Baltimore Sun Resurrection My intentions as a “gnat” publisher (Michael Olesker’s description of me in 1990) would be to preserve the First Amendment in Maryland and its role as the Blue State’s Forth Estate, rather than preserving The Baltimore Sun simply because it is a Baltimore institution. However, The Sun's relentless coverage of the BGE and FPL attempted merger, and its hard hitting exposé on ground rents had significant impacts on these important issues. That said, I feel the need to share some insights for whatever they are worth.

My sale of The Daily Record in 1994 was predicated on the premature paranoia that the internet would wreak havoc on legal and classified advertising. That premonition has come to pass. Craigslist, The Examiner, eBay, and the Facebook/My Space consumers are just a few of the challenges facing The Baltimore Sun.

Requests for an interview with Ted Venetoulis were either ignored or lost in digital oblivion; so this reluctant blogger decided to provide some gratuitous suggestions for survival of The Baltimore Sun.

UNION COOPERATION

Sam Zell purchased Tribune for a cash value of 4% of its public market value - chump change relative to his net worth of +/- $8 billion. He knew full well that radical surgery would be required to turn the company around. Without union buy-in at The Baltimore Sun, the turnaround will be stillborn. To provide an example, the survival of The Daily Record depended on my giving 24 employees of the Baltimore Typographical Union lifetime guarantees in exchange for direct input of content in 1984, which facilitated a financial turnaround. The newspaper unions are resistant to change. The Baltimore Sun does not have decades to get them on board. Union cooperation from the start is critical.

CAPITAL STRUCTURE

Steve Rattner left his job as a reporter at The New York Times to become an investment banker. In a Wall Street Journal article entitled “Red All Over – Is there any hope for the future of newspapers?”, he leads with the declaration that “the news about newspapers could hardly be more dismal: falling circulation, repeated rounds of layoffs, disappearing ads and a chain of bad earnings reports”. He addresses the notion that the public markets have no appetite for a declining business and that the “mogul-in-chief brings its own complications”. With this doomsday picture, he does offer one suggestion that may be relevant to the buyout of The Baltimore Sun. He suggests a not-for-profit status. Baltimore is blessed with numerous foundations including The Abell Foundation. If saving The Baltimore Sun is in the public interest of Baltimore, why not include a preferred level of funding that includes non-profit funds such as the Annie Casey Foundation which has $3.3 billion in assets – a twist on Rattner’s recommendation.

eEDITIONS

I serve on the advisory board of NewsStand, Inc. – a digital delivery company backed by the New York Times, Adams Capital, Noro-Moseley with $45 million in paid-on capital. Last week, NewsStand signed a contract with The Baltimore Sun to start a digital edition - basically a glorified PDF that replicates the actual newspaper. The business model for eEditions has taken a random walk. Originally viewed as a paid subscription model, few consumers have been willing to pay for their e Editions. It appears that its real value may be the cost savings associated with the elimination of educational and international hard copies.

DIGITAL REVENUE

If there is hope in this world for newspapers, France’s Le Monde may show the newspaper world a survival template with digital revenue. Le Monde had a few tortured years. After a 15% fall in circulation and the loss of their classifieds, Le Monde had significant operating losses in 2002. By 2004, 100 employee jobs had been cut. Yet Le Monde is expected to make a profit this year. Why? Its digital revenues are growing by 20 to 50% depending on the web site. A digital strategy will require an editorial staff that writes both for the web and the newspaper.

HYPERLOCAL

Last Monday, The Tampa Tribune laid off 70 of their employees. At the same time, they announced plans to start 15 hyperlocal sites. All of their zone/weekly reporters have reorganized their priorities – online first, print second. It is the online metaphor of zoning. Ted Venetoulis knows about zoning; he started the Owings Mills Times. The success of hyperlocal sites is based on the fact that they are less expensive to publish and can be even more local than print editions.

INVESTORS EMERITUS

Most of this deal’s investors are probably older (and still attached to consuming news via newspapers) than the new demographic that needs to be reached. To achieve a desired turnaround time that beats that of, say, cleaning up the Bay, diversification is key. Smart senior capital is acceptable by just keeping them in an emeritus role. The only way to salvage this institution is with radical, younger agents of change.

Labels: Baltimore Sun, newspapers, Sam Zell, unions

  11:49 AM •  1 Comments • Links to this post

A Week in the Life of Governor O’Malley – To Do or Not To Do Wall Street Journal columnist, citybizlist blogger, City Paper founder, economic conservative, social libertarian Russ Smith wrote an editorial in the The Wall Street Journal and citybizlist last week entitled “Maryland’s Do Nothing-Left” regarding the slow start of the O’Malley administration.

Smith wrote, “Could this be a new model for the Democrats? Lots of talk aimed at the party’s base, only to be followed by very little substantive action once handed the responsibilities of governing?”

eViews wanted to bring some third party objectivity to Russ Smith’s editorial. Press releases were used as the data points. A comparison with Pennsylvania Governor Rendell provides an interesting reference.

In just one day of press releases, Governor Rendell exhibits a broad swath of initiatives and responses related to economic development, agriculture, the environment, flood recovery, housing, youth and taxes.

Can someone show me anything at all that O’Malley has done since he started his term in January? Smith states that “He’s looking to get a sense of the national mood before committing himself to policy.” He continues “ … the media are letting the governor get away with doing nothing.”

Russ Smith’s conclusion was “Sometime even doing nothing has its risks.”

If political expediency is O’Malley’s modus operandi , here’s one that piggybacks on Blue and Red. On Friday, Barack Obama unveiled his plan for a National Low Carbon Fuel Standard (NLCFS). In January 2007, Governor Schwarzenegger of California established a low carbon fuel standard for transportation fuels sold in his state. Obama’s proposal would create a National Low Carbon Fuel Standard (NLCFS) based on the California proposal. Republicans and democrats are coming together for the good of all.

Perhaps it’s time for less touring, signing, congratulating and applauding, and more time for “making government work again” as was the title of O’Malley’s April 10th press release.

“Politics is the art of postponing decisions until they are no longer relevant.”

Henri Queuille

_________________________________________

Governor O’Malley’s April

April 11 – Governor O’Malley Tours Green School in Montgomery County

April 10 – Governor O’Malley Signs Legislation to Make Government Work Again

April 9 – Governor O’Malley Congratulates General Assembly on Successful Session

April 3 – Governor O’Malley Applauds Creation of The Maryland Life Sciences Advisory Board
_________________________________________

Governor Rendell’s April 18th

April 18th – Governor Rendell Responds To Court Ruling Regarding Willow Grove

April 18th
Governor Rendell Announces $927,000 Investment To Help PA Businesses Increase Use of Recyclable Materials in Finished Products

April 18th

DCNR Explores Innovative Soil Solutions To Boost Survival Of Urban Trees

April 18th

DEP Releases Third Round of Test Results From Environmental Assessment in Selinsgrove

April 18th
Earth Day Celebration Brings Agriculture To Urban Philadelphia Students

April 18th
Governor Rendell Proclains April 22-28 Energy Conservation Week

April 18th
Governor Rendell Say Luzerne County Receiving Additional $650,000 To Create Jobs Fund Flood Recovery Efforts

April 18th
Governor’s Advisory Commission on Asian American Affairs Comments on VA Tech Tragedy


April 18th
Latest State Investment For Wilkes-Barre Housing Project To Create New Opportunities for City’s Young Adults

April 18th
Pennsylvania Gives Storm Victims Additional Time To File Income Taxes

Labels: Governor O'Malley, Maryland, Politics, Russ Smith

  3:26 PM •  1 Comments • Links to this post

Mayo Shattuck’s “Green” Payday Friday the 13th of April was a green day for Mayo Shattuck. His 2006 payday of $20 million in compensation was reported by The Daily Record, The Baltimore Sun and The Baltimore Business Journal.

Let’s discuss a different type of “green” and a merger from which we could really benefit. In Sunday’s New York Times, the author of “The World Is Flat”, Thomas Friedman, wrote a seminal piece entitled “The Power of Green”. He starts with a prognostication that America post George W will “want to get its groove back”. He writes, “We will need to find a way to reknit America at home, reconnect America abroad and restore America to its natural place in the global order….I have an idea. It’s called ‘green’.”

Maryland could have benefited if the FPL merger had gone through and Shattuck had
been influenced by FPL so that we could have had a utility/power production company in Maryland that gets green. With the FPL merger in the rear view mirror, perhaps Mayo Shattuck should learn from Friedman and focus on the other “green”.

In regard to the upcoming presidential election, Friedman writes,”We don’t just need the first black President. We need the first green president”. Until then, more CEO’s of energy based companies need to join the green initiative.

Shattuck has done a masterful job of turning Constellation Energy into what Enron could have achieved had not greed overtaken green with collusion among the investment bankers, lawyers, and the boys. However, it is time to show a new leadership – a green leadership.

Other CEOs of Fortune 500 companies have committed themselves to the green revolution. Lewis Hay III, CEO of FPL, suggests that the Federal government put fees on corporations for carbon emissions. FPL is the number one producer of wind power in the US and has investments in concentrating solar plants. It is the big leader among large utility companies for renewables as part of a power production portfolio that also includes the emitting fuels.

Under CEO Jeffrey Immelt’s direction, GE's Ecomagination initiatives for environmental technologies are perhaps the most high-profile example of a growing boom in alternative energies and so-called green technologies. Mayo Shattuck and Constellation have missed the boat to be leaders but it isn't too late to be an influential follower.

Friedman defines the monumentality of the task ahead, “Most people have no clue – no clue how huge an industrial project is required to blunt climate change. Here are two people who do…” Robert Socolow, an engineering professor, and Stephen Pacala, an ecology professor, head the Carbon Mitigation Initiative at Princeton, a consortium focused on solutions for the climate issue. Through a combination of clean power technology and conservation, Pacala states that, “we have to get rid of 175 billion tons of carbon over the next 50 years – and still keep growing”. Pacaal and Socolow have come up with a pie chart of 15 wedges that if phased in over a 50 year period would avoid 175 billion tons of carbon.

Indulge me as I isolate several of those wedges that Constellation Energy Group and Mayo Shattuck could impact with the following actions:

• Replace 1,400 large coal-fired plants with gas-fired plants
• Add twice today’s nuclear output to displace coal
• Increase solar power 700-fold to displace coal
• Cut electricity use in homes, offices and stores by 25%
• Install carbon capture at 800 large coal-fired plants

In 2007, Maryland will join the Regional Greenhouse Gas Initiative, a regional consortium with a goal of reducing carbon dioxide emissions by 10% in 2019. The green initiatives coming out of the Maryland Assembly this past session are a promising portent of more to come: The Clean Cars Act, the increased support for the solar industry, to name two.

It is time for Constellation Energy’s lack of initiative towards environmental stewardship to come to an end. Their opposition to the Healthy Air Act in Maryland was reprehensible.

And for a really green idea, how about tying Mayo Shattuck’s options to carbon reduction - $10 million for every billion tons in carbon avoided…and a 50 year vesting schedule….that’s a green payday and an honorable legacy.

Labels: Constellation Energy, FPL, Mayo Shattuck

  11:46 AM •  1 Comments • Links to this post

Gruner and the JMI Equity Gang Make “A Killing” on Sale of DoubleClick to Google for $3.1 B Friday the 13th brought some headline grabbing news to the Cross Keys venture gang of Harry Gruner and JMI Equity who purchased DoubleClick with Hellman & Friedman for $1.1 billion less than 2 years ago. The Wall Street Journal described the transaction in the rarified language as a “stunning change in valuation for the company”; another reference called it “a killing.”

Google decided to come in with a preemptive $3.1 billion bid for DoubleClick– a billion north of Gruner and Gang’s expectations just a month ago - 10x trailing revenues of $300 mililion for the financial aficionados. Microsoft was left deal-less in Seattle and, once again, thwarted in their efforts to enter the search and advertising arena dominated by Google.

Last December, the financial alchemy started with DoubleClick’s sale of its transaction processing services provider to Alliance Data Systems for $435 million. This isolated deal covered the original equity of $330 million put in 18 months earlier.

Hellman and Friedman’s Phillip Hammarskjöld described the DoubleClick deal, “This was heavy-duty business building that private equity does enormously well”.

So out of the carnage of the dot com IPO tech blowup, a Baltimore venture capitalist cum market timer has beat the herd on Wall Street in the public-to-private to where’s-the-exit stampede. Gruner and Gang’s next fund should easily add another comma, joining the league of New Enterprise Associates as another Baltimore billion dollar venture firm.

"I made my money by selling too soon."
Bernard Baruch (1870-1965) financier & economist

Labels: Baltimore, DoubleClick, Gruner, JMI Equity, Venture capital

  9:47 AM •  0 Comments • Links to this post

A TRIBUTE TO THE HONORABLE J. CARTER BEESE, JR. The premature death of The Honorable J. Carter Beese, Jr. earlier this week left many Marylanders stunned, saddened, and ultimately puzzled.

In the annals of charmed lives, the Honorable J. Carter Beese had made an improbable and Algeresque journey from son of an FBI agent in New Jersey to the rarified halls of government and business. From afar, his life seemed miraculously blessed. The road to Alex Brown in the early 80s had three typical entry points: Gilman, Griswold or The Harvard Business School, rather than his New Jersey and Rollins College roots.

Yet Mr. Beese swam with the sharks and Captain Krongard, rising with the tide to become Vice-Chairman of Alex Brown before uniquely taking the road less traveled by other former Brownies - government service with the SEC and OPIC.

Perhaps his passing will give us time to reflect. A quote from another New Jersey native comes to mind:

“When things are bad, we take comfort in the thought that they could always get worse. And when they are, we find hope in the thought that things are so bad they have to get better.”
Malcolm Forbes

His life was honorable, and we will remember it.

Labels: Alex Brown, Carter Beese, Maryland

  2:15 PM •  2 Comments • Links to this post

A Fetching, Baltimore-based Web 2.0 Company One of the more dramatic, grandiose dot-com implosions was Webvan -the online grocer that delivered. With 3,500 employees at its peak and a 25-city presence, Webvan boasted a roster of powerful backers including Borders Group Founder Louis Borders and former Andersen Consulting Chief George Shaheen. On its first day as an IPO, it jumped from $15 to $26. But in 2000, a $347 million loss presaged that within the next year, Chapter 11 would prevent its last delivery.

In Baltimore, there is a related seedling of a company named www.fetchfood.com.

Fetchfood is delivering fast food instead of groceries. Unlike Webvan, www.fetchfood.com may have a scalable model.

Founder Avery Boyce describes herself as “a woman with a vision - - of hungry time-starved urbanites, pulling their favorite carry-out menu online, ripping through a customized order screen, handily paying by credit card and receiving their food in short order.”

Prior to launching Fetchfood in October 2004, Avery was working for the Kennedy Krieger Institute doing MRI research. Her inspiration came while searching for a place to eat in College Park with friends after an evening class. “If I can buy an automobile online, why can’t I buy lunch?”

Conceived by Boyce and two professional acquaintances, Fetchfood was initially financed with $30,000 from her family. She recently bought out her two partners.
With 40 restaurants on board, a Round 2 Communications marketing campaign, and an off the record Web 2.0 stealth strategy, Avery is starting out to raise an angel round.

I met Avery last week and feel that she understands the scaling challenges of such a startup. She just might accomplish what the Webvan team was unable to do.

The next time you’re thinking about what’s for dinner, visit www.fetchfood.com.

Labels: Fetchfood, online fast food delivery

  4:05 PM •  2 Comments • Links to this post