When we last heard from the fine folks at the St. Paul Pioneer Press, Minnesota Newspaper Guild unit officer Dave Orrick was still seeking a deep-pockets local buyer for the Saintly City’s profitable yet beleaguered daily newspaper, which plugs along while its vulture hedge fund owner squeezes every nickel it can out of it.
It’s been six years since PiPress employees bought an ad in the Star Tribune urging a local, civic-minded buyer to purchase their paper from Alden Global Capital LLC, the hedge fund in question.
There hasn’t been much reporting about this lately because Alden and its media holdings company, MNG Enterprises (formerly Digital First Media), aren’t particularly chatty, and billionaire investors tend not to alert the media to their intentions.
But last week, Orrick offered a bit of news: From mid-2016 until early 2018, a consortium of investors from St. Paul and the greater Twin Cities negotiated with Alden to buy the PiPress. Alden listened because it was selling off some of its properties — the Salt Lake Tribune and Berkshire (Mass.) Eagle — and because the offer was substantial: roughly $50 million, according to people familiar with the discussion.
“The interest was clearly there,” said Orrick, who joined the Pioneer Press in 2006 and now covers the state Capitol for the paper. “In the end, it sort of reached a point where if it was going to happen, it should have happened. I’m not party to all of the behind-the-scenes. And the behind-the-scenes I do know I won’t share with you. But it didn’t happen.”
Neither Orrick nor Blois Olson, the Twin Cities public relations specialist who assembled the consortium, would identify the interested buyers. Olson said one member of the group pushed Alden hard in early 2018, demanding to know if Alden was serious about selling or just stringing the group along.
“That’s when Alden went silent,” Olson said.
The consortium fell apart shortly after that, Olson said.
That’s the bad news.
Here’s worse news: Alden/MNG’s recent purchase of Big Fish Works, the small Minnesota newspaper chain, means they’re entrenched in the Twin Cities for a while. While the Pioneer Press, the state’s oldest continuously-published newspaper, isn’t going anywhere — it’s still profitable — the belt-tightening and stripping of resources figures to continue. And that’s disheartening to PiPress employees like Orrick.
“It’s tough hearing everyone ask you all the time, ‘How’s it going over there?’” Orrick said. “It’s going the same, which is, on a big trajectory, not great. At the same time, I still love coming to work every day. Almost everyone in the newsroom does, or they would have already bailed.”
Olson’s involvement in brokering a potential PiPress deal has been rumored for years, but never confirmed until he spoke to MinnPost this week. “I think enough time has passed, almost two years, that I think people need to know there was a sincere, legitimate local effort,” said Olson, who grew up in St. Paul and delivered the PiPress & Dispatch as a kid.
Olson said neither Star Tribune owner Glen Taylor nor anyone from the Hubbard family, which owns KSTP, were part of the consortium. “I found a lot of ‘nos’ and a few ‘yeses,’” Olson said. “We had a small group of St. Paul and Twin Cities business people that saw both a civic reason to pursue it and a legitimate business opportunity. The paper was profitable, and we had a plan going forward that they were confident it could be profitable for the foreseeable future.”
As media chains beholden to stock prices or private equity interests cut pages and employees, more and more newspapers plead for local owners committed to journalism and public service.
Taylor’s stewardship of the Star Tribune since purchasing the newspaper for a reported $100 million in 2014 has become a model for how that can work. The Strib today is one of the nation’s most financially stable newspapers, and its Sunday circulation is one of the largest in the industry. (Disclosure: My wife, Rachel Blount, works for the Star Tribune, and I worked there for a short time more than a decade ago.) Local ownership also benefited traditionally strong newspapers such as the Boston Globe and the Washington Post.
PiPress employees sought that as well. But the consortium’s effort may have been doomed from the start. To begin with, the PiPress makes Alden a substantial amount of money. Ken Doctor, the newsonomics.com media analyst and a former PiPress managing editor who dug into Digital First Media’s finances in 2018, discovered the PiPress turned a $10 million profit in fiscal 2017, with a 13 percent profit margin. While on the lower end of DFM properties, that’s still extraordinary.
Alden invests little of that back into the product.
Doctor said newspaper brokers who deal with Alden told him the opening bid for one of their newspapers better be four to four-and-a-half times its annual earnings. Based on a $10 million profit, that’s $45 million for the PiPress. “If you come in with a low number, they don’t want to talk to you,” Doctor said.
So the St. Paul consortium was in the ballpark. But that wasn’t all to the bid. Alden also owns Adtaxi, a digital marketing and advertising firm based in Denver with a St. Paul branch office. It’s profitable too, and the local operation had to be part of any sale. Combined with the PiPress, Alden wouldn’t easily walk away from all that cash.
“Because they’re only about money — that’s very clarifying, right? — they’re trying to figure out, if they take your money for the Pioneer Press at X price, how does that X price compare to how much they can wring out of the Pioneer Press in profits for the next three years?” Doctor said. “If they think they can wring out more profits, as they thought when numerous people have come to them, they’ll say, ‘No, go away.’”
Which appears to be exactly the case.
“It was a bummer that it didn’t happen,” Orrick said. “And it’s not to say it can’t still happen. There’s still interested money out there. All I have done is try to remove as many roadblocks as I can.”
Like so many papers nationwide, the PiPress tries to do more with less, and often succeeds. But the Star Tribune continues to poach many of its best reporters and editors. Respected sports copy editor Joe Bissen is the latest to cross the river.
A fiercely loyal East Metro audience that would never dream of taking the Strib keeps the PiPress in business. Circulation in 2019 stood at roughly 143,000 daily and 294,000 Sunday, compared to the Strib’s 262,000/520,000, per the Minnesota Newspaper Association.
Though down significantly from four years ago, that’s still more than the Miami Herald (79,000/123,000 in 2018) and the MNG-owned Boston Herald (reportedly 40,000/46,000).
But the PiPress can’t throw four reporters on a project the way the Strib can. And its clunky, hard-to-navigate website can challenge even the most persistent reader.
Orrick knows how much better the PiPress could be with any investment at all. But that isn’t the Alden way. “As much as it’s frustrating to think about the paper, the resources we want, and of course the resources we used to have,” Orrick said, “if you just dropped in on an alien ship and picked up the Pioneer Press or got onto our website, you can find a very legitimate East Metro news organization that focuses on St. Paul, the East Metro, sports, and politics with a statewide political view.”
Meanwhile, Alden discovered another way to bleed more cash from the PiPress. The paper leases office space on the seventh floor of River Park Plaza, across the Mississippi River from downtown. Space was tight when the paper relocated in 2015 (Alden was liquidating the PiPress downtown headquarters), but buyouts and attrition took care of that. Guild membership has fallen from 276 in 2010 to 83 now, with the newsroom down to about 44.
A few weeks ago, MNG put up temporary walls and plastic to block off the unused space. Orrick said MNG plans to sublease it. It’s a chilling scene. One reporter joked they all might soon be working in the same closet.