Graceful newspaper exit

Updated 9am with WSJ coverage

Unlike the closing of the Rocky Mountain News, the online-only Seattle Post-Intelligencer, and the pending cutbacks (threatened online-only) at the San Francisco Chronicle, Wednesday‘s story from San Diego has a (temporarily) happier ending.

The U-T (as it’s been known since even before the 1982 merger of the two Copley Press papers) announced its own sale to Platinum Equity, a Beverly Hills private equity firm. The sale will mark the exit of the Copley family from owning the 140-year-old paper since 1928. As with other family-owned newspapers, the current owner (David Copley) has more interest in spending the riches, not running a business, and Copley has been dismembering the family empire for the past three years.

Terms were not announced. Rumors have it that the price was near $15 million, although Copley reportedly retained a share in the paper’s future success. The Voice of San Diego estimated that a metro daily should bring $500 per subscriber — which for the U-T would amount to $140 million.

Why did Platinum buy the paper? It doesn’t know how to run a newspaper, but it is working with David Black and his Black Press which owns the Akron Beacon Journal and bought the nearly-defunct Honolulu Star-Bulletin (a sickly paper in a two-newspaper town) for $10K in 2001.

One theory (advanced in the LA Times) is that the new owners are planning on consolidating the San Diego paper with other papers — since both the main Orange County and Los Angeles papers are for sale.

Another theory is that the new owners — like other private equity firms — will just be more ruthless about cutting costs. While local politicos hope for improved coverage, David Black promises “reorganization and severances.” Black has a reputation for hyperlocal coverage and deep cost cutting.

A third explanation is Platinum is not buying a newspaper, but a real estate company that comes with a paper. One estimate is that the paper’s 13.5 acres of land is worth about $105 million, which would be a pretty good acquisition for only $15 million.

This latter possibility would not be encouraging for either newspaper employees or the San Diego public. When private equity firms bought Mervyn’s, they sold the real estate at a profit and left the department store to wither into bankruptcy.

Still, if the UT dies — or goes online only — there are already other alternatives. San Diego also has a decades-old (printed) weekly newspaper (San Diego Reader) plus three online-only papers: the Voice of San Diego, San Diego City Beat and the planned San Diego News Network. Online news snippets are also available on six local TV websites and three local news radio stations.

Update Thursday 9am: The Wall Street Journal account this morning is entitled “San Diego Paper Lands Fire-Sale Buyer”. Two excerpts:

The deal price wasn't disclosed, but a person familiar with the matter said it was less than $50 million, a price largely driven by the Copley Press real estate, which includes the complex housing the Union-Tribune and another facility.
…
The paper generated about $100 million in cash flow in 2004, according to people familiar with the paper's finances, meaning the Union-Tribune could have been worth $1 billion based on valuations at the time. Now, the paper is close to break-even, these people say, as it has been battered by the collapse of newspaper classifieds.

In only five years, the value of being a monopoly user heir has fallen 95%. This is likely to engender panic among the coupon-clipping 3rd and 4th generation heirs of newspaper dynasties like the Sulzbergers (NY Times) and Grahams (Washington Post).