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Who should own newspapers?

Dean Baquet

Former editor, Los Angeles Times

Dean Baquet

If you had asked me would I prefer an owner who wanted a modest profit margin because he or she believed in the public service mission of newspapers, I think that would be fine. That would be terrific. That would be preferable to being a publicly traded company that has to go back and forth to the whims of the market. ...

[There's also] a lot of history that shows that the non-public owner can also be dangerous for newspapers. What's going on in Santa Barbara right now, with [Wendy McCaw, owner of Santa Barbara News-Press], I suspect if you asked the people in the newsroom of the Santa Barbara paper whether they would prefer to have [McCaw] as their owner or a public company that took their journalism more seriously, I think they'd take the public company. ... History is filled with examples of awful people who ran newspapers, and ran them into the ground.

But now you answer to a publicly traded company.

Yeah, yeah. And I guess that has its serious issues, too. Neither model is perfect. I don't know what a perfect model is. ... It's hard in our capitalist society to craft the perfect ownership of newspapers. The problem with the public model is that you have the whims of the market, and you have to be responsive to shareholders. The problem with the private model is, if you have the wrong private owner, that's just as bad.

Newspapers are [in] such an odd position. We're almost like a public trust that has private ownership, and I don't think any ownership is quite perfect. But I like the St. Pete Times' ownership model.

Because it's a nonprofit.

... It's a nonprofit that sets its sights on a lower profit margin and returns a lot of money to the paper and sees its mission as completely public service, so that there's much more of a consistency between the ownership of the St. Pete Times and the editors at the St. Pete Times. In fact, most of the owners of the St. Pete Times have been editors of the St. Pete Times.

As much money as you say the paper is making, as I have come to understand it, to an investor, it isn't anywhere near what a good return is on the investment.

... I think of any other business, and even most newspapers, the return at the L.A. Times is pretty good. I suspect most American financial institutions would look at the return that the L.A. Times has and go, "Wow." Newspapers are hugely profitable, and the L.A. Times is more profitable than most. I think what's happened is ... all newspapers have gotten into the cycle of ever-increasing returns every year, and it gets harder and harder to do for institutions that, as we discussed earlier, are in a state right now where the financial model is under some threat. ...

… Would you like to see the L.A. Times locally owned?

It depends. ... I want the best, most committed ownership. My ideal owner has the same public service view of the paper's mission that I do. I can think of some local owners who wouldn't have that same view. I can think of some local owners who would be troublesome. Local owners either come with a true public service love for the city, which would be fabulous, or they come with so many local entanglements that they create problems for you. So it depends. ...

So realistically, what would you like [in an owner]?

... There's always going to be a certain amount of tension between the editor and any owner. I came here from The New York Times, which many people would say is the ideally set-up ownership because it's got a family that has an institutional, historic investment in publishing a great paper. But I can promise you there has been tension over the years between the editors and the Sulzberger family. That's just part of the game. Everybody's got different priorities.

... The ideal owner for me -- what would make me happiest? ... Lots of money, comfortable with probably a lower profit margin than Wall Street would want, steps back from the job of what the newsroom does and lets it cover even his friends or her friends.

I don't think an owner has to be uninvolved, though. ... If I was the publisher of the L.A. Times, I would want to have some involvement in the community. Otherwise, what's the point of having a local ownership anyway, if you're not going to be involved and engaged in the community? That's imperfect, but it's also great. It's great because you've got somebody who's thinking about the community. It's imperfect because you've got to trust that he won't push his friends and hurt the people he doesn't like. ...

John Carroll

Former editor, Los Angeles Times

John Carroll

Is it possible that there's a new paradigm, a new model? ...

Yeah. I think that paradigms are evolving, and I'm hopeful that some of them will be for journalism. There's the nonprofit model that's certainly been great at NPR, and there are a few papers that are nonprofits, notably the St. Petersburg Times. ... Wall Street and corporations are becoming disillusioned with owning newspapers. ... They're extremely profitable -- they make barrels full of money -- but they don't grow much from year to year. ... Perhaps public ownership of newspapers through publicly traded corporations may diminish, and other forms of ownership, including local ownership, can happen.

Lauren Rich Fine

Managing director, Merrill Lynch

Lauren Rich Fine

Newspapers don't need to be public. They do generate a lot of cash flow. The reason they went public was the wrong reason to go public. Most of these companies were family-controlled and they had no liquidity. And people have a habit of dying -- it just happens -- and somebody has to pay estate taxes. ... So what you did is you sold a separate class of stock to the public so that you had some liquidity. ... This is to me one of the critical issues in the industry, which is, for all the complaints about Wall Street, go private. Use you cash flow; go private. ...

There are several billionaires in Los Angeles ... who say if the Tribune [Company] put the L.A. Times up for sale, they'd happily buy it. ...

That's a real prescription for the industry. Either the people running these companies have to have the conviction to take themselves private, or the industry has to go back to its original roots, which is being owned locally by somebody who isn't just focused on profit margins but really wants that newspaper to stand for all things good. ... When Knight Ridder was put up for sale, there were not a lot of interested buyers of this corporation, but when you went and sold individual newspapers there were multiple bidders for each one. It's because it really isn't a good corporation to own, but it's a great local business. I mean, if you can afford it, you get invited to a lot of good parties if you're on a newspaper. But more importantly, if you really are a passionate citizen, there would be nothing like owning a newspaper; it would be tremendous.

The Los Angeles Times, ... for 120 years it was owned by the Chandler family. They had a real investment in real estate. ... And the L.A. Times was very useful to them ... because it helped to promote the growth of Los Angeles. So a family or individuals can use a paper for other than, say, perhaps, totally altruistic reasons as well.

Sure. As I said, it's a good business. It might not be a growth business, but it does generate free cash. ... You raise another point, which is if these newspapers are being owned for other reasons, that's bias; that's not objective. Yet today the industry is being held to a standard that I think is just way too high. There have always been people who have tried to use the press to manipulate or for other reasons, and you count on the consumer to see through that, and you count on the collective wisdom of who produces that paper to make sure it doesn't go too far, although it still does. ... You don't really want the owner involved day to day; you still want to have a qualified editor and publisher running it. ...

Eli Broad, he is a major collector of art, and when we asked him if he would make any changes in the Los Angeles Times if he owned it, he said: "Yes. I think they should do more fine arts coverage."

But that's fair. The problem is that if you were really looking at what the return on that investment would be, there wouldn't be one. ... The New York Times really tried to do this. They did an analysis, section by section, of the paper -- this was probably in the mid-90s -- and they tried to have a separate income statement for each section to understand, was there enough consumer interest to write on the topic, and could you generate enough incremental advertising to support it? I have not seen a company experiment as much as they have, and I think it's all been good. There are things that have survived, things that haven't survived. ... He could try to add that fine arts section, and it's going to be up to him whether he wants to support the losses or not.

And yet Wall Street put a lot of pressure on The New York Times recently to say, "You're not delivering enough to your shareholders."

They aren't. ... This is still a family-controlled company; it's two classes of stock with family ownership, and they're trying to balance what they stand for, which is quality journalism. I think regardless of anyone's political affiliation, they would have to agree this is one of the best newspapers in the country. They are trying to invest heavily for the future, which is again a good thing, not a bad thing. But it doesn't mean that you need to own the stock near term, because they aren't getting return on the investment. ...

They tried to make a move into TV. They bought into Discovery [Channel], and that didn't pan out so well.

It's a good example of a company that understood, strategically, that they were investing enormously in investigative journalism, and the thought was: Is there a way to repurpose that same content and generate incremental returns? The Discovery Times Channel was a great idea, ... but given the proliferation of cable networks, it really never got the audience that it deserved. So it was a great idea, and I don't criticize them at all for trying it. In fact, I compliment them for trying and acknowledging it wasn't working and getting back out.

So you're a big advocate of newspapers trying a lot of stuff, of innovating. ...

But I wouldn't do it with a lot of the current management teams. I would bring in new people who aren't wed [to] the way things were done, which isn't the same as getting rid of all the journalists, but it is an effort to bring in people maybe from new media and other areas that look at the world differently and understand future generations better. At the same time, you still have 55 million people a day who read a paper. You still want to serve them as well. ...

David Hiller

Publisher, Los Angeles Times

David Hiller

[Billionaire philanthropist Eli Broad] has gone on to make a bid with others for the whole Tribune Company. That's pretty unusual, for editors to be talking to people in the community about buying the paper?

It's highly unusual and I think out of line.

Why do you think it happened?

You'd have to ask John.

Do you think Eli Broad is going to be one of the owners of the L.A. Times?

I don't know. I do know what I read in the newspapers. Because of the terrific Los Angeles Times and some of the other great newspapers and TV stations within Tribune Company, there is a lot of interest in this business. This, in my humble opinion, is the finest set of media assets under any roof anywhere in the country.

The bids have been low.

Well, I don't know what's low. They've been at or above current market, and the current market already has gone up in anticipation that there would be some transaction. So from my standpoint, the market is validating significant value in these assets.

Are you going to be here next year?

I hope so.

You think so?

I think so.

You don't think Tribune will sell the Times?

It's hard to handicap the odds of any particular transaction. My own view is, there's a lot of benefit in having the great Los Angeles Times, the Chicago Tribune and some of our other papers together, so my hope is that transaction keeps the benefit of holding those together. ...

The Tribune was known as a local paper. Mr. Broad and others want to return to local ownership.

I'm personally open and agnostic. If you look at the history of the business, there have been great individual owners, local owners; there have been some terrible ones. There have been good corporate newspaper group owners, and there have been bad ones. It's all about how you do and what you're committed to and what your mission is. We'll just have to see.

What I do believe is that the Los Angeles Times can continue to be a great newspaper under any ownership arrangement.

Eli Broad tells us he's willing to accept 5 to 8 percent profit. Why isn't the Tribune Company?

As a public company, one answer would be the stock price would go way below where it's currently going, which is way below where it used to be. What I think you're seeing is, at least in the current state of things, the public stock markets aren't very hospitable places for media companies generally, including newspapers. So a private owner like Mr. Broad would be able to say, "I'll earn X percent." If he's the owner, he gets to say that. If Wall Street is the owner, they get to say what their expectations are for what a publicly owned business is expected to achieve. As brutal as it may seem, that's kind of a fact of life of the business world. It's not unique to newspapers or media companies; it's true of all businesses in the United States.

If you're organized as a business with owners who are expecting a profit, that's what you get, and you've got to try to deliver or find some owner who's got different expectations. At the end of the day, we'll see who was the owner and what their expectations are.

When Mr. Broad says Wall Street is the enemy, he's right?

Well, I don't think so. It's certainly the case that Wall Street and for-profit owners of papers have expectations about how the business will be run that may be different from how Dean would run them; it may be different from how Mr. Broad would run them, and to that extent they may disagree, and that's fine. But ultimately the owners get to decide. My hope is that we end up with an owner who is going to likely be a business interest so this is not a not-for-profit. This is not charity work, so we're going to have to figure a way into the future to run the newspaper as a business. But we also have an owner who has the same commitment to the quality journalism and civic mission that we've had at the Los Angeles Times for 125 years. If we get that kind of owner, we're going to be fine.

But there are nonprofit ownership situations.

All we need then is a not-for-profit who wants to spend $14 billion to buy the Tribune Company, and then you'd be all set. So if you know one of those, have them call me.

How much for the L.A. Times?

I can't answer that. I don't know. It would be a lot.

Of the $14 billion?


Want to guess?

Three to four [billion].

Three to four billion dollars, for Mr. Broad, etc.?

I don't know. I'm only guessing. …

Have Google, Yahoo! transformed the news industry?

Well, they have to some extent. I think one of the --

Should they buy the L.A. Times?

They could stand in line. There's a lot of interest. I do think of the places where newspapers as an industry haven't played our cards right is letting all our content get out for free on the Internet and get reaggregated by Google and Yahoo! and present their own Google News and Yahoo! News, the core of which is all the news that we've produced. I bet they can't believe their good fortune that newspapers have let that happen.

One of the things where we can continue to make some progress is to retake that role as an aggregator of news, and that newspapers working together and doing those things and creating sites and aggregations of the news that we and only we produce is a way to take back some of that value from Google and Yahoo!.

Larry Kramer

Former head, CBS Digital Media

Larry Kramer

The L.A. Times' ownership changed, all right? And it changed because some people wanted to cash out. People who were willing to carry an organization -- every major newspaper I know is facing this dilemma, where the family institutions that were supporting these institutions, as the generations go on, there's less interest in being a publisher, a proprietor, if you will, and more interest in what does it mean for me profitably as a family member?

They want to make money. They're not really interested in the family legacy.

Right, and even if they are interested in the family legacy, there's an increasing pressure to make more money, because the public markets are drawn into a lot of these things, even though they're privately run; they're run for stockholders. Whenever you open something up to the public and you bring in a public stockholder, you have to worry about their needs, not just your own. ...

Now, no one can sit here today and tell you what the appropriate level of profit is. ... When the economic model gets shattered, you've got to worry about it. You just have to worry about, what do we have to do to stay viable? And it isn't only about profits today. It's about having the economic viability to weather storms in the future, because you don't want to be in a desperate situation. You don't want to be in a situation where it starts going heavily into losses before you can do anything about it, because then ... you have no control over the decisions you make. You just have to make ugly, brutal decisions.

So I don't ascribe the same concern to somebody saying, "We've got to downsize, because here's the economic reality." I mean, I think that's true. My goal, though, would be, as a publisher and as a journalist, to build revenue sources up that allow you to keep a first-class news organization. Increasingly that means you've got to do things other than just print a newspaper.

Well, The Washington Post has Kaplan, [Inc.].

No, no, I mean within news itself. The Washington Post built aggressively, is building an online business, which increasingly is part of its business. Not only is it increasingly an economic portion, but almost as many people in Washington now read The Washington Post on the Web as read it in print. In fact, it might be higher in Washington. It's close. Think about that. We've only had, what, 10 years of the Internet on The Washington Post, and in 10 years they built an audience even within the boundaries of Washington itself of as many people who read it in the print read it on the Web.

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posted feb. 13, 2007; last updated feb. 27, 2007

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