closing at $9.73 a share yesterday, that’s a 33.6 percent premium. (As of 10:00 a.m. today, TPCO is trading at about $10.86, an 11 percent jump.)
• Alden will get two of Tribune Publishing board seats, with the board growing from six to eight members.

Let’s ask three questions about the deal and its impact.

Was this a good deal for Ferro?

Not by historic standards. Through all of the Gannett takeover Sturm und Drang and its aftermath, Ferro told his associates he wanted — and deserved — $20 a share. Last December, Tribune rejected a McClatchy offer of $16.50 per share, with $15 of that in cash, the rest in stock.

So by those standards, $13 pales. But Ferro and his investor cohorts did well on the deal given how cheaply they bought in originally — $8.50 a share in 2016 — and considering how Ferro was able to push the limits of standard corporate governance over his tenure to accrue more wealth.

Why did Alden buy?

That’s not just a question we might have — it’s a question that Tribune’s management and board is now gaming out. The easiest guess: What’s past is prologue.

Alden’s strategy and operating practice is unapologetically cutthroat. The company’s executives believe that newspapers are on a permanent decline, headed inevitably toward a value of zero. However, there are differing opinions about how far away that zeroing-out point is, and over a long interim, smart operators can make a lot of money on the way down.

How? Milk your aging current subscribers by jacking up subscription rates — $600 or more a year for newspapers that might have fewer than a half-dozen reporters left. Invest into the business only what’s required to sustain its operation. Don’t put anything into the silliness of “digital transformation.” (This, remember, was at the heart of its case when it tried to buy Gannett back in January; Gannett, it argued, was wasting too much money trying to figure out a future in digital when it should just give up and skim as much cashflow off the top as it can.) Get rid of newspaper “editors” and “publishers” in favor of regional and lesser positions. Cut costs every which way. In a word: disinvestment.

Just this week, Bay Area journalists at MNG — the brand Alden operates its newspapers under — took to the streets to protest pay rates, saying they’d gotten only one pay raise in the last 10 years.

So is that Heath Freeman’s plan for Tribune? Will he appoint some of the company’s best and deepest cutters to the Tribune board, perhaps chosen from the failed slate of directors he put up in a Gannett proxy fight in May? Will he push Tribune, just as he tried to push Gannett, to optimize shareholder value by employing the tried-and-true Alden way? After all, it was bringing the company as much as $159 million in “profits” and the industry’s highest margins as recently as mid-2017. (At those Bay Area newspapers, Alden managed to double profits over a six-year period as the rest of the industry struggled, not least by cutting about 60 percent of its journalists.)

That’s certainly a possibility. Or — perhaps — Freeman might think that the era of easily sucking cash out of newspapers is drawing to a close. If he thinks the well is about to run dry, he might think it’s a good time to offload his assets. MNG Enterprises (née Digital First Media) has about 200 newspapers altogether, most less than daily, but including bigger names like The Denver Post (brought briefly to national prominence for a dramatic Alden haircut last year), the (formerly San Jose) Mercury News, and The Detroit News.

While Alden would have to abide by SEC rules about conflict of interest, being in both boardrooms at once can make a merger quite a bit easier. So we have to ask: What would a Tribune/MNG combination look like? The same reasoning would apply there as did with GateHouse–Gannett merger: Cut — meaning create hundreds of millions in new “efficiencies” — or die.

While that rationale is clear — and Tribune believes it, like everyone else in the industry — actually putting together the many half-broken pieces of MNG with the more conventionally managed Tribune could be a headache for ages. Determining real value, an issue in any deal, would be even harder given that Alden has managed its business far differently than Tribune. We don’t know the actual earnings of MNG Enterprises today, but we know that its strategies have reduced the market value of its assets going forward.

While there may be back-office synergies of every kind to potentially harvest, there’s little geographic overlap between the two companies. Unlike the New Gannett, which can wring more savings by combining the Gannett and GateHouse clusters in places like Florida and Ohio, a Tribune/MNG merger would bring many fewer such combinations.

While Alden now controls just over a quarter of Tribune, another quarter-interest owner could soon assert more authority. Patrick Soon-Shiong, who bought/rescued the L.A. Times and San Diego Union-Tribune from Tribune, didn’t sell his 24.6 percent interest in Tribune Publishing in the process. His standstill agreement — which temporarily ceded some of his voting authority to management — expires next year. He sparred with Michael Ferro, calling the L.A. Times under his leadership “an abused child, a beaten child”; what do you think he will think of his new Alden partners?

Not to mention that Alden owns nearly all of the newspapers in greater L.A. that Soon-Shiong doesn’t. (MNG’s Southern California News Group includes the Orange County Register, the Riverside Press-Enterprise, the Long Beach Press-Telegram, the L.A. Daily News, and seven other dailies.) In other words, his new partners in Tribune are his direct competitors back home in California.

As a hedge fund experienced in using leverage to maximize short-term advantage, would Alden advocate ladling up Tribune’s relatively clean balance sheet with a lot of debt — upping dividends, boosting its stock price, and otherwise finding ways to take more money out of the company?

Tribune is the bigger dog here, in revenues and in earnings, and that should give it some power. But it’s been thrown off-kilter by the Alden buy, which came as a surprise. (Of course.) In Heath Freeman, Tribune is dealing with someone who uses his unpredictability as leverage. Recall: Freeman so petrified Gannett’s board and management that it ran headlong into the less-objectionable embrace of GateHouse’s Mike Reed.

Will the 2020s be an age of endless vulture newspapering?

As economic inequity roils the world, from Prague to Santiago to Hong Kong, we hear increasing debate about “late capitalism,” increasing questioning of core elements of 21st-century life. Between democratic socialists in the U.S. Congress and populists in high office worldwide, something is clearly afoot in how we think about the role and responsibility of capital in democratic societies.

Within our smaller environment of news and journalism, the direction we’re headed is actually much clearer. Alden is the industry’s personification of the new vulture capitalism that has invaded what was once, not long ago, a business that cared about its mission and its civic role. There is of course much to criticize in the history of American newspapers, but they also did a fair job of balancing profit and service to their communities over the decades. Alden’s putsch-like move into Tribune is only the latest wakeup call. The old world is over, and the new one — one of ghost newspapers, news deserts, and underinformed communities — is headed straight for us.

Today, one year-long drama comes to a close, or at least an act break: New Gannett, the result of America’s two largest newspaper companies merging, will become a reality as the deal reaches final closure. But another drama has hit the stage to take its place.

Yesterday afternoon, this was the Bloomberg headline flashing across your news feeds: “Newspaper Publisher McClatchy Teeters Near Bankruptcy.” McClatchy, of course, being the second largest newspaper publisher in America, after New Gannett.

That headline is an attention-getter, and it contains some truth. You say teeter, I may say totter — either way, there’s a whole lot hanging in that balance. But there’s some nuance in this new drama — one of many to come from the past decade’s conversion of news companies into financial instruments stripped of civic responsibility by waves of outside money men.

After all, when we talk about newspaper companies, we typically use their corporate names — Gannett, GateHouse, McClatchy, MNG, Lee. But it’s at least as appropriate to use the names of the hedge funds, private equity companies, and other investment vehicles that own and control them. It’s Fortress Investment Group that’s taking control of New Gannett today; it’s Apollo Global Management supplying the debt that let the merger happen (and first in line to skim whatever cashflow New Gannett can produce). It’s Alden Global Capital that has strip-mined MediaNews and Digital First papers, become the industry’s bête noire, and provoked drama across the industry.

With McClatchy’s troubles — its share price collapsed last week, down 82 percent across five trading days — a new financial player steps to center stage: Chatham Asset Management.1 However McClatchy gets reorganized — and now it must be, one way or another — Chatham, the company’s biggest lender and shareholder, is in the driver’s seat.

While it’s easy to think of money men monolithically, they’re not. Each brings a particular view about the 2020s newspaper business, a particular theory of the case to their investment. But the lenses through which they view it are quite different from those of traditional newspaper company executives. I haven’t found any, for instance, who believe there’s a growth story for local news. As a result, their question is: What’s the best way to operate distressed companies in a distressed industry? How do you manage, and budget for, businesses on the way down?

Leaving this woeful decade and entering a new one, it’s the financial players that have the firmest grip on what these companies will become — what will be defined as news, and who will be employed to report it.

A McClatchy reorganization could end up with a company quite similar to today’s with Craig Forman remaining as CEO. Could. It could also mean a change at the top. Forman has to thread some narrowing financial needles.

One other likely outcome: a merger with its most fitting partner, Tribune Publishing. Last week, I reported that the two companies are once again in early talks, reprising one of the more durable storylines in the Consolidation Games. I first reported that potential merger in September 2018; the two came close to a deal last December, but it fizzled.

While a deal in the coming months is possible, given the past week’s events, Tribune seems more likely to wait out McClatchy’s drama and see what comes out on the other side. The idea: Let McClatchy reorg itself, even via bankruptcy, and tidy up its balance sheet by shedding debt. Then merge. That would create a stronger merged company, the theory goes.

Who might become the CEO of a merged Tribune–McClatchy — Tribune CEO Tim Knight or McClatchy’s Forman? The industry joke is that the loser of that potential power struggle will get to run it; the winner will head home with a nice departure package.

Here’s what we know at this point, with the help of confidential sources close to all the dealings.

Start with that teeter-totter. McClatchy sits on one end, bloated with more than $700 million in debt. That’s way down from the more than $5 billion it saddled itself with by acquiring Knight Ridder in 2006 — a disastrous deal, burdened with a price-tag held over from the good old days, just as they were ending. But it’s still $700 million.

Who’s sitting on the other end? Now that’s a good question.

The federal Pension Benefit Guaranty Corporation, established in 1974 to be a pension payment backstop, has taken a seat. Congress set up PBGC in 1974 to take over pension liabilities when companies found themselves unable to fulfill their commitments.

McClatchy, both directly and through some of its now three consulting companies — Evercore Group LLC, FTI Consulting Inc., and Skadden, Arps, Slate, Meagher & Flom LLP — began talking with PBGC when the Internal Revenue Service jumped off that teeter totter. See, McClatchy had asked the IRS for a waiver that would let it skip its upcoming pension plan payment, due next fall, arguing that the fund, with $1.32 billion in hand, was in good-enough shape to handle it. McClatchy also made clear that its financial condition would make it hard to make that $124 million payment. (The company currently has fewer than 2,800 employees — and more than 24,000 pensioners.)

The IRS denied the waiver. That set up the conversation with PBGC.

Across the teeter-totter, McClatchy pitches PBGC this plan: You guys take over our pension plan, via a “distress termination,” and take the funding we have in it. We’ll work out a new defined and limited payment plan over time. The PBGC benefit is that it gets some new money over time from McClatchy, which it wouldn’t get in a bankruptcy. For McClatchy, the benefit is in reducing, and then capping, its cash outflow.

Such a PBGC agreement could be a very good thing for McClatchy, freeing up cashflow to invest in its digital transition. So if those talks are in progress, and that payment to the pension plan isn’t due until next fall, then why is that dreaded word — bankruptcy — getting thrown around now?

McClatchy, more through cost cutting than through improving revenues, continues to have positive cashflow. In its Q3 financials, it even posted a modest 4.6 percent (or $869,000) increase in EBITDA year over year. While that’s a milestone of sorts — the first increase in eight years — McClatchy made clear it doesn’t expect to report similar plus-earnings in the coming quarters. Over the first three quarters of 2019, it generated $64.9 million in adjusted earnings. Moreover, the company has largely kicked its next major debt payments down the road a ways, to 2026.

So, in the big picture, McClatchy is cutting, just like everyone else, and it can pay its bills — other than that pension contribution next fall. But the focus has been on the ominous language in some of its SEC filings, acknowledging potential illiquidity and difficulty maintaining ongoing operations. That language — though mostly standard fare, given the pension issue — has stirred the headlines.

But it’s also fairly clear that both a financial restructuring of the company and bankruptcy are among the outcomes the company and its three consultants are considering.

Why — and why now? If that big pension payment is still months away, why the new urgency over the past week?

Consider some of the moving pieces. If PBGC agrees to a “distress termination,” it will secure a priority position in claiming McClatchy’s assets should the company later go bankrupt. Inserting PBGC high up in the claim chain inevitably forces others — largely equity owners — to slip further down it. (What about those receiving the pensions? “The company believes under current regulations, such a solution would not have an adverse impact on qualified pension benefits for substantially all of its retirees.”)

In other words, a PBGC deal requires some financial restructuring.

Then, on the other side of that teeter-totter, PBGC can slide over, making room for McClatchy’s current lenders and shareholders. Most prominent among those: Chatham Asset Management. Chatham is both McClatchy’s largest lender and largest shareholder.

The name on the door says “McClatchy.” That acknowledges the family, which launched the company in California’s Gold Rush in 1857, and which on paper still “controls” the company through a two-tier share structure. In a lot of ways, though, the door may as well say “Chatham.”

Chatham is the most important player in that McClatchy war room, with all those consultants. Assuming there’s a PBGC deal, the war gamers plot out those two scenarios:

• A financial restructuring of the company. That would put PBGC into the claim order and change others’ place in line.
• A bankruptcy. This would be a pre-pack bankruptcy — meaning that, as the company filed for Chapter 11, it would already have at the ready a plan to emerge from that bankruptcy. A pre-pack saves a lot of time — and prevents hellacious traumas such as Sam Zell’s four-years-in-court bankruptcy from hell. That bankruptcy semi-paralyzed Tribune at a pivotal time, when it should have been focused on digital transformation.

In either case, the McClatchy family would likely see a reduced position in the company. A bankruptcy would likely mean the end of its control. So there’s a lot to balance here.

Importantly, this isn’t a new situation. When then-McClatchy CEO Gary Pruitt bought Knight Ridder in 2006, he paid $4.5 billion in cash and stock and assumed another $2 billion of Knight Ridder’s debt. It took out $3.75 billion in bank debt to make the deal work. (Knight Ridder was bigger than McClatchy, just as Gannett is bigger than GateHouse. In both cases, the smaller acquirer had to take on outsized debt to gain the larger target. Adding to the sting in McClatchy’s case was that it was the only company to even bid for Knight Ridder when it was up for auction.)

That McClatchy–Knight Ridder deal and Lee Enterprises’ acquisition of Pulitzer in 2005 turned out to be the most ill-timed of the era. Both Lee and McClatchy have struggled to deal with all that debt since.

McClatchy’s efforts on that front have been remarkable. It’s paid off more than $4 billion of its debt over a very tough period for the industry. And yet here it is, almost 15 years later, its very existence as a standalone company threatened by the debt that remains.

Money men taking front and center isn’t a new phenomenon either. Remember 2009, the bottom of the Great Recession? Newspaper revenues took at 19 percent hit that year — and it’s been all downhill since then, at varying trajectories, but with an alarming deceleration in revenues the past three years.

It was the Great Recession that largely opened the doors for those money men to enter. MediaNews, Tribune, Lee, and others all declared bankruptcy. Debt holders gained new sway and new equity. Companies like Angelo Gordon, Credit Suisse, Oaktree Capital, Alden, Apollo, and Fortress began showing up in SEC filings — and in company boardrooms.

Now, amid the tatters of a once-proud industry, they’re the ones who increasingly determine the fate of the primary gatherers of local news across the United States. Yes, there are a few contrarian independent papers — the ones with the well-known owners in big metros and the lesser-known smaller chains and single property owners. Those are largely still run by people with strong newspapering DNA. But across the wide expanse of this country, the papers still driven in part by a civic mission become fewer and fewer — and the ones that treat news providing as just another business grow in number month after month.

1. This story originally called the McClatchy lender and shareholder Chatham Capital rather than Chatham Asset Management. They’re different companies, and Chatham Asset Management is the one involved in McClatchy. We regret the error.

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.”

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.

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.

A combined Gannett and GateHouse would create a superchain that owned and operated more than one-sixth of all daily newspapers in the country — a prospect I first reported on in mid-May. The merged company would control 265 dailies with a combined daily print circulation of about 8.7 million. The next largest newspaper chain in print circulation is McClatchy, well behind at about 1.7 million.

Gannett and GateHouse executives (and their bankers) continue to put the deal together. The hard issues have been gamed out, like which company’s shareholders would get a majority of the new company; so have many soft issues, like cultural fit between both companies’ leaders. Over the months that they’ve been talking, the comfort level has grown, I’m told, and that’s what increases the chances of an announcement in the relatively near future.

Call it maybe the only deal that can get done in this environment of newspaper companies in decline. Their leaders have spent the last few years — 2019, especially — sketching out nearly every possible corporate marriage, all in a quest for enough cost-cutting to buy a little more time. The hunt for scale seems to be ending with a merger of No. 1 and No. 2.

Regulatory review would follow the announcement, with the newly merged company likely to start life by early 2020. And of course, that’s only when the laborious, time-sucking work of combining management teams, tech stacks, and corporate (and editorial) cultures begins.

These are the deal dynamics coming into focus:

• GateHouse, via its parent company New Media Investment Group, would be the acquirer — even though it’s the smaller company by market cap, cash flow, and revenue.
• NEWM would then own both GateHouse — the operating company for its 156 daily newspapers and more than 300 weeklies — and Gannett, with 109 dailies and more than 1,000 weeklies and niche publications. The merged company would then take on a unified brand. That could be Gannett, with its longer history and national USA Today brand. Or it could be a new name altogether. (Not TEGNA, that’s taken.)
• With investors currently granting its earnings a higher multiple, GateHouse shareholders would likely get a majority of the combined company’s shares.
• The Gannett board, I’ve learned, would likely be content with its shareholders getting a cash payment in the neighborhood of today’s $7.90 closing share price. The premium would be paid in shares.
• Fortress Investment Group, which manages New Media/GateHouse by contract, will play a still-being-worked-out role in the transaction. Currently, Fortress takes an annual management fee out of the operation. In 2018, it took out $21.8 million in total — based on a basic management fee of $10.7 million and the rest an incentive payout based on GateHouse’s net income. Will Fortress continue to play a role in a merged company? Gannett’s board is unlikely to feel comfortable with that, and that’s one of the issues still to be tackled. According to its management contract, Fortress can be bought out of its agreement. That, though, will cost one year’s fee, or about another $10.7 million (in addition to whatever it’s earning for calendar 2019) and an additional buyout of its incentive fee.

Meanwhile, Fortress’ marketplace heft could be integral to getting the deal done at all. That’s why several industry observers say this may be the only big industry deal that can make it to the finish line in mid-2019.

Throughout the first six months of what I’ve called the 2019 Consolidation Games, industry sources have been reminding me (and I’ve reminded you) that obtaining financing for any major newspaper transactions remains fraught. Who feels confident about any daily newspaper financial projections for 2021, much less 2023? So, Fortress — with its own capital, its standing in financial markets, and its newer Softbank ownership — may be able to bring a deal to financial conclusion where others would stumble.

The logic of the deal

The thinking isn’t hard to understand. This isn’t about building a digital news juggernaut ready and eager to blaze a new chapter in American journalism. Despite the unprecedented scale on offer, you won’t hear any talk of building a “Netflix for news” or a “New York Times for local.”

Simply put, these companies’ leaders think a megamerger buys two or three years — “until we figure it out.” The “it” is that long-hoped-for chimera of successful digital transformation. Gannett and GateHouse, like all their industry brethren, look at ever-bleaker numbers every quarter; the biggest motivation here is really survival, which in business terms means the ability to maintain some degree of profitability somewhere into the early 2020s.

If the deal gets done, the parties will, of course, cite the synergies of the deal — all real, all likely inflated to some degree, as they are in nearly all mergers. Figure those savings could add up to something like $200 million over the next two years, though some are putting the number higher.

“Two CFOs, two legal counsels, two sets of technology, etc.,” one savvy observer summed up the targets of this and other attempted deals. But will it also mean more newsroom cuts? Both Gannett and GateHouse management have done their share of newsroom cutting, and both realize the damage those cuts — and further ones — do to the products they try to sell to subscribers, print and digital. But they have cut, and they will continue to cut, to make the numbers they think they need to make.

One thing you don’t see in that quote above is “two CEOs” — a cost one expects to get halved in a corporate merger like this. That’s a curious wrinkle here. Mike Reed serves as CEO of New Media Investment Group; his longtime business partner Kirk Davis serves as CEO of GateHouse Media. Meanwhile, Gannett doesn’t currently have a CEO, and hasn’t since Bob Dickey retired earlier this year. An announcement of that new CEO had seemed close for months — only to be delayed. Has Gannett abandoned that hire, given the imminence of a GateHouse deal?

Apparently not. Gannett is still apparently proceeding with its hiring of a well-known industry figure, who’ll be considered a twofer, sources tell me. The new CEO, Gannett would expect, could lead the company forward in the runup and workthrough of a merger. Or, if the merger failed, he could operate the company.

The obvious question: Who’ll run the merged company? Would Reed move to chair of a new board? Would Gannett’s new CEO or Kirk Davis ascend to lead this behemoth of a newspaper chain?

The synergies extend beyond cutting, though cutting is where the financial analysis begins. Consider the matchups:

• Both companies’ properties are concentrated in smaller to mid-metro communities. Gannett owns a number of metros (Phoenix, Indianapolis, Detroit, Nashville, Milwaukee, Cincinnati), and GateHouse’s assembled a few too (Columbus, Oklahoma City, Providence, Austin). But their core properties are in smaller markets.
• Both companies have focused on building local agency advertising-plus services and believe more scale may help profitability.
• Gannett touts the success of its USA Today national digital ad network; a merger would add more scale to its offerings.
• Both companies have regionalized huge portions of management and daily production work — editors overseeing multiple properties, regional design centers handling layout, centralized printing and unified tech backends. While that makes for a cultural fit, it also of course means there are probably fewer cost savings left to be squeezed out of even more regionalization.

“Regionalization” really should be a key word here. “Local” news is rapidly coming to mean “regional” news. Readers in print and digital too often now get “local” news out of places 50 miles away, just as long as the daily’s corporate parent also owns those news operations down the road. And I’d expect to see a lot more regionalization out of this merger.

The fall of the house of Gannett

There’s the deal here, and then there’s the spectacle.

Little GateHouse — historically a minor and frankly not journalistically well-regarded newspaper company — ascended from the ashes of a 2013 bankruptcy. As part of that process, Fortress Investment Group invented New Media Investment Group as a holding company, and GateHouse has been on an acquisition rampage ever since.

CEO Mike Reed, who I interviewed for Nieman Lab last summer was able to use Fortress-assembled pools of capital to play the industry’s timing well. A disciplined buyer, he found smaller newspaper owner after smaller newspaper owner, all of them ready to get out of the business as ad fortunes sank deeper and deeper.

The day it came out of bankruptcy less than six years ago, GateHouse had 78 dailies. Today it has 156, by far the most of any chain.

For much of that growth spurt, investors liked what they saw in NEWM, which offered a good-sized dividend. GateHouse’s own performance and strategy hit a wall over the past year, but with this merger, Reed has apparently pulled a new rabbit out of his hat.

Business is always all about timing, and the timing here is fascinating. Gannett has been on its heels since 2016, when it tried a hostile takeover of Tribune, which then Tribune (and soon Tronc) chairman Michael Ferro used to blow Gannett’s house backward. It reached a point of maximum weakness last December, when CEO Robert Dickey announced he’d retire in May and it became clear the company — facing sad financials — had no plan in place to succeed him.

Smelling blood, Alden Global Capital, the trade’s bête noire, struck, making a hostile (maybe even unusually hostile) bid for Gannett at $12 a share. Gannett successfully resisted the Alden push, which apparently ended when shareholders voted down Alden’s alternative board director candidates in May.

But Alden had pushed Gannett into play, as I reported throughout the spring. Forced to defend itself against Alden, Gannett slow-walked its hiring of a CEO and hired Goldman Sachs to explore “strategic options.”

With that exploration — and with the overriding logic of consolidation driving the entire newspaper industry — entered GateHouse. Over the past several months, the two companies’ executives, boards, and bankers have found themselves increasingly charmed by the prospect of putting the two companies together.

It’s remarkable that Gannett — for the past decade, the clear big dog of the local newspaper industry — isn’t the acquiring party here. While its board will have a say in the structure and leadership of the new company, its status has clearly fallen. The silver lining for the top remaining Gannett executives, some of whom will see this as an excellent time to depart? Change-of-control provisions in their contracts will provide some very silky golden parachutes after a sale is completed.

But remember: This deal isn’t quite done yet. What could intervene? Financing could still prove impossible to obtain. Alden could come back with an all-cash offer higher than $8 — but could it finance it? Could a Gannett/Tribune marriage — the subject of multiple failed proposals, as recently as last year — be resurrected? Sources say that’s unlikely — Ferro is still Tribune’s largest shareholder, and he and Gannett have not played well together — but consider it possible.

If this deal concludes, it will certainly earn the gold medal in the 2019 Consolidation Games I’ve covered all year. It’s one big answer to the question of what’s the survival strategy for top newspaper chains. At the same time, though, it poses another big question: How will — or can — the rest of the big players respond? Will Alden, Tribune, McClatchy, and Lee find new and complex ways to mate?

Or can they? The gap in scale between them and a merged GannHouse would be larger than ever, and money is already tight. Even companies with some of the industry’s best balance sheets are currently having trouble refinancing debt, several financial sources tell me. Even with the best deal logic, would financing be available to pull off any other mergers in the industry’s second tier? And where does this all leave the many, many smaller players — the private regional groups, the lone family papers still standing? The top end of the newspaper food chain is getting a lot bigger, and the effects will be felt all the way down.

Now, a few decades after that vision of digital personalization, The New York Times is out with a fresh, modern test of it.

It’s called “For You.” For some users, it popped up — prominently, by design — at the center of a new one-row nav at the bottom of the Times’ iPhone app homepage in mid-June. (The Times, like many companies, rolls out design changes to all users over time.) It sits between Top Stories, which remains the default view at launch, and Sections.

While the Times has been experimenting with limited forms of personalization for years, it’s that prominence in the interface that makes this a turning point.

“This is the most prominent surfacing of active personalization in the experience,” Matt Ericson, a Times assistant managing editor, who worked on this project, said.

No surprise: The goal here is more and deeper engagement. And of course the Times will be closely monitoring how subscribers and non-subscribers use For You, seeking datapoints to suss out “propensity to buy,” the holy grail of our reader revenue age.

“This is not a completely new feature, but the update that we have made is that we are now trying to make it a little more front and center, make it easier for readers to find their way to the stuff that they’re most interested in a and make it easier for them to get into the stories that matter most to them,” says Mollie Vandor, a Times product director, who came to the company in February after a half dozen years with Twitter, Instagram, and Facebook.

We’re all hearing a fair amount of nonsense about AI, ML, and the like. It’s not that these technologies won’t have a profound effect on the news business, but that they are simply tools in the hands of journalists and those that support them. It’s a great boon for the Times to use such tech to do something that seems quite simple: Show us more of the stuff that we say we’re interested in.

The Times launched the similar “Your Feed” last year, with a small and apparently confusing page-like symbol at the top right of the app. The Times gauged enough experience with that usage — by interpreting data and with qualitative focus groups — to take this step of providing prime real estate to For You.

This is one fundamental lesson of this relaunch: It’s not just about providing a function, utility, or service for the reader. It must be crystal clear what that service does for…me. For You is an attempted antidote for overload, one way to break through the noise of any app or a reader’s own busy days, to make it brain-dead simple to access a truly useful new tool.

A new reader habit can lead to increasing engagement, and more engagement means both better subscription sales and retention. Several years ago, the Times was the first news company I spoke with that had discovered that a reader’s devotion to two or more distinct news topics was a big boost to sales and retention. Hook ’em with one topic, okay, but two or more can help seal the deal. The now-1,600-strong Times newsroom publishes about 250 stories a day. While the phone is a wondrous interface for creating user habits, it’s lousy at displaying breadth. Consider For You one effort to widen the reader’s awareness of stories that would otherwise seem hidden — and maybe get that Trump-news-only reader to check out Smarter Living, or the Book Review devotee to spend more time in Opinion.

The major national/global news publishers have worked around the edges of personalization for a while. Each can bring more firepower to personalization than they have thus far. But all are mindful to maintain the tradition of making top editors’ judgment what leads the news presentation. Most are wary of the dreaded filter bubble and enabling readers to simply re-enforce — and not challenge — their own worldviews. (Ten years ago, the Times’ own Nicholas Kristof weighed in with a warning about that.)

As we move further into the fully digital news era, we’re learning that the combination of experienced news judgment and smarter technology will be as much as art as science.

“How do we get personalization to amplify our news judgment?” asks Ericson, a newspaper veteran and a valuable tweener between the newsroom and engineers. “There’s a fair number of signals that we have around from the newsroom in terms of curating a particular pool of stories. How can we make sure that the right one gets in front of you?”

As the biggest publishers experiment, they take different tacks.

The Wall Street Journal, with its My WSJ feature on mobile takes an approach different from the Times. It’s all about passive personalization; the Journal delivers to readers a “recommended” list of stories derived from their viewing history, without any explicit effort on their part.

Importantly for the Times, For You is all about active personalization. You get, more or less, what you affirmatively choose to get. The Times provides me with stories on topics that I have chosen to follow over the years when given the opportunity in various “Recommended” modules.

When I hit the For You star, it populated with a range of Mueller Investigation, Pop Culture, and Climate Change stories. Apparently, it has a better memory of my past choices than I do. (It’s no joke when we say we’ve downloaded our memories to our devices.)

I can’t pick out which topics in my feed I’d like to delve deeper into, newsletter-like; instead I scroll through a variety of stories from across my topics in an order that seems mostly driven by a sense of timeliness. A screen or two down, a carousel of “Saved for Later” stories reminds you of stories you saved but forgot about. Changing the topics you follow takes only a simple trip to settings.

Note that these really are “topics” — not “sections,” which provide the architecture of story placement in the rest of the app. A climate change story may appear in business or theater as well as in Climate and Environment. Options include The Future of Work, Obituary of the Day, Global Migration, Only in New York, and Bitcoin & Blockchain. (Oh, and Animals — “We thought you could use a break,” the app offers.)

“That story and that particular topic might span multiple newsroom desks,” Vandor says, “but the idea is that if you want to follow everything about climate change for example, you’re going to want to see our best stuff from across a variety of different desks, rather than just focusing in one particular desk.”

All of this is managed with lots of under-the-hood metadata. “Part of this is actually powered by the fact that we have actually a pretty good strong history of tagging our stories not just by where they appeared in the paper, but also what is the story about, who’s mentioned, and so forth, so that helps power it,” says Ericson.

For You then, doesn’t offer a bunch of touts for people like you. It’s you, gleaned from your stated preferences. (Don’t like what you see? Change your preferences!)

At this point, readers can choose from several dozen topics, a motley group. (Why, among columnists, do Dowd, Manjoo, and Krugman get topics, but not Gail Collins or David Leonhardt? Why ‘What to Stream’ but not Watching, or New York City Arts but not Broadway Critics’ Picks?)

I’ve liked the ability to follow specific journalists, as The Guardian used to allow and the Journal does currently, but publishers have told me the return on such an offering has been underwhelming. So only a few of the Times’ top reporters and columnists can be chosen. Given how the breakaway success of The Daily podcast has helped create a small galaxy of new Times personalities, there’s clearly more opportunity to allow readers to follow the voices they are getting used to.

For You is an iOS product only at this point, pending further testing. There’s no browser or Android analog.

We’re at the beginning of this personalization test. The Times, while innovative, can sometimes take a long time to build and improve new products; we’ll see over the next year whether this turns into a real hit or just another experiment. For now, this is an experiment that poses as many (good) questions as it answers.

If a GateHouse/Gannett merger — rumored for weeks, today reported as a deal in some stage of progress by The Wall Street Journal — becomes reality, about 1 of every 6 daily newspapers in the United States would be owned by a single company. Totaled up, 267 dailies would fall under a single ownership and management. That’s an unprecedented concentration of control in the history of the American press.

(Back in 1977, The New York Times wrote with concern about the growing concentration of newspaper ownership, pointing to Gannett’s 60 dailies as the most of any chain in the country. The United States had 1,756 daily newspapers back then, and Gannett owned about 1 of every 29. Times change.)

Megaclustering is a notion I first wrote about two years ago as I looked at the possibility of a GateHouse + Gannett + Digital First Media combination. And that’s still a combination that could tumble out of today’s consolidation talks.

Of course, a Gannett/GateHouse merger isn’t a done deal, and talks aren’t even all that advanced. Today’s Journal story drew new attention to the potential hookup, which I’d pointed to a couple of columns here at Nieman Lab within the last month. Such a merger would win the championship ring in the 2019 Consolidation Games, the prime driver of newspaper strategy in 2019. Merge, buy, or sell — they’re all routes to cutting costs in this abysmal advertising climate, one way or another.

There’s no small irony that this sort of merger might well be counted as a success by Alden Global Capital, the cut-to-the-bone newspaper company that poured gas on this round of negotiations by saying it wanted to buy Gannett in January. But Alden never supplied certain financing for the deal, and many believed it just wanted to put Gannett into M&A play, so it could profit off the 7.5 percent stake it already owns in the company.

Gannett won the battle to stave off Alden. But in play it plainly is.

Industry observers like the shape of this potential deal. The financial coming attractions:

• The matchup between the Gannett and GateHouse maps. Both companies have looked keenly at where their newspapers mesh or overlap, and some enterprising data-viz creator could help all us play along at home. With 267 dailies — plus lots of weeklies and niche publications — we could all see how closely the GateHouse and Gannett dots match up. The more match, the greater the synergies. Speaking of which:
• Synergy savings. “$40–50 million in back office duplication,” one financial observer told me. Distribution, printing, and ad sales would all get regionalized. Not to mention more “regionalized” reporting. Last week, I detailed the combination of GateHouse’s own layoffs of 200 or so and launching of regional investigative teams. That’s part of a continuing trend — and one that could be supercharged by this merger. “Local” newspapers get increasingly regionalized in their journalism as well as in all their business functions. In this big a deal, such financial synergies would be probably be touted in the $125–$175 million range. Of course, the costs — massive severance and related “closing” costs — are usually soft-peddled in the synergy-selling business. Still, the savings are real, and they are the big driver of this deal.

In effect, these two companies — and their peers, including Tribune, McClatchy, Lee, and Alden Global Capital’s MNG Enterprises — have all run into the same wall in mid-2019. They’re trying to make their companies more digital, and less reliant on print, but they have little available cash to invest in those changes. The never-ending depression in print advertising — it’ll be down another 10–15 percent this year, similar to the past couple of years — has made their transformation math next to impossible. While they’re laying off staff, they know they can’t do that forever without seeing even deeper losses in print circulation.

So M&A is only route that offers big short-run savings. Do any of these publishers have a grand plan to really turn it all around, to make daily publishing once again — after a decline of now more than a decade — a growing business? No. But they hope consolidation can buy them time — maybe two years or so — to survive and keep pushing “transformation.”

So what are the odds on this deal happening?

We can now say Gannett + GateHouse should be a better bet than Gannett + Tribune, another combination that’s been the subject of off-and-on talks.

Gannett + GateHouse would be a bigger company, which makes it more attractive, and the synergies between the two chains’ markets — both concentrated on mid-metro-sized properties and smaller — makes more sense than combining with Tribune’s larger markets.

But as I’ve noted throughout all the various consolidation moves and dekes this year, logic is one thing — valuation is another.

How much value does each company really bring to the deal? That will be the argument. In recent years, GateHouse has generally gotten more credit from the market, a valuation based on a higher earnings multiple. Gannett currently trades at 4.5× its EBITDA enterprise value, while GateHouse/New Media still fetches 7×. That could be a sticking point in finding a mutually suitable formula.

Both companies, like most of their peers, have seen steady declines in share price. Value investors (and everybody else) are increasingly souring on the staying power of newspaper earnings.

The markets didn’t have much of a reaction at all to today’s Journal story. Gannett’s share price popped up when the market thought Alden’s interest in buying it was real. But now it’s back down under $8 a share, and it barely moved today: closing up 1.5 percent after a brief 5 percent spike on the Journal report. GateHouse, traded under its owner New Media Investment Group, has also had a terrible time of it of late, down more than 50 percent since last July to around $9. It was up 4 percent today.

So we get to the banker questions: What’s the price of GateHouse “buying” Gannett? How much of that is in stock, how much in cash? As the Gannett board undoubtedly burns up its conference lines, the numbers guys — Goldman Sachs represents Gannett — run the spreadsheet formulas over and over.

Gannett, remember, doesn’t even have a CEO right now. Bob Dickey retired earlier this month, as he’d announced last December, and Gannett’s board still hasn’t named a replacement — a task it had high on its list as soon as the board fight with Alden ended two weeks ago. Is its hesitance announcing a new top boss — one who would presumably get a golden parachute in the neighborhood of $10 million if the company were sold — part and parcel of GateHouse talks?

That could well be.

GateHouse’s Mike Reed — described in the trade with phrases like “disciplined operator” and “great dealmaker” — could emerge as CEO of the merged company. He’s a 30-year veteran of the news business. In our long interview at the Lab last year, Reed laid out in detail his strategy for GateHouse. If Gannett is merged into it, expect Reed to double down and combine the digital marketing businesses of both companies and emphasize events business expansion.

If — a big if — this chip falls into place, then the Consolidation Games will move into a next round. Might then McClatchy and Tribune — having found little other companionship on the mating market and the bar closing soon — restart talks that failed in December? And what about Alden? Might if pick up any papers a Gannett + GateHouse might have to dispose of for antitrust concerns? What other plays might it consider?

Finally, the important question: Is this good for journalism, or for the communities that daily journalism serves? That’s what we should care about most in all of this, and it can get lost.

This move — like the other consolidations batted around so far this year — is financially strategic. It is not journalistically strategic. Both these companies have been executing various editorial strategies — some patchwork, some earnest, some with real community-serving potential — and both are severely hobbled by declining editorial budgets. This kind of consolidation would buy some time. How that time, and the money saved, gets reinvested into a longer-term solution to local journalism’s woes remains a hanging question. Still required: More capital and a better vision.

No surprises: Today, Gannett shareholders officially rejected Alden Global Capital’s amateurish efforts to win board seats and push the country’s biggest newspaper chain by revenue to sell itself.

Over the last month-plus, Alden — using the name of its MNG Enterprises, as in MediaNews Group, a moniker it now prefers to its previous Digital First Media — pivoted repeatedly. Seeing its failure on the horizon, it reduced the number of board members it was recommending. Its PR army maintained its fusillade of Gannett-baiting correspondence, which Gannett’s own forces answered. (Do remember that PR jobs now outnumber journalism jobs 6:1, that ratio growing annually.) But all of it, as I’d previewed, stank of failure.

But that other scent remains in the air: the sweet aroma of mergers and acquisitions, the coming consolidation of the newspaper industry.

The 2019 Consolidation Games aren’t just about Gannett, of course, as we’ve assiduously covered this year. Borrowing from Paul Simon: “Everybody’s buy and sell / And sell and buy / And that’s what the whole thing’s all about.”

This hostile Alden attempt to takeover Gannett appears defeated at this moment, as did McClatchy’s bid to takeover Tribune in late December. Those were whiffs, but the thinking of industry executives remains dominated by the inevitable merging of the big chains.

“This is all going to take some time to sort out,” one CEO in the midst of the action told me last night as the results of the Gannett election became clear.

So the question of the day, of course: What now?

Are we back to where we were before, back before Alden’s Heath Freeman sniffed fear and disarray in the Gannett leadership ranks as CEO Bob Dickey announced his retirement?

Not really. Alden, despite today’s immediate failure, has successfully thrown Gannett into play. While its board rejected Alden’s offer of $12 a share — an “offer” never fully backed up by certain financing — expect that a new offer of $13 or even $13.50 a share migh well succeed. Pushed by Alden, Gannett retained Goldman Sachs, and that opens is up to plenty of new M&A potential — more today than yesterday.

Gannett’s share price — which first took its big tumble three years ago when its attempt to seize Tribune Publishing flopped — is down to the $8.75 range today. The market had recently priced in Alden’s expected lack of success; it was at $9.75 the day before Alden’s offer in January and spiked to near $12 shortly after it.

So $13 starts seeming pretty good. And given even a $9 share price, a cash-and-stock offer could be successful, with the shares serving as a potential upside.

But one would have to be optimistic for that the upside. Take a look at this one-year share price change chart:

Gannett down almost 24 percent, Tribune down 35 percent, McClatchy down 76 percent. “Optimistic” may be the wrong word; “settling” and “getting out” might be better characterizations.

So how soon might Gannett buy, sell, or merge? Perhaps Alden could back with a new bid — though its comments on losing the fight suggest otherwise.

One thing we know is that Gannett is now, after this nasty fight, about to hire its next CEO. Presumably he (and it is expected to be a he) will check two boxes Gannett has wanted to check: (1) a name that the industry will recognize; (2) digital business credibility.

Will that next CEO be next operational leader for a company that badly needs new strategy and better execution? Or will he be Gannett’s chief dealmaking officer in the Consolidation Games? Given all the uncertainties, the CEO’s golden parachute should be eye-popping — maybe in the ballpark of Tronc’s small Air Force.

Throughout the Gannett/Alden war of words, Goldman has been working in the background. Among the prime tasks is valuing what a combined Gannett/Tribune would look like — an exercise the two companies rehearsed last summer, though with no public performance. Quite simply, how much would each company’s shareholders get in the deal?

That’s the other ante. How much cash will it take to buy one of these companies? Given the industry’s dismal trajectory, how much financing can be obtained? Each new valuation must reflect the most recent public financials, plus whatever access these companies’ give potential suitors to their data rooms. (Alden found a “closed” sign on Gannett’s.)

This month’s Q1 reports only reinforce the bloodbath of decline industry-wide. Tribune yesterday announced it was down 8 percent in same-store revenues (after doing some gymnastics with its reported figures). That’s losing $1 out of every $12 in one year — a number that parallels its peers and has been remarkably consistent the past two or three years.

And yet: “Adjusted EBITDA increased to $21.3 million, up $12.8 million year-over-year.” Operating expenses were down 6.5 percent, and that of course means fewer journalists doing journalism.

Therein lies this larger M&A push: Where else can any of these companies get big (if short-term, think 2 or 3 years) savings to slow their downward spirals?

Print advertising remains down double digits across the industry, and digital advertising — even if you include “marketing services” — is newly weakened in the face of Google and Facebook’s 77 percent share of local digital ad revenue. “It’s been growing for six years,” one top revenue exec told me this week. “This year, it’s struggling.” Local digital subscription revenue is the one operational area the industry looks to for growth.

As Tribune continues to assess who it wants to sell to, or buy, or merge with — McClatchy continues its search for a partner. And, as I noted a month ago, even GateHouse — the past few years’ go-go acquirer, amassing 145 titles — is now reassessing its own strategies. Those plans haven’t turned the company around. Will it remain a standalone company (known formally as New Media Investments, Inc.)? Or will it participate in a grand industry rollup that some have prophesied for years?

GateHouse may be more cash poor than in years past. But it is still backed by giant Fortress Investment Group, which was itself bought in 2017 by supergiant Softbank. The capital is there. Does anyone there see enough profitability in owning one-sixth of all America’s daily newspapers — which is what a GateHouse + Gannett marriage would produce?

Mostly, that’s a question of sheer investment potential. At what price — given all the somber forecasts for the years ahead — does anyone feel comfortable putting down a bet? Certainly, Alden — able, willing, and apparently eager to ride the print newspaper industry down to its end — will be a buyer at some price. (Word is that its execs were checking out other, smaller potential acquisitions as recently as last week.) But is there anyone else?

If we do see big mergers, who will run the companies that result, with what strategies? And — big question — will they have enough capital to execute on their vision of a digital transformation?

Familiar story. New chapter. All today’s news does is turn the page.

In this edited Q&A — assembled from my interview with Thompson for this accompanying story — I asked Thompson about the wider takeaways others might take from the Times’ success.

He’s a bit more circumspect now, but he still likes to talk about the Times as a “navy that can fight on many fronts” and characterizes his multiple strategic positions as places “where we can stand and fight.” In the age of Brexit, the evocation of British sea power is almost endearing.

But make no mistake: The Times’ fight — characterized more by movement than by standing still — has now delivered it to a position in global journalism unimaginable almost a decade ago, when it first started talking about a “paywall” to hoots of derision. It stands today as queen of the turbulent newspaper seas, head of a distressed fleet it can barely recognize looking back in its wake.

Two weeks ago, the Times released up its full-year 2018 financial report and its numbers shocked any “newspaper” industry watchers accustomed, for the past decade, to seeing only negative numbers. It again reported a year-over-year increase in revenue, up 6.2 percent. Its digital ad business grew 11.3 percent; print ads dropped, but only by 5.3 percent, about a third of the decline suffered by the rest of the industry. The Times can now count 3.4 million paying digital subscribers and 4.3 million overall. Thompson says that of those 900,000 “print” subscribers, 85 percent of them also use digital devices to some extent.

Symbolically, it makes sense that The New York Times Co. was the first publicly traded newspaper company to issue its annual report. As the rest of them surface over the next several weeks, they’ll present a marked contrast to the Times’. In fact, it’s this set of awful reports that is complicating the frenzied M&A strategizing — what I’ve called the 2019 Consolidation Games — among the rest of the industry’s biggest survivors.

Take Wednesday’s numbers from Gannett, which is currently struggling to fend off the rapacious Alden Global Capital. Gannett reported its overall 2018 revenues were down 6.1 percent and its fourth-quarter publishing revenues down 8.5 percent. So the Times, in being up 6.2 percent for the year and in being up 10.4 percent for the fourth quarter, has in effect created a 12-to-19 percentage-point gap between it and America’s largest newspaper chain. That number marks the end of one era and the dawn of another as well as any.1

Three numbers now stand out to me most prominently in thinking about the Times in 2019:

• It now employs 1,550 journalists. That’s 1,450 in the newsroom and about 100 in the Opinion department. The Times’ news force in total — still twice the size of the rival Washington Post, which has increased its own staff at roughly the same rate as the Times in recent years — will grow even more this year, Thompson says.
• The Times’ share price burst through the $30 barrier earlier this month, a height not seen since May 2005. It’s up nearly 50 percent just since January 1. Investors believe this new digital business is sustainable and even a good investment. They value the company today at $5.38 billion; towards the end of 2016, that number was less than $2 billion.

Long-ago Times competitor Gordon Crovitz, former publisher of The Wall Street Journal, thinks that investors still undervalue what the Times has become. “Do equity analysts fully appreciate the greater value of high-margin, recurring digital subscriber revenues versus the historic print advertising revenues? Shouldn’t the NYT be trading at revenue and EBIDTA multiples more like an information-services business than like a structurally challenged, still advertising-reliant newspaper business?”

Crovitz brings some experience on that question. “In the early 2000s, I made this pitch to the equity analysts who followed Dow Jones when it was an independent company, and incremental earnings from high-margin digital subscriptions to the WSJ accounted for all the brand’s profits.” His question is a good one and gets to the core of both the sustainability and valuation of majority subscriber businesses.

• “10 million subscribers,” a Times aspirational mantra I first wrote about two years ago, has now has been given a deadline by Thompson: 2025. Now that the Times is more than 80 percent of the way to its previous big goal — $800 million in digital revenue by 2020 — it was time to install a new goalpost. You might be surprised by how the Times plans to get to that new goal.

In a wide-ranging one-hour interview last week, I talked with the Times CEO as much about the future as about the recent past. (You can, and should, read a lot about that in the Q&A with Thompson that accompanies this article.)

The Times’ success is a welcome tonic to anyone consumed with worry about the fate of the press into the 2020s, a fear neatly summarized recently by the former Guardian editor Alan Rusbridger: “We are, for the first time in modern history, facing the prospect of how modern societies would exist without reliable news.”

The Times’ success doesn’t turn around the miserable woes of the local and regional press in North America and western Europe. But it does offer lots of intelligence about the path forward.

The Times, of course, enjoys an enviable market position to reach what the internet rewards most, scale. But in its beliefs in increasing its volume of high-quality content, in hiring the best journalists, in creating superior mobile products, and in providing a technological foundation to support that business, it can teach lots of lessons to any news operator — no matter the size. Let’s look at a few of them.

The 10 million — and anticipating The Trump Slump

Of those 10 million eventual digital subscriptions, how many does he think will be to the main news product? How much of the Times’ future growth will depend on diversifying both its content and its products? Thompson is quite clear: The core of the Times is trustworthy news and analysis, and that ship’s flag flies highest and first.

I asked him which metrics matter most in that path to 10 million. He said he’s focused on the number and nature of those engaged but not subscribed. (“I look at the health of that group,” he told me.) So, while retaining those 3.4 million digital subscribers is Job 1, farming the next group of likelies is the next one. A key question the Times is asking: What kinds of experiences make them want to go deeper?

Despite all the targeting and propensity modeling the Times has done — it counts about 300 in its Marketing, Product & Design and Data Insights groups — Thompson acknowledges that the Times still needs more “rigor” in understanding all the complexity in the path from Times discovery to Times sampling to Times readership to Times subscribing.

He talks about the multiple levers the Times pulls. There are the newsletters, the homepage presentations, the podcasts, the introductory offers, and more — all of them efforts to turn partially engaged audiences into subscribers.

There’s one more lever the Times may soon pull harder: registration. Registration, as all subscriber-seeking publishers know, is a great onramp to eventual payment; “subscribing” to free newsletters has been a great tactic. The Times may try requiring all those who download its free app to register — something it doesn’t currently require. The Times knows what other top publishers know: App users consumer magnitudes more content than browser users. Maybe such registration could lead the Times to higher (and faster) conversion of the partially engaged.

At the same time, the Times’ resources allow it to test new products. That’s in part about understanding the whole Times reader; it’s also in part about believing that there may well be a Trump Slump at some point — an era in which Times readers no longer feel the need to compulsively check their iPhones in trepidation of what just happened.

Next up is a new effort to get to younger families. The Times will soon deliver Parenting, a product which has had a long gestation and will be nurtured slowly. The Times would like to be able to add it to its paid-niche-product complement — led by Crosswords and Cooking, which together account for 35 percent of new digital subscriptions, albeit at far lower price points than news subs. Parenting, though, will be free at launch, led by newsletter seeding and lots of engagement watching. At some point, the Times will look to charge for it.

Down the road, that leads to bundling possibilities, Thompson says. News + Crossword. Or News + Cooking + Parenting. Or combinations still to be created and tested.

It’s a big world after all

It’s even easier than normal for Americans to forget these days, but the United States is only home to five percent of the globe’s populace. Lots of publishers have eyed the potential markets outside their own borders, and all of them are closer to the beginning of reaching it than the middle.

The Times’ outside-the-U.S. sales, though, are beginning to boom. Even as the intense political news cycles drive domestic subscription totals up, the Times’ international growth rate exceeds its U.S. one. In all, 16 percent of Times digital-only news subscribers are international. International readers make up 26 percent of its total digital audience.

I’ve tracked that percentage of international subscribers for at least three years, and it’s usually come in at 12 or 13 percent. Sixteen percent is noteworthy.

So how many of those would-be 10 million subscribers in 2025 will live outside the United States? More than two million of them, Thompson believes. That’s an astounding number — and it’s based on extrapolation through data. Another area of growth is in female readership, which now makes up a majority of Times users, after decades of a male-dominant readership. The Times says (without providing specific data) that over the past two years, “our readers and subscribers have become generally more female, compared to before 2016 election.” That could be an indication that the Times’ efforts to broaden its content mix — as best showcased in its burgeoning Smarter Living story count — is working. (It could also mean women concerned about the direction of American politics make up a larger share of that Trump Bump.)

Finally, the Times says it is moving beyond its areas of greatest subscriber concentration in the Northeast, mid-Atlantic, and West Coast. Which states showed the highest year-over-year growth in subscribers? Florida, Arizona, Georgia, and Connecticut.

The Times’ human voice

The Times brand has long stood, domestically and globally, for authority. But its voice has long been above the fray, often aloof. You may trust the Times, but you didn’t feel a lot of affinity for it.

That’s started to change. It’s The Daily, the Times’ breakout podcast, that best symbolizes the loosening of its tie and dropping of its shoulders. Launched two years ago and hosted by unlikely Times personality Michael Barbaro, The Daily was Apple’s most downloaded podcast in 2018 with 8 million monthly listeners. The best thing about that audience: Nearly 75 percent of it is 40 and under, the Times says.

On the platforms

The Times has been the most public about its testing of Subscribe with Google, and Thompson doesn’t want to go into detail about similar relationships with Facebook or Apple. Why partner? It’s data, mostly: “Machine learning. They know a lot about their audiences and we want to know more.”

Those were the days

Thompson notes how the Times, which once enjoying a unique recruitment business, has lost almost all of it in print. “We had $130 million in help wanted in 2005. Last year, that was $6 million or $7 million.”

The collapse of classifieds — recruitment, real estate, and cars — marked the first major downshift for the newspaper industry. The Times, almost uniquely among the “papers” that once counted on classifieds for outsized profits, has found a way past that major disruption.

The world outside newspapering

You might think that Thompson has been focused mainly on the impacts of the Trump Bump and avoiding that potential Trump Slump. However, he can readily tick through a list of other overarching phenomena that are not only changing our world, but necessarily force those who run news businesses to think through their impacts. In eight words, he reminds us how those who intend to operate news businesses successfully well into the 2020s must take a wider focus in their vision: “Globalism, automation, the decline of the West, and human migration.”

1. Editor’s note: This paragraph originally misreported Gannett’s numbers, confusing its fourth-quarter and full-year results. They’ve been corrected.

It’s reminiscent of an earlier brand of warfare. Newspaper chains — all cutting desperately, each facing a shortening deadline to make a “digital transition” — line up their dealmaking armies, swords sharpened if not yet crossed.

Gannett, having rejected the hostile takeover bid of Alden Global Capital, has decided to hire Goldman Sachs to advise it on the next rounds of dealmaking, I’ve learned. Goldman participated in Thursday’s Gannett/Alden meeting, alongside Greenhill, its ongoing deal-advising firm.

As that meeting happened, Alden, with its banker Moelis, filed an alternative slate of directors for election at Gannett’s upcoming annual meeting. That action, though, is just another uncertain indicator of whether it’s Alden’s true intent to acquire Gannett, a number of insiders have told me.

As Bloomberg’s Brooke Sutherland summed up well in her lede on Alden’s slate: “The more MNG Enterprises tries to prove it’s serious about buying Gannett Co., the less credible it looks.” (MNG, née MediaNews Group, is the name Alden uses for its newspaper holdings, conglomerated after two bankruptcies.) Remember, Alden’s initial move against Gannett said both that it wanted to buy the company and that Gannett should begin “a review of strategic alternatives to maximize shareholder value.” That’s a baffling combination — do they want to buy the thing or not? Then Alden failed to show Gannett enough financial wherewithal to actually fund an acquisition. Then, after just one rebuff, it filed the alternative slate. Of course, the deadlines of the corporate calendar drove the board filing — but still, it all looks maladroit, clumsily rapacious for the cutthroat Alden.

On the sidelines, Tribune Publishing — an active would-be seller for most of the last year — is waving its shiny, largely debt-free balance sheet Gannett’s way. It’s now advised both by Lazard and Methuselah Advisors LLC.

Curiously, in this small media banker world, switcheroo is fair game: Two years ago, Methusaleh was advising Gannett as it company fended off a hostile bid from Michael Ferro’s Tronc — the company now known (again) as Tribune. And who was representing Tronc then? Goldman. Importantly, all these parties know one another — and the innards of these companies — well.

While a Gannett/Tribune merger looks like one of the likeliest Alden alternatives, Goldman will look broadly at the industry landscape and where Gannett best fits in it — whether as a seller, a merger, or a buyer.

As these three companies line up, a fourth — McClatchy — is looking for its own place on the shrinking battlefield, as I detailed as February began.

“It could be weeks — it should be weeks,” one of the participants told me at the end of last week. “These parties know a lot about each other already.” But all the same questions about valuation (how can you best forecast these companies’ earning power over the next few years?) and financing remain. (How much is it back to the drawing board? “A lot has changed in a year,” another insider said. “In some ways, we have to start all over.”) So any timelines remain TBD.

None of these companies comment on the action, of course, beyond issuing standard-letter comments on each other’s action, as last week when Gannett decried Alden’s board slate and formally rejected its $12-a-share January offer.

Each company has a lot on its plate right now. Bad budget projections for the rest of the year have made this the season for workforce cuts, with McClatchy’s, Gannett’s, and GateHouse’s all making the news. These companies are also preparing to release their full-year 2018 numbers, scheduled over the next several weeks, which will all be down. The biggest investor questions will revolve around forecast earnings for 2019.

While none of these chains has reported yet, The New York Times Co. did last week — further demonstrating how much it has separated itself from its former print brethren. With remarkable numbers, the Times showed new strength that propelled its share price beyond $30 in more than a decade. Remarkably, in doing so, it grew revenues 6.2 percent year over year — a number few other newspaper companies could even realistically daydream about. Digital advertising climbed 11.3 percent for the year, with print advertising down only 5.3 percent.

The Q4 numbers, which included the usual end-of-year holiday bump, were even better, up 23 percent year over year. In Q4 2017, the Times pulled in 17 percent more money from print advertising than from digital. In Q4 2018, the ratio was reversed: It generated 17 percent more money from digital advertising than from print.

Those numbers — oh, and its 3.4 million paid digital subscribers (and 4.3 million overall, including print) — are something whatever execs are left at Gannett, Tribune, McClatchy, and Alden can only marvel at.

We could construct quite a chart of the divergent trajectories of the Times against the chains, individually or collectively. But you hear almost no one in those chains talking about why The New York Times (or the Financial Times, or The Washington Post, or The New Yorker) has been so successful, and what their own companies might apply accordingly. Fundamentals like:

• an increasing volume of high-quality, knowledgeable reporting and writing
• data-driven marketing systems that accurately assess readers’ likelihood to subscribe, and then use that knowledge to convert more of them into subscribers
• advertising innovation that competes well into the Google/Facebook-dominated digital ad world and recognizes that advertising continues to be a prime driver of journalism company revenues, if now a secondary one
• respect for the consumer that seeks to exchange a constantly improving product for earned payment

There are plenty of other lessons to apply, but I’ll stop there for now.

Instead, in this M&A quagmire I’ve called the 2019 Consolidation Games, we get charts like this:

This chart, offered up by Alden Global Capital as it presses Gannett to accept its buyout offer, says so much in so few words.

First, let’s just take note of the enormous violence being done to the art of data visualization here — the non-zero baseline, 11.8 and 11.6 percent being the same height, but 13.4 percent being higher than 13.9 percent. The graphics people at their newspapers would do better. Here’s a more accurate portrayal of their numbers:

Alden points to its MNG EBITDA, or earnings before interest, taxes, depreciation and amortization. “Ours keep going up,” it essentially says, “while yours at Gannett decline. Prima facie evidence that we can manage decline better than you can.”

The numbers tell us much more.

Some history: After I reported on Alden’s outsized profits here in May 2018, the company complained that the numbers were wrong — “we don’t know where they came from,” “they do not reflect the true cash flow of these businesses,” “those aren’t the real numbers” — and that actually Alden’s profit margin was nothing special.

Some quotes from a June staff meeting at The Denver Post with Joe Fuchs, the board chair of Alden’s Digital First Media (emphases mine):

We don’t produce the kind of profit margin that some of the competitors do, but we are in there to be sort of be in the midrange of what I would call profitability…

So, what is an appropriate profitability? You know, that’s a real tough question to ask. I’d say, I said to you before, we compare our numbers with everybody and then some private companies when we can. And we’re sort of in the middle.

…trust me, we do not want [the Post] to fail, we want it to be vibrant we want it to be a force in the community and yes, we want it to be profitable in the range that is sort of the norm within the industry. Nobody’s driving it to be the most profitable.

Now, instead of saying it’s only a middle-of-the-pack profit maker, Alden has reversed course and points with pride to its top-of-the-industry profiteering.

Further, Alden does manage to show that while both companies have cut and cut — with staffing at some Gannett newspapers no better than the more publicly maligned Alden-owned ones — Alden’s success in squeezing accounts better for itself. Why invest in what it sees as Gannett’s digital marketing businesses of dubious profit potential when you can line your pockets more thickly?

So where do we think the action goes next?

By all accounts, Gannett — with lame-duck CEO Bob Dickey retiring and board chair John Jeffry Louis shouldering the burden of leadership — prepares to do battle with Alden. Between now and its annual meeting (expected this spring, though the date is as yet unannounced), Gannett wants to make sure it can defeat Alden’s board slate, and that its directors can maintain control of the company’s fate. That’s job one for Goldman. The fact that Alden baldly put up a group of its own insiders — including Joe Fuchs and former DFM CEO Steve Rossi — helps Gannett’s argument that the slate is simply meant to deliver Gannett to Alden, and not “pursue Gannett’s best interests.”

This morning, Gannett increased its aggressive response to Alden’s offer, on numerous grounds, including these gems:

At least three of MNG’s candidates may be legally incapable of serving on the Gannett board under applicable antitrust laws, given their roles with MNG, which is a competitor of Gannett. Several other elements of MNG’s notice to Gannett raise additional concerns regarding the credibility of its proposal, including nominating 78-year-old Mr. Fuchs, who exceeds Gannett’s mandatory retirement age applicable to all directors, and MNG’s statement that it reserves the right to substitute director nominees in direct contravention to Gannett’s bylaws.

But it still has to prepare the defense.

The question then: Hamstrung by that defense and less-than-robust leadership, will it have enough bandwidth to seriously enter new talks with Tribune Publishing and its new CEO Tim Knight? Knight, with the backing of his board, his advisors, and 25 percent owner Patrick Soon-Shiong, would like to put together a Tribune–Gannett merger. And, we can expect, he’d like to become CEO of the combined company, which would by far be the largest newspaper chain in the country. (If Alden managed to snatch the CEO-less Gannett, who might lead that combined company? Two sources this weekend suggested that same Steve Rossi, who retired as Digital First Media’s last CEO in 2017.)

The path is there. Combine the companies, claim $100 to $150 million in synergies over two to three years, and make the case that it’s in the best interest of shareholders, employees, and readers. And proclaim that it’s a better deal for shareholders than Alden’s offer.

Gannett and Tribune negotiated last year, but talks fell apart on valuation issues (how much of the merged company each side would get) and on whether ex-Tronc chairman Michael Ferro would get a board seat.

That was 2018. Sources say Ferro, who still heads a group that owns 25 percent of Tribune, has now dropped his demand for a board seat. His hand-picked CEO Justin Dearborn is gone, dispatched last month as damaged goods in order for Tribune to finally get a deal done.

One would-be dealmaker offered this arithmetic. Combine the cash flows of Gannett (around $300 million), Tribune (around $100 million) and merger synergies (let’s say $100 million), and that can support the financing — in addition to stock swaps — needed to get a deal done.

The companies have each done their analyses on how a merger might work — even though the industry’s worsening state, updated revenue forecasts, Tribune’s plummeting share price, and the threat of recession will all force revisions. February and maybe March should be about these companies and their advisors working on those two issues: valuation and financing.

What’s a split of the new company acceptable to both parties? Could the deal be done as a stock swap, or it would necessitate new financing? If so, at what cost?

That’s the money side. But there’s also that other element in any negotiation: time. It’s fleeting, faster than all the print ad dollars exiting newspapers. Will Gannett be able to deeply engage with Tribune at the same time it battles Alden?

Can it afford to spend that time? Can it afford not to?

So go the fortunes of four of the six largest U.S. daily newspaper companies. The journalists’ Twitter is alight with Game of Thrones metaphors, but I think that’s misplaced. The action seems more Bravo-esque, The Desperate Housewives of Main Street, perhaps. Or, more prosaically, as one newspaper company exec told me Wednesday, “The pressure for consolidating is only intensifying.”

Those aren’t the only digital media soaps in action. Consider the draconian, get-ahead-of-the-recession first-of-the-year layoffs at both BuzzFeed and Verizon, and Friday at Vice. Take that as one end-of-the-decade sign that the VC-driven, digital media hockey stick of near-infinite growth is badly bent, if not broken. Infinity, it turns out, isn’t infinite. Then, there’s Conde Nast’s suddenly getting paywall religion, announcing it will — after years of dithering — paywall them all, in some fashion. “I’m not sure what they are doing,” one magazine industry pro told me this week. “They’ll lose 90 percent of their traffic.” And so, as Condé has dispatched CEO Bob Sauerberg on the heels of a $120 million annual loss, there’s more potential M&A.

Is it all connected? And how much does it matter?

There’s Jill Lepore’s “Does journalism have a future?” Or Farhad Manjoo’s “Why the latest layoffs are devastating to democracy.” Jeff Israely’s “2009: The internet is killing (print) journalism. 2019: The internet is killing (internet) journalism.”. Or AP’s: “Loss of newspapers contributes to political polarization.”

CNN blared: “Media industry loses about 1,000 jobs as layoffs hit news organizations”.

And The Newseum, the temple of what-journalism-once-was, looks as if it could be sold off for parts.

All in two weeks.

Yes, it all matters, and it’s all connected.

The state of consolidation games

As January plummeted to a close, attended by those thousand or more journalism layoffs, where do we stand with all the huffing and puffing around newspaper company M&A? (The companies declined comment on their potential buying or selling strategies for this piece.)

At this writing, Gannett, having taken several weeks, will soon formally tell Alden Global Management a polite no to its “offer” to buy the company for about $1.5 billion on January 14. Though the Gannett board, which met Thursday, is suspicious that Alden doesn’t have the financing available to complete such a buy — and Alden, sources say, didn’t respond to its request to show Gannett its money — its public suiting has awoken Gannett anew. And that may have been its game plan all along, in making its “offer.” On Friday the Wall Street Journal reported that Alden’s DFM has hired a financial advisor to press its buying case. (See my best reporting-informed speculation, below.)

So what do we do know about Gannett today?

Expect the company to soon complete its process of hiring a banker to work alongside its long-time advisor Green Hill. That banker will help Gannett assess its market position. Another way to put it: America’s largest regional daily newspaper chain, the globe’s second largest given its ownership of UK’s Newsquest, is in play.

“Ask the banker” will tackle these questions: Should Gannett sell itself — and at what value and price? Should it buy? If so, what? The company experienced corporate indigestion in swallowing whole the Journal Media group in 2016. Then, it kneecapped itself in making a hostile effort to buy out Michael Ferro’s then-new trophy Tribune Publishing/Tronc, later that year. It was enough to make Gannett publicly swear off buying more newspapers — even as its merger negotiations with then-Tronc (now Tribune Publishing again) continued.

Instead, CEO Bob Dickey, who’s headed into retirement this spring and was told to focus more on “digital” by his board, re-targeted his efforts in buying digital media. In fact, it was Dickey’s buy of digital marketing companies that gave Alden a talking point, as it stalked Gannett.

Meanwhile, Gannett continues to reel internally. In January it laid off dozens of people. It’s cutting back on its heavily promoted program of placing USA Today national news inserts in many of its 109 dailies, multiple sources told me. Those inserts have largely been standalone sections; now they’ll become more integrated with local newspaper sections. That saves on newsprint cost, which ran as high as $20 million annually when the sections were introduced five years ago. One potential result: less space for local news. And, of course, fewer journalists to fill the pages anyhow.

“I am getting the feeling that Gannett, especially with the January cuts, has moved a lot closer to DFM news staffing than is generally recognized,” one veteran news manager told me. “I see the El Paso Times [with a metro population of 844,000] shows 13 people on its news staff. The editor there retired some months back…One person told me their goal is not more than one senior editor per state…This all just makes me wonder if Alden really knows what has been cut in recent years. They wouldn’t have had the detailed financials, given that it’s a hostile offer.”

As the company looks for anywhere to trim, like all public companies, it eyes the calendar. In February, Gannett, Tribune, McClatchy, Lee and the other public companies will have to report their fourth-quarter, 2018 and full-year financials. They will be ugly. The question: How ugly?

Gannett has already announced cutbacks — but it won’t be alone as companies trim ahead of the earnings reports to show their commitment to shareholder value.

Fast-declining revenues are a certainty. But how did these declines impact earnings, and what do the CEOs forecast for 2019? As wheeling and dealing among newspaper chains continues, the price of assets — the valuing of merging, acquiring or selling — gets adjusted. The weaker the results, the more vulnerable the company. The more vulnerable the company, the lower a potential sales price or valuation in a merger.

There’s also financing to worry about. Financing is tighter now than it was in mid-2018, though it has eased some from December. That isn’t only the case for the ailing newspaper trade (see Tuesday’s news that Gamestop’s buyers couldn’t get financing to complete an acquisition). But it is truer of newspaper companies, given how tough it is to forecast going-forward earnings in an industry declining so rapidly. Any of these potential deals faces tough financing standards. “Lenders now want to see any deal include some deleveraging,” said one financial observer. “If it doesn’t, it won’t fly.”

How long will the consolidation games go on?

There’s lots of action ahead. For its entire history, the U.S. daily newspaper industry has been a fragmented one. In the beginning, local printers became publishers.  Most were one-offs, single proprietors. In the seventies, eighties, and nineties, chains — Gannett, Tribune, Knight Ridder, Advance, Hearst, MediaNews, Lee, and more — grew. But they were still outnumbered by the number of family-owned concerns across America. Importantly, no single company dominated the landscape.

Today, Gatehouse (under New Media Investment Group) leads the pack with about 155 dailies. Amid all the would-be M&A hysteria, Gatehouse CEO Mike Reed has stuck to his knitting and his strategy of buying up remaining family-owned, smaller circulation titles, some in small chains, as well as individual properties. It is an approach characterized by greater precision and less rancor — and the need to incrementally grow topline revenues by acquisition. Although the company performs at the top end of regional chains, it still is losing about five percent of its same-store revenues year over year.

Just this week Gatehouse bought long-time independent Schurz Communications for $30 million, adding 10 dailies and 10 weeklies to its total. Reed’s value-oriented buying — backed by ready, lower-cost financing through Gatehouse’s operator, Fortress Investor Group — has been steady. It will likely continue to buy, as it can more easily raise money where others can’t.

All totaled, three companies — Gannett, Gatehouse, and Digital First Media — now control about a quarter of the remaining daily titles. That’s a significant concentration, historically. But in an industry where expense reduction is the prime strategy, much more consolidation is likely on the way. Little regulation prevents it, and the financials all favor it.

There remain some newspaper chain CEOs who still see a straight line between maintaining, if not growing, their title’s journalism capacity and the product quality, mainly digital, to deliver. They are a minority, unfortunately. For one, fewer and fewer would-be buys — at the prices the market still demands as of this moment — appear palatable.

“Yes, we could buy select properties, but the multiple would have to be low enough, considering the reinvestment needed to maintain EBITDA through recession,” said one of the savviest, speaking of the Tribune titles. “And we just can’t justify the reinvestment necessary in these papers to get them through the recession.”

Q: How much does the fear of recession drive M&A thinking?

A: A fair amount.

The next recession may not happen anytime soon, but in the words of economist Sam Khater, there’s a “mental recession.” Corporate chiefs, in newspapers and in other industries, now largely assume one. For many thriving industries, that just means a re-calibration. For a newspaper industry in such a distressed state, this driver carries more weight. Buying any newspaper property may require more reinvestment and for a longer period if both revenues and profits take a further hit in a 2019-2022 recession.

The fear of recession is one of at least two drivers connecting those dots from Gannett/DFM to Buzzfeed/Verizon and Conde Nast. Everyone in the media business believes it is going to get worse — before maybe getting better.

Q: What is the other common thread?

A: Google, Facebook, and increasingly Amazon dominate digital advertising and will likely will take more and more share, especially into a recession. The most recent estimate is that they control 61.9 percent of the digital ad market, worth $111 billion. (For every one percent, you could pay the salaries of over 10,000 journalists, but I digress.) (Digital disruption has wounded every legacy news and information industry in the Western world and now it’s turned on the digital news disrupters as well.

Q: What does Heath Freeman, Alden’s president and Digital First Media magnate, really want? Is Alden a buyer, or a seller, or a lemon-squeezer?

A: There’s a one-word answer: Money. To his credit, in the stories often told by his former management, Heath and DFM are really straight shooters. They’re just greedy in the “Wall Street” sense, although today’s newspaper industry is rapidly redefining the possibilities of looting sinking ships.

Four possible rationales have emerged for Alden’s bid for Gannett:

1) Alden looks at Gannett and truly sees lots of fat, despite all the skinnying Gannett management has done for good part of the decade. That’s why Alden’s bid freaked out so many Gannett employees: It could get worse.

2) Alden wants to juice Gannett’s share price so that its 7.5 percent stake, bought at about $9.68 a share, will increase. Alden cashes in and makes more money without actually having to strip any more parts from any new newspaper company. Alden’s $12 offer shot Gannett’s share price up from the $9 range, and it still rests at about $11. On paper, then, Alden’s got about $11 million.

3) Alden actually wants Gannett to buy it, as rumored recently. Would Heath Freeman sell anything? Yes — back to the single motivating principle, profit maximization. Is it likely that Gannett, which is stumbling its way into the new wilderness with a lame duck CEO, wants to buy DFM properties? No, and remember that CEO’s opinion above about how much any buyer would have to put into distressed properties. DFM properties are among the most distressed.

4) Alden wants to put Gannett into play. If someone else buys it, sending up the stock price, Alden wins. If Gannett is put into play along with Tribune, and with McClatchy eagerly seeking a deal, then maybe DFM could offload some or all of its properties as part of somebody’s roll-up strategy.

If you had to bet (don’t), you’d pick the fourth one. Alden does not appear to have the financing to make a $1.5 billion hostile takeover of Gannett possible, though its hiring of a financial advisor may tell us it’s more serious than some suspect. SEC law complicates the second option. The third one seems unlikely. Why not just cause more chaos in the flagging distressed industry and see what new hand Heath Freeman may have to play?

Q: Why is February 7 important?

A: That’s the date by which Alden would have to file an alternative slate of directors for a contested election at Gannett’s spring annual meeting. The maneuver would show Alden is serious. (Bonus points to readers who recall that Gannett CEO Bob Dickey fatally wounded his own hostile takeover of Tribune two years ago by missing the deadline to file an alternative slate in a Tribune board election.)

Q: What’s with these change-of-control clauses? Haven’t they played a major role in Tronc/Tribune Publishing’s directing of millions to a few top execs while whittling down their newsrooms?

A: Yes. Those with lots of experience in C-suite thinking say that “change of control” clauses actually carried some logic. The idea: Investors don’t want top management to reject a lucrative buy-the-company offer just to save their own jobs and incomes. Pay them well in the case of sale, and you’ve removed that disincentive.

In normal times in normal industries, that might make sense. In the newspaper industry of this wretched decade, it’s just been one more perverse incentive. As Howard Schultz gooped his intentions to run for president, journalists noted that he makes 1,049 times as much as the median Starbucks employee. I haven’t run the numbers in the newspaper industry, but it’s a number worth researching. These jobs should be well recompensed, but along the way some companies lost their ethical center.

Q: So what’s going to happen in February, or March?

A: The consolidation games push everyone into the pool.

Gannett will “assess its future.” That probably means rejecting Alden for now. Its likely next move will be to pick up the talks with Tribune that it abandoned in 2018. Now that Ferro lieutenant Justin Dearborn has been dispatched (deemed more likely to mess up a Tribune sale than help lead it), and Ferro himself has told people he would give up his long-time demand of a board seat, a deal is more likely. It would involve a stock swap, with the valuation of who gets what chunk of mergeco still the contentious issue. And who would lead? New Tribune CEO Tim Knight is the last man standing in those two companies right now, but is he “digital enough” for Gannett’s board?

Tribune badly wants to sell, but hasn’t closed the deal. It rejected a $16.50/share offer from McClatchy in December, and now trades at around $12. Suitors have included Will Wyatt’s Donerail Group and Jeremy Halbreich’s AIM Media. But in the wake of rejecting McClatchy, it couldn’t move on either of those deals. Price and financing are issues. It will likely turn to Gannett again. Importantly, Patrick Soon-Shiong, who owns 25 percent of Tribune, recently gave the Tribune board the ability to make its selling decision, giving up blocking rights. He wants out, and knows removing more obstacles to sale may finally seal some deal.

McClatchy was sorely disappointed that it failed to win Tribune. It would been more icing on CEO Craig Forman’s “deleveraging” cake, as he has pushed out the company’s big debt off into the 2020s. With Dearborn out, Soon-Shiong standing down, and Ferro’s interest maybe waning, could the deal be revived?

Or could Gannett solve its current identity problem by buying McClatchy? That would give Gannett an even bigger national footprint. But McClatchy’s $745 million debt (well down from what it borrowed to buy Knight Ridder 13 years ago) is a sticking point.

Still, financial analysts tell me that either the Gannett/Tribune deal or Tribune/McClatchy deal could result in $100 million or more of “synergies” — those cost savings that drive all of this action.

Finally, consider a few other players. Lee, a big chain of small dailies, could find a new partner. Gatehouse and Hearst will hang around the periphery, glad to pick up selected titles that may fall out of any big deals — if they can pencil them out to their satisfaction.

Could the moves presage the major rollup that’s been increasingly talked about in America’s now-in-play, ever-struggling daily newspaper industry? Does the move tell us anything about the likelihood of Alden Global Capital successfully winning Gannett?

What will Tribune, Gannett, Digital First Media, and McClatchy — four of the major U.S. daily chains, all involved in this possible buying, selling, and mating — look like when the newsprint M&A dust settles?

The suddenness of Dearborn’s removal suggests that bigger moves are imminent.

One theory: Tribune — in play itself but left without a good buyer — seizes the moment made present by Alden’s Sunday night bid for Gannett. As Gannett itself scrambles to fend off Alden (expect a meeting between the two companies by the end of the month), both Tribune and Gannett see the same opportunity: A Gannett/Tribune merger.

Gannett now sees a Tribune merger as probably its best move, if Alden’s charge is a serious one. Tribune investors — led by former chairman Michael Ferro, whose group controls a quarter of the company’s shares — want to sell. Though Tribune rejected McClatchy’s mid-December offer of $16.50 per share, Alden’s blitz has altered the board game.

With Ferro nemesis Bob Dickey retiring, in part due to Ferro’s victory in defeating Dickey’s 2016 hostile bid for the company, Ferro could gain the merger he sought and crow about a victory. At the same time, he could exit Tribune and satisfy his own Chicago-based investors in the company. It’s no secret that it’s been Ferro — not Dearborn — who was seen as an impediment to a Tribune sale. Now, though, Ferro may have softened his stance.

In fact, to get such a deal done, sources say Ferro would be willing to drop his previous demand for a board seat on the merged Gannett-Tribune. (Ferro’s poor reputation has only gotten worse.) Or, if the Gannett deal is a bridge too far, Tribune could act on the offers made by the two companies (Donerail Group and AIM Group) that came in behind McClatchy in the fall selling sweepstakes.

With Tim Knight ascending to the CEO position, and the likely elimination of three high-priced executives earning more than a million dollars annually in salary, Tribune cuts expenses. Further, it may be able to charge the share-based compensation — totaling $10 million or more — now. That’s the clearing, or financial clean-up.

Both moves would help in its calculation of going-forward EBITDA (earnings before interest, depreciation, taxes and amortization), which often stands as the key number in calculating a sales price. The fewer the going-forward expense obligations, the higher the EBITDA, on paper at least. Buyers then pay a multiple of EBITDA; Alden’s offer stands at about 4.7x EBITDA. Raise the EBITDA by a million dollars, and a selling company could see a return of about $5 million. Raise it by $10 million and it could yield — depending on the negotiating skills and leverage of the buyer — as much as $50 million.

As the news sprinted across the web that Ferro’s long-time right hand man Justin Dearborn was gone overnight, people puzzled. With his quarter-share of the company, Ferro has long controlled the company, its board and management.

Why would Tribune dispatch Ferro’s right-hand man, Dearborn, and two Ferro hires — Ross Levinsohn, the former Yahoo head whose brief stint as publisher of the Los Angeles Times was ended by sexual harassment charges, and Mickie Rosen — so apparently unceremoniously?

The “clearing the decks” metaphor offered by one financial analyst is one good theory. The fact that David Dreier, the former GOP congressman whom Ferro put on the board in 2016, becomes chairman buttresses the case. It seems more likely that this apparent coup has Ferro’s hand on it than that he and his people are the victims of it.

While Dearborn, Levinsohn, and Rosen are now all immediately unemployed, they stand to reap millions of dollars in stock and other compensation, promised to them in agreements Ferro provided over his tenure as Tribune/Tronc chairman.

Upon sale of the company, Tronc/Tribune packages provide millions of dollars in payout. Even as they exit the employ of the company, their stock grant redemption should hold, say sources.

In March 2018, Dearborn’s compensation agreement was updated. He received “an annual base salary of $600,000 and…an annual cash bonus, with a target of 100 percent of base salary.”

The most current Tribune SEC filing totals Dearborn’s compensation, including stock awards, at as much as $4,397,500 in 2017 and $8,123,914 in 2016.

While Dearborn served almost three years in the job as CEO, both Levinsohn and Rosen’s values to the company are much less apparent.

Levinsohn joined Tronc as publisher of the Los Angeles Times in August 2016. He hired Lewis D’Vorkin as editor-in-chief, and D’Vorkin lasted four months in the job, upended by staff mutiny. Levinsohn himself was there for less than six months, as sexual harassment allegations resulted in a suspension. An internal Tronc inquiry cleared Levinsohn and he moved on to become CEO of Tronc’s L.A.-based digital play, Tribune Interactive.

Both he and Rosen, whom he had hired as LA Times president, have since quietly headed that effort, amid many staff complaints that they were being paid to do little.

As I wrote from SEC filings in August 2017, Levinsohn’s package was huge: An employment term of three years, through August 2020. One million dollars a year in salary, $600,000 per year and an additional $100,000 per quarter. A cash bonus of up to 166.66 percent of his base salary. Stock share — exercisable on a vesting schedule of three years, in three equal installments over the term of his agreement — worth about $8.5 million at [then] current Tronc share pricing. Levinsohn would also receive 400,000 shares, plus 200,000 more in the form of stock options. The most current Tribune SEC filing totals Levinsohn’s compensation, including stock awards, at as much as $7,036,000 in 2017.

It’s unclear from this reading how and when exercisable those grants may be, but financial observers doubt that the let-go executives will forego that compensation. Further, a “change of control” at Tribune — meaning a sale — is the likely accelerant to these riches. That, as I’ve pointed out over the years, encourages executives to manage to a sale, rather than to better civic and reader service.

Such numbers will only further grill Tronc/Tribune’s many critics, who have accused the company of self-dealing and profiteering. “Tribune is still making money,” one observer told me. “They are taking the cash they earn in January, February and March and giving it Dearborn, Levinsohn and Rosen.”

Meanwhile, cuts to newsroom budgets have resulted in weakened Tribune products and dozens, if not hundreds, of additional job losses.

Tribune intrigue now joins Gannett intrigue, with January only halfway over.

We know the Gannett/Alden set-to should move well into February. Gannett’s been scrambling all week, getting its defensive ducks in a row. But Gannett is known as a “shareholder-friendly company,” meaning its defenses against unwanted suitors are weak.

Alden could take its case case to those shareholders by putting up an alternative slate of board directors. The deadline to file that slate is mid-February, a few months before the vote. (It was, curiously, Gannett’s failure to file an alternative slate on time in its Tronc takeover attempt of 2016 that fatally retarded its efforts.)

Expect a first meeting between Gannett and Alden by about month’s end. In the interim, Alden may be asked to demonstrate how it would finance a $1.4 billion cash acquisition. Speculation is growing that Alden only wants to shove Gannett into play, not actually buy it.

Public filings show that Alden paid an average of $9.69 a share for its 8.5 million Gannett shares. If it fetched $12 a share — bought by someone other than Alden at the price Alden offered this week — that would net the hedge fund $19.7 million in profit. After peaking at $11.95, a nickel under Alden’s bid, on Monday, the share price has drifted downward, but still surpasses the pre-bid pricing.

Inside Gannett, there’s great nervousness.

The company is trying to send out reassuring messages to its workforce. (Long-time industry watchers will note the irony here since Gannett’s own expansion led to worries, some well-justified, of the Gannettization of the papers it acquired. That was then, this is now, and as I noted two years ago, “Your Gannettenfreude will only take you so far.”)

Gannett employees’ woes are exacerbated by the knowledge that layoffs will follow a buyout offer. Even as Alden makes its laughable case that it can better manage Gannett, the company looks publicly weak as it cuts more staff and heads toward a full-year financial report in February that won’t be positive.

Further, there’s the little problem at the top. CEO Bob Dickey announced his May retirement in December. Company executives say uncertain leadership over the next few months is only a continuation of something that was a problem for more than a year.

“Bob was just checked out,” explains one associate. “He has spent a lot of time at his home in Bend [in Central Oregon, a long journey each way to and from Gannett’s suburban Virginia headquarters].”

“There’s no doubt he’s working when he is there, but he just has too little contact with top company execs,” added another.

Execs point to Dickey’s failed bid for Tronc as the beginning of the end of his tenure, which began when Gannett divided its valuable TV properties into TEGNA in 2015.

Dickey, too, was well-compensated as his company’s operating performance declined and it cut many journalists. His 2017 compensation was estimated at $8.7 million, following $6.9 million in 2016. In retirement, he will likely reap millions more.

At Tribune, Tim Knight moves into the CEO position. Long considered a “good operator” in newspaper publishing parlance, Knight kept his head down through the twists and turns of the Michael Ferro era at Tribune.

Within the industry, Knight has been considered the adult in the often fractious Tronc room. He’s the exec with decades of newspaper executive experience, leaving the Tribune Company after 13 years and then joining Ferro for four years beginning in 2011 as Ferro operated the Chicago Sun-Times. After a brief stint as publisher of Advance’s Cleveland Plain Dealer, Ferro hired him back at Tronc in March 2017. When Ferro left his formal position as chair of Tronc last March, Knight’s responsibilities continued to grow.

Yet, interestingly, as one source put it Thursday, “he’s not a deal guy.”

Knight’s tenure could be very short, depending on whether Tribune sells and to whom. But it’s also possible that he could become CEO of a Gannett-Tribune mergeco, the chieftain of the nation’s largest newspaper company.

On Monday, I noted the dearth of CEO newspaper leadership, as Digital First Media operates without one and Dickey heads to retirement and Justin Dearborn looked like a short-timer. Dearborn’s overnight disappearance surprises even me.

Now, Tim Knight (who was unavailable to comment Thursday night, as were other players in this story) joins the CEO group. He may have a parachute amounting to more than $4 million in potential compensation, but he’s in for turbulent skies and an uncertain landing.

Photo of Tribune Tower by Bernt Rostad used under a Creative Commons license.