Philadelphia Metropolis

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The Kindness of Strangers

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Blanche Dubois.jpgI hate the sight of the Philadelphia Inquirer becoming the Blanche DuBois of American newspapers, alluring only to the gentlemen callers who are kind to her because they are drawn to her faded beauty.

They prefer to see her as she was, not as she is.

And if she is, perhaps, more vulnerable, needier, more open to their approaches, then who is to complain? It pleases her that they are interested.  That they see her as her former self, a Southern Belle still desirous after all these years.

Of course, then there is reality.

Mitt Romney to the contrary, corporations are not people.  They are economic entities who exist not to do good, but to do well -- for their investors.

And the Inquirer and Daily News and its affiliated properties are not doing well.

The property had a gross profit -- before taxes, etc. -- of $4 million last year, compared to close to $120 million in 2010.  A precipitous drop in a short period of time.

The phalanx of hedge funds that bought the company in 2010 paid $139 million. Recently, they sold the Inquirer/Daily  News building for $23 million.  They are looking to sell the papers for $100 million, but that is about $50 million to $60 million more than they are worth, according to standard financial analyses.

In other words, the papers are damaged goods as financial investments.

The question is: who wants to buy the papers today.

Other newspaper chains? Of course not.  They are reeling post-recession and struggling for profitability. Some of the largest are bankrupt or close to it.  They are not in an acquisition mode.

Other hedge funds? Are you kidding?  These guys are interested in double-digit profits, not break-even operations.  One set of Masters of the Universe has already lost money on the venture. Why would another be so foolish as to rush in?

To these potential buyers, the Philadelphia papers are a hag, not even worth a look.

Which explains why Inquirer/DN publisher Greg Osburg approached Ed Rendell a while back to ask him if he could assemble a group interested in buying the paper.  Rendell agreed and brought together a roster of wealthy, politically-connected folks. 
Are there dangers in having people like Ed Snider, Lou Katz and George Norcross included?  There sure is.  Ed Snider owns the Philadelphia Flyers.  How would you cover the Flyers if their owner was your owner?  George Norcross is the Democratic power in South Jersey.  Watch what you say about him.  Lou Katz has many diverse holdings -- all of which could be sensitive topics to cover. And how do you cover Rendell if he is chairman of your board? Yikes.

It's easy to criticize these combines of potential owners.  (Others said to be interested in bidding for the papers include local real estate guy Bart Blatstein, billionaire pere et fils Ray and Ron Pearlman and soft-drink magnate Harold Honickman.)

But, what is the alternative?

Cast them aside and look for Mr. Perfect, a benign billionaire from, say, Russia? A savior from Indianapolis? A foundation from Switzerland?

Rendell's group, which clearly has the inside track, is a perfect suitor as far as Osberg et al. are concerned because it appears to be willing to pay a premium for the operation. They are not making an investment; they are buying into the aura and allure that comes from owning a newspaper.

Their motives could be seen as altruistic and civic minded, stepping into to save a storied local institution in peril. Or they could be seen as making a power grab so they can direct the editorial side of the paper and use it to protect themselves and, if they so desire, punish their enemies.

Clearly, it would be better if they took a vow not to interfere with day-to-day editorial decisions.  Clearly, such a vow would be difficult to enforce. 

To the credit of Inquirer and Daily News staffers, at least they are trying.  They recently issued a statement, signed by most of the journalists now working at the papers, reminding people of the importance of editorial independence.  You can read a copy of their statement here.

So local ownership has its perils, as it has had through most of newspaper history.

It's only been in the last 50 years that we have seen the rise of large media corporations, such as Gannett. The preferred model in the past was family ownership.

When Walter Annenberg owned the Inquirer and Daily News, he used them to reward friends and punish enemies. He'd airbrush people he was feuding with from group pictures. He'd sic his political and investigative reporters on political enemies.  He'd use the front page as a venue for long editorials pushing his preferred candidates or excoriating candidates he despised.  (Annenberg was a good hater.)

All the while he amassed colossal wealth from the papers and his other media holdings.

Today's would-be local owners seem benign compared to an Annenberg, a McCormick or a Hearst. They'll never see much, if any, profit from their purchase

These local ownership groups may not be the best option for newspapers, but they may be the only option. We may wish for the perfect suitor -- who is handsome, rich and gallant -- but that's not realistic. 

But, as Blanche herself put it: "I don't want realism...I want magic!"

-- Tom Ferrick

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