There were a few key points that didn’t get much play in all the coverage provided by the reporters, columnists and editors at The Detroit News and Free Press when ownership of the papers they work for changed hands last week.
The blockbuster deal disclosed last Wednesday has Gannett, the country’s largest newspaper chain, obtaining the Free Press from Knight Ridder, the country’s second largest newspaper outfit. After decades of owning the Freep, Knight Ridder is giving up on Detroit, acquiring three smaller papers with better profit margins in Idaho and Washington state from Gannett as part of the swap. Gannett also gets a paper in Florida from Knight Ridder in the deal. Think of the game Monopoly and the way players trade property to maximize the profits of holdings that are clustered together.
“Knight Ridder decided that this market wasn’t good for the bottom line, and they figured out a way to get out of it,” says Ben Burns, head of the Wayne State University journalism department and former Detroit News executive editor.
The new player in Detroit is MediaNews Group, a Colorado-based company that owns the Denver Post, more than 50 other daily newspapers and more than 121 non-daily publications. The company is also partnered with Gannett in two other markets, though neither of those deals involve a JOA. If all goes as announced, that company will take control of the News.
The deal involves several significant changes to the Joint Operating Agreement, or JOA, the papers entered into in 1989 under the auspices of the federal Newspaper Preservation Act. In an attempt to slow the trend toward cities having only one daily newspaper, that act lets struggling newspapers circumvent some antitrust laws by allowing competitors to combine business operations and share profits as long as they maintain separate and distinct editorial content. Such arrangements require the approval of the U.S. Justice Department.
Under terms of the deal announced last week, the News will switch from afternoon to morning delivery, a move seen as necessary to revive its steadily declining circulation numbers. Afternoon papers have long been seen as a relic of bygone days when news cycles moved at a considerably slower pace.
Another aspect of last week’s deal involves stopping joint publication of weekend papers; the News and Free Press will each publish a separate Saturday paper, and the Freep will be solely responsible for the Sunday paper.
All of that has been well reported. What hasn’t gotten much ink is the role the Justice Department could play. The way the three media companies made it sound last week, this is a done deal. But that’s not necessarily the case. The proposed changes must be submitted to the DOJ; it’s then up to the department to decide whether its antitrust division will delve into the issue. At this point, the department isn’t disclosing much.
“We’re aware of it,” is all DOJ spokeswoman Gina Talamona would say about the issue.
Lips are equally tight about specific financial arrangements Gannett and MediaNews Group inked.
Under the current JOA, Knight Ridder and Gannett each receive a 50 percent share of the profits generated by the two papers. Last week, The New York Times reported that the new deal has Gannett getting more than 70 percent of the profit. A Gannett spokeswoman said the company isn’t “disputing” that report. A spokesman for MediaNews Group wouldn’t comment, telling Metro Times that details of the agreement hadn’t yet been publicly disclosed. The fact that a report of the deal’s specifics had appeared in the nation’s paper of record failed to persuade him to answer questions regarding how that change in profit distribution could affect newsroom staffing.
The bottom line, at least initially, is that The Detroit News will see a whopping 40 percent reduction in profits.
“There’s a certain anxiety level across the board about all these changes,” says Lou Mleczko, president of the Detroit Newspaper Guild.
What sort of challenge — if any — there might be to the deal is unknown at this point. But there is precedent.
A fierce legal battle was waged in an attempt to stop the JOA from going through back in the late ’80s. The fight went all the way to the U.S. Supreme Court, where a 4-4 split decision failed to overturn a lower court ruling that gave the deal a green light. John Kelly, an attorney and former Michigan legislator, was heavily involved in the attempt to keep the original JOA from being approved. The concern was that the agreement — and the unified operating structure it produced — would reduce competition between the editorial departments at the two dailies.
It’s a concern that has proven to be legitimate, Mleczko and others say.
This time around, much of the trepidation being expressed centers on the predominant role Gannett will play in this advertising market. Earlier this year, Gannett acquired Hometown Newspapers, giving it control of that company’s daily paper in Livingston County and 60 nondaily papers, most of which are in the metro Detroit and Lansing areas. Now, with majority control of the agency overseeing business operations at both Detroit dailies, and ownership of the Freep — which has a daily circulation of 347,000 compared to the News’ 218,000 — there’s the threat that it will have too much influence over southeast Michigan’s advertising market.
“I would think the Justice Department would have to look at this,” says Kelly, who now teaches political science at the University of Windsor. It’s also possible that someone with “standing” — a competitor or advertiser, for example, who might be economically hurt by the new deal — could launch a protest and force the DOJ to scrutinize the proposed changes, Kelly says. “If anyone in the community is concerned, now is the time to speak up.”
But even Kelly isn’t convinced that the new deal will be bad for Detroit journalism and the public it is supposed to serve.
He and several others interviewed for this article said NewsMedia Group’s entry into the market could spark a new era of competition between the city’s two daily papers.
“My impression is that this might not be a bad thing for journalism in this area,” Kelly says. “The News may be able to carve out a niche for itself and become a very profitable little daily newspaper by taking a strong investigative approach. If that happens, the Free Press will have to respond in kind.”
Newspaper analyst John Morton says the News’ switch to morning publication is key to making the deal work on all levels. Readers nationwide have shown they prefer morning papers, so the door is open for the News to increase circulation. The earlier deadline will give its stories more immediacy, potentially sparking a renewed sense of competition, experts say.
Even the reduction in its share of the profits doesn’t necessarily mean drastic cuts in staff are in store, Michigan State University journalism professor Steve Lacy says. He explains that, unlike Gannett and Knight Ridder, which are publicly traded and must answer to Wall Street’s demands, MediaNews Group is privately held, giving the company more leeway in how much profit it extracts from a paper.
In that respect, company CEO William Dean Singleton has a mixed record (see sidebar). The hope is that he will be true to recent statements and build a profitable paper by investing in good journalism.
“There is a segment of the population that wants good journalism,” Lacy says. “There’s money to be made in producing good journalism.”
Even so, he says, in the long run it’s unlikely that metro Detroit will be able to support two mainstream daily papers. Competition from cable TV news, the Internet and alternative media will continue to gnaw at the bottom line of dailies.
“I think ultimately there will only be one daily,” Lacy says. “The only question is, when will that happen — five years, 10 years, 20 years, 30 years?”
See Also:
Cluster pluck
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The big deal fits in with corporate trends.
Shuffling the deck
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When big deals trump goodwill.
Meet the new boss
By Curt Guyette
The two sides of Dean Singleton.
