Trials and Stribulations
Taking the stand in Judge David Higgs's courtroom, Par Ridder couldn't have looked more like a rich boarding-school kid. The 38-year-old publishing scion was decked out in country-club navy blue with a haircut that was square in every sense of the word.
His counterpart, MediaNews CEO William Dean Singleton, a self-made media mogul from Graham, Texas, cracked wise with reporters in the gallery outside the courtroom. Shuffling on legs hobbled by multiple sclerosis, the 55-year-old was in town just to enjoy the show—and to watch Ridder squirm.
The ignoble occasion was a three-day hearing in late June that pitted the Pioneer Press against the Star Tribune, Minnesota's two largest daily newspapers. Ridder had raised eyebrows in March when he announced he was stepping down as publisher of the Pioneer Press to take the top job at the Star Tribune. Ridder's family had run the St. Paul daily for nearly 80 years. In that time, the two broadsheets went to war over scoops, revenues, and readers. To switch sides was the publishing equivalent of treason.
But the real bombshell came in April, when MediaNews, parent company of the Pioneer Press, sued Ridder and the Star Tribune in Ramsey County District Court. In unseemly detail, the civil complaint laid out accusations that Ridder stole a laptop computer, sensitive financial data, and top employees when he jumped ship to the Strib.
"This theft of confidential information—and its receipt by the Star Tribune—was a clear violation of the law," one court document reads, asserting that Ridder and others used "wiping programs" to "cover their tracks."
Now, here Ridder was on the stand essentially admitting he had done all he was accused of. He even expressed regret for his actions.
"I would do it differently," Ridder said of taking spreadsheets with him across the river. "I wish I didn't have the information."
But a sense of entitlement still crept in. "I thought I would spend my career with Knight Ridder," he said, referring to the longtime owner of the Pioneer Press. "My family has a long history with that company."
For the two days Ridder was on the stand, the courtroom was the best show in town. So many lawyers populated the gallery that one observer said, "I've tried to tally up all the firms represented here, but I gave up." Laughter rippled through the room when Ridder admitted that he met one exec from the St. Paul paper at a Lund's grocery store in Eagan so that they wouldn't be seen together. Here was a man from a family of millionaires, pulling in nearly half a million a year, reduced to holding a business meeting in the baked goods section of a supermarket.
Like a cat batting around a cornered mouse, Singleton relished every uncomfortable minute. When Ridder's testimony wrapped and court adjourned for the day, Singleton turned to a couple of reporters and chortled, "Now tell me, boys, would you buy a car from that man?"
The last year has been a period of unprecedented turbulence for the state's two biggest daily newspapers, each of which has changed ownership.
The Pioneer Press was first on the auction block. Under pressure from Wall Street, the Knight Ridder newspaper chain sold its 32 daily papers to the McClatchy Company in June 2006. But because McClatchy already owned the Star Tribune, it quickly announced plans to re-sell the Pioneer Press in order to avoid running afoul of antitrust regulations. Denver-based MediaNews then purchased the St. Paul paper and three California newspapers for $1 billion.
Just six months later, McClatchy announced it was selling the Star Tribune, the flagship paper in its chain of 33 dailies. If the sale was a surprise, the price was downright astonishing. Avista Capital Partners, a private equity firm with no prior experience in the newspaper business, agreed to buy the Strib for $530 million—less than half what McClatchy had paid for the paper eight years earlier. McClatchy tried to put a positive spin on the shortfall by pointing out that the sale would save the company $160 million in taxes. But the Strib sale nonetheless became a national benchmark for how steeply the value of daily newspapers has tumbled in recent years.
"I was stunned," says Tim J. McGuire, the newspaper's former top editor. "I didn't realize that revenues had declined quite as much as they obviously had."
The ensuing months have seen continued turmoil. The Star Tribune has undergone two rounds of buyouts, resulting in the loss of 75 newsroom employees—or roughly 20 percent of its editorial staff. Among the departed are many marquee names, including metro columnist Doug Grow, one-time Pulitzer finalist Sharon Schmickle, redoubtable sports reporter Jay Weiner, and political guru Dane Smith. "I've used the term lobotomy to describe it," says Smith, who left in March after 30 years as a Minneapolis daily newspaper reporter.
The bloodletting hasn't been confined to the editorial ranks either. Last week, chief financial officer Mike Riggs announced he was leaving the Strib to take a position with Meredith Corporation in Des Moines.
The news is just as grim across the river. The 380 Pioneer Press employees represented by the Minnesota Newspaper Guild Typographical Union recently began negotiations on a new labor contract with MediaNews. The company, which has a well-earned reputation for cold-blooded fiscal calculations, is seeking a slew of concessions, from cutting gas reimbursements by 30 percent to allowing for unlimited use of freelance workers.
Last week, MediaNews also announced that it was seeking buyouts from at least 30 employees, including 15 from the editorial ranks. After this latest round of belt tightening, the number of newsroom guild employees will have dropped from 243 to 147 in just six years—a 40 percent reduction.
Declining circulation is one reality plaguing daily newspapers. According to the Newspaper Association of America, nationwide daily circulation fell 2.1 percent last year, while Sunday sales dropped by 3.1 percent. The news is slightly worse for the Star Tribune. In the first quarter of the year, daily circulation was off by 4.8 percent, with Sunday sales down 5.1 percent. The Pioneer Press, however, actually recorded a minuscule increase (less than 1 percent) in both daily and Sunday circulations.
More worrying for the future health of daily newspapers are the radical changes to the advertising landscape. Kneecapped by free, online competition from the likes of Monster.com and Car Soup, the revenue from classifieds—long the bread and butter of daily newspapers—has fallen off a cliff. McGuire speculates that the Star Tribune has lost somewhere between $60 million and $80 million worth of Help Wanted ads since he departed in 2002. To put that figure in perspective, it could pay the salaries for everyone in the newsroom for roughly four years.
"The real problem with newspapers is that the business model is under attack," says McGuire, who now teaches journalism at Arizona State University. "The advertising game has changed."
For a glimpse at how dire the advertising market has gotten for newspapers, consider a single Macy's ad contract discussed in last month's court hearing. The Pioneer Press argued that Ridder utilized sensitive financial data to lure the retailer to the pages of the Star Tribune. The dispute resembled nothing so much as a couple of scavengers picking over bones.
Making matters worse in the Twin Cities market has been the nasty legal battle that's costing both newspapers millions in legal fees, not to mention the respect of many readers and employees. Last week, the Star Tribune's Newspaper Guild employees voted by a near-unanimous margin, 110-2, to demand the resignation of Ridder.
"Par has shown he can do two things," says veteran reporter Steve Brandt. "Steal a laptop and cut jobs."
When the McClatchy Company bought the Star Tribune in 1998, the economic prospects for daily newspapers still seemed bright. The Cowles family, which had operated what were originally two newspapers since 1935, sold out at a top price. Folks in and outside of the newsroom wondered about new ownership. "You know what they say: 'the last hired, the first fired,"' Strib reporter Allie Shah told the Pioneer Press.
But to the relief of reporters and readers, the eventual suitor, the McClatchy Company, bore a striking resemblance to the Cowles. A family business that had operated newspapers in California for 150 years, McClatchy espoused the same respect for journalism that had been a hallmark of the Cowles era. The McClatchy chain paid $1.4 billion for the Strib, an amount well above the $1 billion Wall Street predicted the sale would fetch, making it the third most expensive media transaction of the year.
"Some analysts say we've paid too much," Gary Pruitt, CEO of McClatchy, said at the time. "I think they're wrong, and I will prove them wrong over time, and I look forward to doing that."
For a while, Pruitt seemed poised to live up to that promise. McClatchy was flush, and cash flow at the Strib had been near $90 million a year. The Star Tribune went on a rosy manifest-destiny campaign, aggressively courting readers from western Wisconsin to Sioux Falls, South Dakota. The newspaper began offering zoned suburban editions, and at one point in 2001, the paper's ad revenue was up 4.9 percent.
Then the market bottomed out. The Star Tribune started seeing a dip in circulation and struggled to keep readers and revenues at home. This culminated, infamously, with a more than yearlong redesign project. When the new Strib debuted in October 2005, human-interest stories populated every section, with full-color photos that ran as big as three-quarters of a page.
To hear former and current Stribbers tell it, the situation has only worsened with time.
"I still get the paper, and I find there's very little in there I want to read," says Conrad deFeibre, a Capitol reporter who took a buyout after 34 years. "They've gone a little yellow."
Longtime staffers point to the late 1980s as a high point of the paper's success. By then, the Strib had hit its stride after the 1982 merger of the Minneapolis Star and the Minneapolis Tribune. Under editor Joel Kramer and publisher Roger Parkinson, the Strib boldly dubbed itself "The Newspaper of the Twin Cities," opened a St. Paul bureau, and aggressively expanded home delivery around the metro.
The reporting was more in-depth, the stories longer. The front page featured six or seven headlines, mostly national and international news. One week in July 1987 brought three illuminating stories on federal farm subsidies. An article by longtime pop music writer Jon Bream on the closing of the famous Carlton Celebrity Theater (immortalized in Fargo) jumped not once, but twice. A story about radioactive waste in Dearborn, Michigan, carried a Strib byline instead of the Associated Press logo.
Nowadays, some staff members worry whether they'll have the resources to cover the bare necessities. "In my own area, politics, we have a looming presidential election, the Republican convention, congressional races," says D.J. Tice, the former Pioneer Press columnist who is now the Star Tribune's politics and government team leader. "I just don't like thinking about it, thinking about how we're going to cover it. Who's going to do the cop checks? Who's going to the city council or the school board? Who's going to keep an eye on those things?"
Other Strib veterans express dismay that the paper is myopically focusing on suburban issues at the expense of national and international affairs. "We've lost our guts to tell people what matters," says Grow, the longtime metro columnist who still feels like a part of the paper even after taking the buyout. He points to a recent edition of the Strib where restrictions on water sprinkers in Eden Prairie were on the front page, while news of crucial Supreme Court decisions—"ones with huge impact here"—was relegated to A6.
"I'm not saying there isn't a place for the sprinkling ban, because there is," Grow says. "But we do a disservice if we think people only care about how brown their yards are and don't give a shit about anything else."
In the fall of 2006, Jay Weiner was excited about his job at the Star Tribune. The veteran sports reporter was coordinating a chain-wide plan for all McClatchy daily papers to cover the 2008 Olympics and had been drafted to head up Buzz.mn, an ambitious blog that was still trying to find its footing. Editor Anders Gyllenhaal, still weeks from taking off to the Miami Herald, was actively seeking input on various features and special projects to go on the internet. There was a sense that McClatchy appeared keen on investing in its flagship paper. "The newsroom was functioning, and we were spending money," Weiner recalls.
Weiner was at an airport in Puerto Rico at the end of December when he received an email informing him that the paper had been sold. "I read about it, and it's a cliché, but the rug had been pulled out," Weiner says. "It's been a freefall ever since."
The new owner of the Star Tribune, he learned, was Avista Capital Partners. Like most Star Tribune employees, Weiner had never heard of the private equity firm. Once the shock over the sudden sale had dissipated, the question on everyone's lips was: Who is Avista Capital Partners?
The ensuing months provided precious little substantive information about the investment group. Avista was formed in 2005 by a group of professional investors, most of whom had previously worked for DLJ Merchant Banking Partners. They raised an initial $2 billion from 60 investors and opened offices in New York and Houston.
Up until the purchase of the Strib, the group's holdings were mainly in health care and energy. And they spent money in those areas. In May 2006, Avista pumped $50 million into Celtique Energie Limited, a company that performs oil and natural gas exploration in Europe and Africa. In February 2007, Avista purchased BioReliance Corporation, a pharmaceutical services company, for $210 million.
The purchase of the Star Tribune wasn't the first time Avista had tried to buy into the newspaper industry. In 2006, the company made a failed bid for Philadelphia's two struggling daily newspapers, the Daily News and the Inquirer, both of which had been owned by Knight Ridder.
But since the news of the Strib purchase broke, speculation has been rampant that Avista's chief interest in the newspaper is the prime downtown parcels of land it owns. Ever since November, the Minnesota Vikings team has looked at land in the Downtown East neighborhood as part of its plans for a new stadium.
Almost immediately after the Strib sale, Vikings owner Zygi Wilf was meeting with people from Avista to discuss the possibility of buying the land. To that end, the Vikings announced in June that the team had purchased four parcels from the Star Tribune for $45 million—more than double the value ascribed by a Hennepin County tax assessment.
Looking through stadium plans that have not been made public but were shown to City Pages, it's clear that there's one missing parcel in Wilf's sweeping vision: the lot that holds the Star Tribune's offices. And the Vikings organization has made no secret that it covets the land.
"We certainly made it clear that we're interested," says Vikings VP of public affairs Lester Bagley. "Given what's going on at that newspaper, I'm not sure [Avista] wanted to displace all of their people."
But with Avista's 2007 revenue off by 20 percent of projections, according to a recent Wall Street Journal report, selling the Strib land could be a quick way to get back in the black. The building is in need of renovation, and Weiner points out that Avista might find it cost-effective to open "satellite offices" around the metro. "Why not have your Bloomington guy in Bloomington?" he asks.
Chris Harte, a consultant for Avista who serves as chairman of the Star Tribune, denies that the company has any plans to close the newspaper's downtown office.
"We only own one other block downtown, and we are about to invest a big piece of the cash we'll get from the sale of the other four blocks so we can move more of our people into that remaining block," Harte writes in an email to City Pages. "If we had wanted to include that block in the sale, we would have."
Regardless of the fate of the land, Avista has already created a near mutiny in the newsroom with its handling of the Par Ridder controversy.
"It hurt, it was outrageous," Weiner says. "Reporters were saying, 'He's toast, you've harmed the brand, you're toast.' If I were Mr. Avista, whoever that is, I would have fired him right there. Do you know what that would have done to morale in the newsroom?"
Instead, Avista let Riddergate play out in the media and eventually the courtroom. The inexplicable loyalty to Ridder has fueled speculation that his family might have a financial stake in Avista. Tony Ridder, Par's father and the former chairman of Knight Ridder, has denied that the family has any connection to the private equity firm. And a recent New York Times article reported that "Par Ridder stated unequivocally that neither his father nor any other member of the Ridder family was part of Avista, and another person familiar with the deal to buy The Star Tribune concurred." (Par Ridder did not return calls for this story.)
Harte defends the embattled publisher, insisting that he's been treated unfairly by the media. "I'm frankly astounded at how many journalists are jumping to conclusions on the basis of allegations of a competitor who is obviously out to gain competitive advantage," he writes.
Avista claims that it's in the newspaper business for the long haul—Harte writes that he expects Avista to own the paper for "quite a while." But fears persist that the company bought the paper to cut costs and sell out within five years for a quick profit, something for which private equity firms are notorious.
"I think people were hopeful, waiting to see what Avista would be doing," says Weiner. "But after the big round of buyouts, it became clear that they wanted cuts. The dynamic changed."
Shortly after MediaNews acquired the Pioneer Press last August, William Dean Singleton paid a visit to the St. Paul newsroom. The CEO assured editorial staffers that he had no intention of shutting the paper down. "You're joining us because we want you," Singleton told employees, according to a story in the Pioneer Press. "We think there's a lot of opportunity here, and if we didn't want it, we wouldn't have bought it."
But employees had good reason to worry. During more than three decades in the newspaper business, Singleton earned the nickname "Lean Dean"—a reference to his habit of trimming costs and employees. His checkered résumé includes shuttering the Fort Worth Press in 1975 and gutting the Trenton Times in the early '80s. In 1995, he sold the Houston Post to Hearst, which owned the newspaper's chief competitor, the Houston Chronicle, and immediately closed the newly acquired paper.
In the last decade, however, Singleton's reputation has undergone something of a rehabilitation. In 2001, he became chairman of the Newspaper Association of America and was named "Publisher of the Year" by Editor & Publisher magazine. He has earned plaudits for his stewardship of the chain's flagship paper, the Denver Post. Summing up the transformation, a 2003 profile in the Columbia Journalism Review called it "The Evolution of Dean Singleton."
But the ever-worsening economics of the newspaper industry have caused Lean Dean to revert to form recently. Last month, the Denver Post laid off seven newsroom employees. They joined 14 former editorial staffers who voluntarily took buyout packages.
In recent weeks, Pioneer Press employees have gotten a tutorial in the company's hardball labor-relations philosophy. Last month, contract negotiations began between Media-News and the 380 Pioneer Press employees represented by the Minnesota Newspaper Guild Typographical Union. (The current five-year labor deal expires at the end of this month.) The process has not been pretty. The initial proposal from MediaNews asked for a laundry list of concessions. Most seemed aimed at cutting costs and weakening the union. Under the proposal, all restrictions on hiring freelancers would be eliminated. Employees who work for online and niche publications would be excluded from union membership. Mileage reimbursement would be reduced by nearly a third, from 48.5 cents to 35 cents, at a time when gas prices have hit $3 a gallon. And in perhaps the most foreboding proposal, MediaNews wants to reduce severance pay from 38 weeks to just 12. More layoffs are clearly on the minds of management—last week brought word that 30 staff positions would be cut.
Alex Friedrich, a Pioneer Press reporter who sits on the union's bargaining committee, argues that the proposed changes would significantly undermine the newspaper's editorial integrity. "Do you really want some inexperienced freelancer covering a city council meeting?" he asks. "Ultimately, it's the people of these two cities who are going to have to live with the consequences."
Rick Edmonds, a newspaper analyst at the Poynter Institute, says that the bargaining behavior is vintage MediaNews. "That fits the pattern in San Jose and other places where MediaNews operates," he says. "They have typically come in looking for a lot of concessions in work rules and health care and those kinds of things."
Employees of the Star Tribune, who have just one more year left on their labor contract, are anxiously watching the negotiations, knowing that it will set the table for their own talks. "What MediaNews has proposed is essentially an attempt to break that unit," says Chris Serres, a business reporter and union officer at the Star Tribune. "You have to be prepared for the worst. What we're seeing across the river certainly is the worst-case scenario."
Last week, the Star Tribune and Pioneer Press filed final arguments in the case that will decide whether Par Ridder and two newspaper executives he lured across the river will be permitted to perform their new jobs. A ruling isn't expected until the end of summer. But no matter what the judge decides, the case seems likely to drag on for months, if not years.
As far-fetched as it might seem given the current animosity between the two papers, many media observers believe that ultimately the competing dailies will put away the knives and work more closely together. A hallmark of MediaNews's operating philosophy has been to enter into so-called joint operating agreements in markets where there is more than one daily paper. In cities across the country—Denver, Salt Lake City, Detroit—the newspaper chain has opted to work with the competition rather than attempt to kill it off. "They certainly do have a comfort level with joint operating agreements," says Rick Edmonds, of the Poynter Institute.
Frederick Mott, a veteran MediaNews executive who served as interim publisher of the Pioneer Press for three months after Ridder departed, says this practice reflects Singleton's business philosophy. "Dean sees that as the way to operate, not be off in your own little shell reinventing the wheel," he says.
Singleton insists, however, that the Star Tribune's deceitful behavior makes such an agreement impossible at this point. "You cooperate with competitors that you trust," says Singleton. "There's certainly been a breach of trust."
Probably a bigger impediment is that Justice Department guidelines require that at least one of the newspapers be operating in the red. Despite all the hand wringing over declining profits, neither daily is running a deficit. In fact, just last year, the Star Tribune had profits of roughly $50 million.
In the long run, however, a merger or buyout of some sort makes economic sense. Former Strib editor and publisher Joel Kramer points out that there's been a "slow erosion" of newspaper subscribers for 50 years. "You have drop in revenue in a business that has high fixed costs. That's it in a nutshell," he says.
For two decades, many have assumed the Star Tribune would eventually swallow the smaller St. Paul daily. The Pioneer Press so far has survived. But whether through a merger, a takeover, or a shuttering of one paper or the other, the prospect of having just one major daily in the Twin Cities seems more likely than ever. "I think the business logic says it will happen," Kramer says. "I don't have a crystal ball to say where or when, but it seems inevitable."
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