Friday, January 22, 2010

Why Singleton will stay after bankruptcy

William Dean Singleton, the Evel Knievel of newspaper publishers, amazingly will remain at the helm of MediaNews Group in spite of a bankruptcy that will cost his lenders $750 million.

In the latest act of a long and resilient career, Singleton is scheduled to continue as the chief executive of the company after it is reorganized under a prepackaged bankruptcy filed today.

How does he get to keep his job after losing all that money? The same way the real Evel Knievel got to keep his.

No matter how badly the late daredevil was mangled in numerous wrecks – he is said to have established a world record for breaking the most bones in one incident (35) – Knievel always got back on his motorcycle as soon as he could, eagerly embracing the danger of jumping over alligator pits and yawning canyons.

Risking life and limb was just another day at the office for Knievel, who succumbed rather prosaically to a host of medical problems at the age of 69 in 2007.

The 58-year-old Singleton has pretty much emulated Evel’s derring-do since he used someone else’s money to buy his first paper in Texas at the age of 21. (He has been using other people’s money ever after, too, which is why he isn’t losing a nickel of his own cash in the upcoming bankruptcy.)

Sometimes, Singleton’s bravado achieved great success, as he did in purchasing the Denver Post from Times Mirror at a distressed price in 1987. The paper today dominates the market after the shutdown of the Rocky Mountain News, its partner in a joint-operating agreement. He also deserves credit for rescuing the struggling Oakland (CA) Tribune from what almost certainly would have been an ignominious fate.

But other Singleton acquisitions, like the Houston Post and Fort Worth Press, ended in write-offs, as will be the case in the bankruptcy filed today.

In the planned reorganization of Affiliated Media under Chapter 11, lenders will lose three-quarters of a billion dollars and the Hearst Corp. will lose $317 million in equity it had invested with Singleton. While the prepackaged bankruptcy plan calls for lenders to own 80% of the going-forward concern, Singleton and other key managers will own a 20% stake in the business.

Why would the creditors keep the guy who lost all that money?

Because he is the best chance they have of extricating any value from the business.

Here’s why:

The lenders understand that the newspaper industry is in a period of irreversible contraction, as consumers and advertisers alike increasingly migrate to the digital media.

But the lenders also know newspapers are major and valuable brands, attracting the largest proportions of advertising dollars spent in each of the communities they serve. That is to say: Even though they used to be bigger, newspapers remain big businesses.

The trick in wresting future value from the MediaNews properties (and all other newspapers, for that matter) is to find a new, sustainable business model to ensure their long-term viability and profitability.

Singleton not only knows and loves newspapers, but he also is uniquely un-squeamish among publishers in doing whatever it takes to make a publication profitable.

In his pursuit of finding sustainability for newspapers, nothing is sacred to Singleton. If he can merge production or circulation operations, he will. If he can consolidate newsrooms or ad sales, he will. If it is cheaper to outsource customer service or ad make-up, he will.

He has done it before and, if the opportunity presents itself, he will do it again.

No other senior newspaper executive is as daring and seemingly impervious to pain as Dean Singleton.

That’s why he’ll climb out of this wreck, saddle up and start all over again.

18 Comments:

Anonymous Anonymous said...

You are quite right. I know of no other newspaper owner willing to ignore market economics to run his newspapers. It works in good times, but comes home to roost in bad, as the bankruptcy move shows. The remarkable thing is that the contracting out and consolidation moves he imposed on his newspapers now are being copied by Gannett and other chains. The wonder is that the public keeps buying these papers, even though they know they are shadows of their former selves.

6:36 PM  
Anonymous Anonymous said...

I am still trying to figure out what prompted the debt holders to go along with this plan to take stock for their debts. Now I note from a story in Billy Dean's Salt Lake Tribune that in addition to stock, there are also warrrants for future equity:
"Lenders, led by Bank of America, will swap $930 million in debt for an 80 percent ownership stake in Affiliated. Bondholders will get warrants for future equity."
So the future of the stock is to be diluted when and if those warrants go into effect. Wow. Is this taxpayer money the Treasury gave Bank of America that is going to reward Billy Dean?

6:50 PM  
Anonymous Resident Skeptic said...

Derring-do? Singleton? Yes, it was so adorable the way he squeezed every last cent out of newspapers, then shut them, laid off loyal hardworking reporters, ruined careers, turned off the tap of information in communities that relied on their daily rag... The way he put his own fortune into hock so the media we need as citizens could survive. He's got the guts to kick you into the street in traffic - that's why the lenders love him.

6:56 PM  
Anonymous Robert MacMillan said...

Resident Skeptic is correct. No question. But as someone (you?) once said: The best thing about Dean Singleton is that he doesn't care about the journalism you do when you work at his paper. The worst thing about Dean Singleton is that he doesn't care about the journalism you do when you work at his paper.

7:24 PM  
Anonymous Anonymous said...

My question is why would anyone work at one of this asshat's papers? You put up with this kind of management, you get what you deserve.

7:41 PM  
Anonymous Perry Gaskill said...

Here's a question: Why do we usually assume that the value of a newspaper's brand must always be a positive number?

Without putting too fine a point on it, it seems to me that the concept of branding is closely related to the goodwill aspect of the value of a small business. So what happens when a small-town cafe, for example, has had a good reputation but over time becomes better known for high prices, bad food, and rude service? Is the goodwill then an asset or a liability?

At the risk of waxing nostalgic, there was a time once when newspapers had a symbiotic relationship with the towns where they were located. The business model being, for better or worse, that if the paper took care of Main Street then Main Street would take care of the paper. For a lot of reasons, that tacit social contract is now broken. By-and-large, papers no longer serve the communities where they're located. Instead, communities have become markets to be exploited.

So it seems absurd to me that one of Singleton's reportedly bigger answers to digging MediaNews out of a hole is yet more consolidation. As if the way to win is to somehow become the WalMart of news with all that implies. Or am I missing something? And yes, I understand that consolidation in the context of the post means operational efficiencies and not necessarily more acquisitions.

12:59 AM  
Anonymous Anonymous said...

Alan, I know you were just trying to tie your Knievel comparison up at the end, but Singleton is never daring. He takes long shot chances when he has no skin in the game. He takes hobbled organizations and drives them into the ground. And now he wants to be the "aggressor" in what he expects are upcoming consolidations. Pity those communities.

2:27 AM  
Anonymous Anonymous said...

Resident Skeptic, how did Singlton "ruin careers"? All he did is lay people off. If those people cannot get a job elsewhere they have unmarketable skills, either because they just aren't very good at doing a job that makes their employers money, or because the industry they work in is fading out. Neither of those things is Singleton's fault. They should consider themselves lucky that they got paid so long for what they had to offer.

3:08 AM  
Anonymous Anonymous said...

AHA. The light just went on, and now I think I understand the dynamics of this bankruptcy deal. The key to this is Bank of America, which is getting equity for the Billy Dean debt it holds, which is in danger of default. But if this goes through, troubled BOA gets to replace those bad numbers on its books with new equity whatever price is set for the stock -- fictional price or not. Voila: a big bad debt magically becomes an asset. Bank examiners will look at this as a plus, and BOA can claim its wiping out its bad debts.
BOA becomes a strong bank again, its stock advances, it repays its Treasury loans...everyone is happy. Ain't life marvelous?

6:44 AM  
Blogger Bill said...

Sounds like Singleton will do what others don't have the balls to do the industry needs a shakeup. Newspapers are a businesses like any other business money pays the newspapers bills. Newspapers need to change what they do and how they do it review every product line and improve internal efficiency working across the silos to generate ideas to create a better products for our customers. The fatted calf is dead.

7:39 AM  
Anonymous Tom Debley said...

Find your comments good, except for one -- that being that Dean Singleton rescued the Oakland Tribune from an ignominious fate. It may be in business, but as a resident of Oakland and former newspaper reporter & editor who longs for good coverage of my city, I find the Tribune a journalism disgrace.

8:49 AM  
Anonymous Anonymous said...

Perry Gaskill writes that newspapers used to take care of Main Street and Main Street used to take care of newspapers. Perhaps nostalgic, but also quite true.
Then remember that it was Singleton who moved his Salt Lake Tribune editorial offices from Main Street Salt Lake City to an outdoor shopping mall and his printing press miles from Salt Lake City to damn near Nevada.
If that's what the author calls Kneivel-like derring do, then he's mistaken. Singleton is more snake oil salesman than daredevil.

10:19 AM  
Anonymous Anonymous said...

It's perfect. Dean loses no personal money and can let the evil bankers controlling 80% of the board to take the fall for the layoffs. It's a win-win.

1:13 PM  
Anonymous Anonymous said...

Plus, he's still chairman of the AP board. Pretty nifty.

5:30 AM  
Blogger Frank Keegan said...

Hey, say what you will, the boy knows how to dance. He didn't kill any newspapers, but he kept a lot of dead newspapers alive longer than they would have lived otherwise. The newspaper industry's self-inflicted wounds are systemic and can't be blamed on any one person. As somebody who was sold once by Dean Singleton and fired several times, I think I can speak objectively.

10:57 AM  
Anonymous Anonymous said...

You guys can fuss about Dean in the same old unimaginative way 'cause everybody's looking for a whipping boy, but this guy cares more about newspapers than most of the now-corporate venture capitalists who ran to bankruptcy court long before Dean did (see also Philly Inquirer and Minneapolis Star-Tribune).

6:46 PM  
Anonymous Anonymous said...

Alan,

Rather than extrapolating what Bank of America will allow Singleton to do or perhaps not to do in the future, I suggest you brush up on the regulations banks face regarding their tier one asset ratios and risk-adjusted assets. As such, you'll see that Singleton won't be allowed to be as free-wheeling and reckless as he has been in the past.

9:12 PM  
Blogger Howard Owens said...

My god, Dean Singleton is only 58 years old? That's scary. I'm only 10 years younger, and when I met him, I thought he was a very old man.

Also, it's called harvesting, and as I said on Twitter -- I can't imagine anybody who could harvest better than Singleton. There are any number of executives who would be a better choice to turn around a newspaper company, if that were possible, but if you wanted a CEO who could wring every last cent of profit from newspapers, it would be Singelton.

4:22 PM  

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