Jack Shafer

Alternative weekly colossus Boston Phoenix cracked and fell yesterday, ceasing publication after 47 years. According to a Phoenix executive quoted in the obituary in today’s Boston Globe, the alternative weekly was losing more than $1 million a year, and a format switch last fall from newsprint to glossy had failed to attract the sort of national advertising it desired.

Once one of the leading alt-weeklies in the nation, the dead paper leaves behind $1.2 million in debt and roughly $500,000 in assets. The fact that its owner didn’t — or couldn’t — sell the publication to cover some of its debt signals the illness of the greater alternative weekly market.

Like its daily newspaper counterpart, the alt-weekly has enjoyed a terrible half-decade of plummeting revenues, circulation and page counts in the 100-plus markets currently served. One large chain that owned papers in Chicago, Washington, Atlanta, Charlotte and elsewhere filed for bankruptcy in 2008 and was eventually spun apart, but that financial disaster was as much about clueless proprietors overleveraging themselves as it was the decay of the alt-weekly business model.

The formula, pioneered by the Village Voice in the 1950s, finessed by the Phoenix in the 1960s and perfected by the Chicago Reader, the Phoenix New Times and others in the 1970s, became such a cinch that know-nothing bar owners and recent college graduates (or dropouts!) eventually made millions off it. Some papers, like the Phoenix New Times, built immense chains from the links they forged and acquired. The formula connected underserved readers with overcharged advertisers in both compact, urban settings like New York and Washington and sunbelt expanses like Phoenix and Dallas. In 2005, the two largest alt-weekly chains, anchored respectively by the Phoenix New Times and the Voice, combined to create a company valued by the participants at $400 million, with annual revenues of $180 million. Newspapers started in bar booths had become big business, but like many of the daily newspaper merger and acquisition deals going down during same period, this deal also proved too rich.

Many former alt-weekly editors would like to persuade you that their cutting take on city politics and the arts combined with their dedication to the feature form won readers. Actually, it was the whole gestalt that made the publications work. Comprehensive listings paired with club and concert ads to both entertain and help readers plan their week. Classified ads, especially the personals, often provided better reading than the journalistic fare in the front of the book. No better venue for apartment rentals existed; even people who had long-term leases used the housing ads to fantasize. Even the display ads, purchased mostly by local retailers and service providers, were useful to readers.

Last week, Washington Post Publisher Katharine Weymouth discontinued the ombudsman position, replacing it with an ambiguously defined “reader representative” to whom readers will be able to address their “concerns and questions,” as soon as the paper gets around to appointing one.

This “ombudsman lite” slot is a radical dilution of the old position. As conceived back in 1970, the ombudsman’s job was, in former Post Executive Editor Ben Bradlee’s words, “to monitor the paper for fairness, accuracy, and relevance and to represent the public in whatever strains might arise from time to time between the newspaper and its readers.” (Emphasis added.) The Post ombudsman was “resolutely autonomous,” Bradlee wrote. Working on contract rather than staff, the ombudsman was given the independence to write about whatever he wanted to write about. He couldn’t be assigned. He couldn’t be edited. And he couldn’t be fired, Bradlee continued.

On paper, the power to write such a weekly column and dispatch internal memos of rebuke to the newsroom sounds like a job fit for a hanging judge. But the occupants of this perch have generally shied away from using their power to inflict public punishment or embarrassment on the Post. On some occasions the paper has filled the job with experienced government functionaries, such as Joseph Laitin, Bill Green, Sam Zagoria and Robert J. McCloskey, but usually the job has gone to journalistic veterans, such as Geneva Overholser, Andrew Alexander, Richard Harwood, E.R. Shipp, Michael Getler, Deborah Howell, Joann Byrd, Robert C. Maynard, Charles B. Seib, Patrick Pexton (who just completed a two-year tour of duty) and others. No matter what the ombudsman’s background, the tendency has been to pull punches whenever the Post erred. Instead of roasting the paper for its transgressions, the ombudsman could be relied on to sympathize with the hard job of newspapering and gently explain the newsroom’s mistakes to readers. Worse yet, some ombudsmen have played Monday morning quarterback with their columns, detailing from the safe remove from deadline pressure how they would have assigned, reported, written and edited a flawed story had they been in charge.

The New York Times Co. has been shedding its non-core assets, smoothing its cost structure, strengthening its balance sheet and rebalancing its portfolio with such haste over the past two years that only a cruel and unusual press critic would urge it to quadruple those efforts.

I am that cruel and unusual press critic.

The company was a diversified media outfit 10 years ago, owning eight television stations; two radio stations; 16 newspapers in addition to the New York Times, the Boston Globe and the International Herald Tribune; and a slew of websites. It had a market cap of about $7 billion. Today, the emaciated operation is worth a notch over $1 billion on a good day.

The television stations were liquidated in 2006, but the most aggressive dismantling began 20 months ago, as piece by piece the Times Co. steadily broke off chunks of itself and put them up for sale. To Barry Diller’s IAC/InterActiveCorp went the About Group for $300 million and to Halifax Media Holdings its Regional Media group of newspapers for about $145 million. The company shed its stake in the Fenway Sport Group (Boston Red Sox) in two installments for a total of $180 million and sold off its share in the job-search engine Indeed.com for $164 million. The stripping of the old media conglomerate to its Times-ian essence—the Times itself and the rebranded International Herald Tribune as the International New York Times—will be complete when it finds a buyer for the Boston Globe and its allied properties. One research analyst predicts the Globe could go for $175 million provided the Times Co. covers the pension liabilities.

From their lazy fingers to your scratchy eyeballs, journalists are now transmitting their “year in review” articles and “best of 2012″ lists if, unlike the New York Times Book Review, they haven’t already published their lists of 100 notable books or their 10 best round-up.

In the coming days, a torrent of best-of-year-in-review copy will crack, crumble, and flow like a calving glacier from the keyboard in business, sports, arts, and editorial sections across the land and plop into readers’ laps. Hundreds, perhaps thousands, of beat reporters, political columnists, gossip columnists, tech columnists, and art critics of every denomination will type out their arbitrary listicles about the best and worst of the year and otherwise describe the 11-and-one-half-months just past. Lined up, one-by-one, the best-of-year-in-review packages resemble the floats gliding down wide boulevards during a New Year’s Day parade: colorful, big, but pointless. My own news organization, Reuters, builds its own floats, as its “Year in Review 2011″ package proves.

Only a scold would insist that every best-of-year-in-review story is crap. I look forward to the top 10 list critic Mark Jenkins assembles each year for inclusion in the Village Voice‘s “Pazz and Jop” music poll, but mostly because he keeps a keener eye on the topic than I do. I’m sure that if I spent more time sifting through best-of-year-in-review articles I’d find more delicious copy to savor, but the same can be said for extruding all of Craigslist through a strainer in hopes of trapping a few edible morsels.

As the daily newspaper winds down after a century of dominating the news business, so does the job of editing one. Editorships of the top papers were once comparable to lifetime appointments to the federal bench, with all the perks and prestige that came with a judgeship. A.M Rosenthal led the New York Times for 17 years. Benjamin C. Bradlee served as executive editor of the Washington Post for 13 23* years, and after him came Leonard Downie Jr., who had the job for 17 years.

Today, the top editor can rely on no more longevity than your average NBA coach, who fully expects to be dribbled out the door (or take the initiative to make a fast break for it) after a few seasons. The latest editor given his walking papers is Washington Post Executive Editor Marcus Brauchli, who after four years at the job has been given the new title Washington Post Company vice president and assigned to evaluating new-media opportunities. His replacement, announced today, is Martin Baron, currently the editor of the Boston Globe. By comparison with other newspapers, the Post is a safe harbor for editors: The Los Angeles Times has cycled five journalists through its top job since 2005. Prior to editing the Globe, the itinerant Baron held the top job at the Miami Herald from 1999 to 2001.

Baron arrives at a paper much diminished from its salad days under Bradlee and Downie, when the Post was the leading mass-advertising vehicle in Washington and corpulent with profit. Under Bradlee’s and much of Downie’s tenures, the paper’s biggest problem was finding something to spend all that money on. It established domestic bureaus in New York, Chicago, Los Angeles, Austin, Denver, and Miami. It expanded its business pages into a freestanding section in the early 1990s. * It created local bureaus to serve the suburbs that circle Washington, filled them with reporters and produced zoned editions. It experimented with new weekly sections covering consumer tech and lifestyle.

At the age of 70, Michael R. Bloomberg nears an actuarial end that not even his $22 billion net worth can reverse. By giving him a measly 13 years of life expectancy, the law of averages has made the New York mayor acutely aware of time. In 2006, he installed a countdown clock in his mayoral headquarters that marked time until the end of his second term. As his third term commenced in 2009, Bloomberg escalated his war on time, putting a stopwatch to meetings. Was he racing the clock, or, as the co-inventor of the Bloomberg Terminal, did he think that a firmer grasp on life’s raw data would prolong his life?

Before he’s ushered to his reward, Bloomberg – whose current term as mayor ends at the close of 2013 – yearns to do something as grand as revolutionizing Wall Street, making billions, and running New York City government. Ordinary billionaires find this sort of psychic remuneration in philanthropy, but Bloomberg, a generous donor, is no ordinary billionaire. Philanthropy gives him a kick, but not the kick he craves. Back in 2006, Bloomberg’s special something looked to be a presidential campaign. He took foreign policy lessons from a centrist, priced the cost of the race at an affordable $500 million, and played the big-town flirt as he explained to one news organization after another how he didn’t really want to run for president – while reminding them what a splendid president he would make.

He didn’t run because he came to understand that he couldn’t win as a Democrat, a Republican or an independent. It’s for the best that he didn’t become president: His idea of governance is giving orders, as if he’s the people’s CEO. It’s also for the best that when the Obama administration shopped him to fill the vacancy at the World Bank, as its president, he declined the position because he didn’t want a boss, as New York’s Gabriel Sherman reported.

When did the ripe, bulbous, and gibbous newspaper bubble pop?

It was probably in the 1990s, when the business better resembled a cruising blimp than it did the dotcoms like Pets.com, Boo.com, and TheGlobe.com, which all went kerblewy around the turn of the century. Unlike the bombing dotcoms, the high valuation of newspapers was based on real, not imaginary profits, and the belief that the profits from these deals would extend for years, if not decades, into the future.

And such deals there were. The New York Times Co bought the Boston Globe for $1.1 billion in 1993. In 1997, McClatchy acquired the corporation that owned the Minneapolis Star Tribune for $1.4 billion and Knight-Ridder purchased the Kansas City Star and Fort Worth Star-Telegram (and two other smaller papers) for $1.65 billion. On the sidelines, newspaper consultant John Morton crunched the numbers and expressed the market consensus about these transactions in the headline for his January/February 1998 American Journalism Review column: “Expensive, Yes, But Well Worth It.”

Morton’s column provides no sense of the impending doom, no inkling that an entire industry is arrowing its way to a hospice, no clue that all these newspaper people have booked passage on a death ship. Even after the Hearst Corp ditched its San Francisco Examiner for a $660 million deal to buy the San Francisco Chronicle in late 1999, more happy talk ensued. If anybody cited Warren Buffett’s 1991 warning that newspapers had lost their special “franchise” value and that he wouldn’t be buying any more of them soon, I missed it.

Choking softly on the wad of debt “rescuer” Sam Zell fed it, Tribune Co checked into a Wilmington, Delaware, bankruptcy court at the end of 2008. Now newly slimmed, especially after the payment of $410 million in legal and other professional fees, the much diminished patient is about to be released and turned over to its new owners, a group of banks and hedge funds. How diminished? At the time Zell acquired control in 2007, Tribune Co’s newspapers, television stations, other media properties and Chicago Cubs baseball franchise were valued at $8.2 billion. Reporting from court filings, Chicago Tribune reporter Michael Oneal put Tribune Co’s current value at about $4.5 billion.

That’s not a haircut. That’s a beheading. Some of that loss in value represents the sale (for $845 million) of Tribune’s Chicago Cubs operation in 2009, but still.

What will the likely new owners (JPMorgan Chase; Angelo, Gordon & Co.; and Oaktree Capital Management) do with the reconstituted Tribune Co? According to Oneal, who has been monitoring the ailing company’s vitals since before its bankruptcy, Tribune isn’t so sick that it must sell off all its parts immediately. But hedge funds and banks aren’t the best managers of media properties, and when combined with today’s declining market for media properties, those hedge funds and banks might want to put out a for-sale sign as soon as possible. I’m sure that if you were interested in Tribune’s 23 TV stations, which are valued at $2.9 billion, they’d meet you for coffee.

In his 2004 book The Vanishing Newspaper: Saving Journalism in the Information Age, Philip Meyer imagined “the final stages” of a “squeeze scenario” by a newspaper owner who wanted to exit the business but didn’t want to actually sell the title: He would start charging more for his newspaper and delivering less, commencing the “slow liquidation” of his property. This slow liquidation would not be immediately apparent to observers, Meyer wrote, because the asset “being converted to cash” would be “goodwill” – the newspaper’s standing in the community and the habit of advertisers and subscribers of giving it money.

One reason an owner would want to extract a newspaper’s goodwill value before selling its physical assets – its real estate, presses, computers, trucks, paper, ink, etc. – is that traditionally, goodwill is where most of a newspaper’s value has resided. When Meyer asked two newspaper appraisers to estimate how much of a newspaper’s value was locked up in goodwill versus physical assets, both gave him the same answer: 80 percent goodwill, 20 percent physical assets.

Selling goodwill is a dangerous strategy because once sold, it’s difficult to reacquire. But a newspaper owner who feels trapped by losses and can’t find a new owner at what he considers a fair price may feel he has no alternative but to cheapen his newspaper bit-by-bit, month-by-month. He may explain the goodwill sell-off as temporary economizing to be reversed once business conditions improve, or even as the exploration of a new business model. Sellers of newspaper goodwill might protest that the financial losses they’re absorbing constitute a serious investment in the newspaper’s future, that they’re harvesting nothing. But don’t be fooled. If you’re winding your company down with no strategy to wind it up, you’re burning goodwill even if you don’t acknowledge it.

Just because Warren Buffett blew $142 million in cash on 63 daily and weekly Media General newspaper titles yesterday doesn’t mean that newspapers are back. All it means is that an old cow that’s still a milker has been moved to a neighboring farm’s pasture, where it will be squeezed until it can give no more and will then be ground into pet food.

Buffett has long loved newspapers, having made about a half a billion dollars on the Washington Post Co. after his company, Berkshire Hathaway Inc, started investing in it in 1973. In 1977, he bought the Buffalo Evening News for $32.5 million, and after it vanquished the city’s other daily, it became one of the country’s most profitable newspapers, as measured by return on assets.

But Buffett isn’t romantic about newspapers. He buys when he sees value that others don’t. For instance, in a lecture he gave at Notre Dame in 1991 (pdf), Buffett explained why he bought Washington Post Co. stock.