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

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