Big profits at Pioneer Press as corporate parent destroys it

There’s good money in destroying your local newspaper, which will come as awful news to those who hope the St. Paul Pioneer Press can be saved from the clutches of Alden Global Capital, the hedge fund that is best known now for dismantling the Denver Post, the flagship newspaper of its puppet — Digital First, which owns the PiPress and 61 other daily newspapers across the country.

The publicity has been horrible for Alden Global Capital since the Denver Post published a devastating editorial against its corporate overlord.

You can get away with that exactly once in the news business. This week, an editor at a newspaper in Boulder wanted to do the same thing. The company said “no” so he self published it. He’s out of a job now.

“When I started on this debate, about whether we should write on this, the key point was that this is an important story for Boulder and Boulder should know about it, and the story is that it’s newspaper is on the verge of death, that it’s on a trajectory toward death,” Dave Krieger tells KGNU.

That’s what Alden policies of milking it for all of the cash it can are doing to the paper. The only end is that the paper ends up closing. My position was that Boulder needs to know about this. The only reason they don’t know is because it’s happening to the town’s “story teller.”

We would tell the story about any other 128-year old Boulder institution. If Boulder wants to save this institution, it should know it’s in dire peril and take whatever steps it wants to take. If Boulder doesn’t want to save it, that’s O.K. too, as long as it knows this is happening.

Meanwhile, reports today say the company has fired all of its editors at a Denver Post editorial supplement that covered the state’s marijuana industry.

Today, Ken Doctor, of Nieman Lab, revealed that Alden Global Capital had a 17-percent operating margin in 2017, well above most newspaper companies. The Pioneer Press cleared $10 million in profit, a 13-percent operating margin after the company slashed the workforce to about 60 people.

Big profits while slaughtering a newspaper is bad publicity and Doctor says Guy Gilmore, the former Pioneer Press publisher and now Digital First’s chief operating officer, and two Alden Global Capital partners are feeling the pushback from what’s left of the public that cares about the role of journalism in a community.

“Gilmore can rant and rave about who he wants to fire, but people have so far talked him down,” one source told me. As national media splashed into the story — The Washington Post, The New York Times, Times, Forbes, Esquire, Time, and public radio programs from coast to coast — the actions of Gilmore, Smith, and Freeman may be tempered by a new reality they face.

DFM and Alden face a tough choice: crack down on its ever-vocal journalists and risk more public (and perhaps financial) damage — or wait to see if the rebellion dies down. Tempers are hot; actions remain unpredictable. The protesting editors remain in limbo — and need continuing public support.

Hedge funds, however, speak only one language. It’s not civic pride or an informed citizenry.

It’s money.

“Lenders have been asking the company for more information on its business plan and strategies,” one source told me. Even with that 17 percent operating margin and record profits, the company maintains credit facilities. (When Alden bought a majority of DFM, it bought a largely debt-free company. Since then, it has leveraged it up by borrowing.)

The public protests have raised concerns among lenders, I’m told. Those concerns may center on the continuing viability of DFM’s milk-it business model, or they may account for new risks to future performance. For instance, there’s word of two or more high-profile Denver Post advertisers talking about pulling their business from the paper, in protest of the last big layoff of 30 newsroom staffers.

Even without a formal boycott, a source close to the city’s top newspaper advertisers puts the Post’s dilemma in perspective. When Post publisher Mac Tully resigned in frustration in January, no one replaced him. Guy Gilmore — the COO of DFM, as well as its chief executive and main Alden liaison — also serves, on paper at least, as the Post’s publisher. But he doesn’t — as Tully did and most successful publishers do — regularly meet with top advertisers. The result, says this source, is that “numerous advertisers are on the brink of pulling out.”

Meanwhile, the remaining staff of the Pioneer Press heroically puts out a newspaper against the odds in the belief that the community sees the value of a newspaper beyond being a corporate ATM.

(h/t: Paul Tosto)

Related: One Alabama newspaper’s business model features a chair and cigar box (Columbia Journalism Review)