Denver newspaper war: Endgame
It’s been more than two months since Scripps announced that its Denver paper, the Rocky Mountain News, was up for sale and two to four weeks past the mark they said it would close if they failed to find a buyer.
I talked earlier about the likelihood that Scripps and rival Denver Post owner MediaNews were staring each other down, each losing more than $1 million every month in hopes that the other would blink, close up, and leave an entire city’s readership to the victor. Later that day, the Denver Business Journal voiced the same suspicions. But the entirety of industry speculation is based on a very small amount of publicly available information; Scripps and the Rocky are largely mum, looking to avoid violating their Justice Department-approved joint operating agreement with the Post, and MediaNews is a private company that plays its hand close to the chest.
But a little extra context and a new development may shed some light on what’s taking place behind the scenes. Not long after the Rocky went up on the auction block, Shawn White Wolf of White Wolf Media announced he and his investment partners would prepare a bid for the beleaguered newspaper.
Since the December announcement, there has been no news about White Wolf until recently, when his company announced they would be setting up media training offices in Denver. They’ve remained publicly silent on a bid, but clearly something has inspired Scripps to keep the money-pit paper open longer than planned.
If you’ve paid attention to the drama, though, you know that MediaNews owner and Denver Post publisher Dean Singleton has right of refusal on any purchase. Under conditions of the joint operating agreement, he needs only to match an outside bid, not beat it. At that point, MediaNews would fold the Rocky, acquire the remaining half of the Denver Newspaper Agency (DNA), which handles advertising and publishing of both papers, and hope being the only paper in town will allow the Post to stave off collapse long enough to become profitable again.
Here are the ways things can play out for MediaNews, from most to least preferred:
1) Scripps receives no bids. They shut the paper down, ending Denver’s newspaper war and allowing the Post to expand its readership to the rest of the city. MediaNews acquires the DNA, its building and its presses on the cheap.
2) Scripps receives a bid, which MediaNews agrees to match. The prospective buyer recognizes shutting down the Rocky is worth more to MediaNews than they are willing to pay to acquire a hole in the ground into which they can shovel money a newspaper caught in the middle of both an industry-wide crisis and a city newspaper war. No further bids are made and MediaNews acquires and shuts down the Rocky.
3) Scripps receives a bid too high to consider matching — a bid high enough that it would be foolish to match it, given the reward, whihc is that the Post continues to run and lose money until it switches to a profitable business model some time in the indeterminate future.
MediaNews will do everything it can to avoid the third scenario. To the Post, new Rocky ownership and continued competition pose an existential threat. So it’s not surprising to see MediaNews, in story after story, maintain their finances are better than they look on paper, despite their credit’s downgrade to junk status long ago, and its steady sinking toward default. (Scripps remains investment-grade.) It’s all pretty suspect, of course. At a time when, more than anything, MediaNews needs some cash to prop it up to weather a fundamental reshaping of the news industry, they’d release any information they had if it would counter the dim credit assessments.
MediaNews is bluffing. They’re hoping an aggressive posture will send two messages: First, that they are prepared (and, in fact, can afford) to match any reasonable bid, which will make buying the Rocky prohibitively expensive; and second, that any potential buyer will find themselves in a newspaper war that the Post will be able to wait out for years.
The first, with some limitations, is probably true. The second is a joke. One Denver paper will almost surely close its doors this year. That paper will be the Post if investors come in with enough capital and the will to prop up the Rocky for a few years.
The wild card in this is still the Justice Department, and it represents, for MediaNews, an unpredictable but absolutely worst-case scenario. If the Justice Department (in charge of the labyrinthine legal complexities of newspaper joint operating agreements) finds that there’s truth in Scripps’ accusations that the Post funneled $13 million from the DNA to make payroll, they may find MediaNews in violation of the JOA, giving Scripps anything from the freedom to sell without Singleton’s right of refusal to imposing fines big enough snuff the Post and give the Rocky the chance to buy up the wreckage of the DNA — a complete reversal of fortune from how MediaNews is hoping to see this play out.
It’s a fascinating story, and a damn shame that when this is all said and done, we’re probably not going to learn about all the intrigue going on behind closed doors.