Sunday, March 08, 2009

Want to save your local paper? Read this first.

If you think life would be sweet if the profit-oriented corporations running newspapers were replaced by wealthy, civic-minded people operating them in the public interest, consider the case of the Berkeley Daily Planet. Then, think again.

Three weeks ago, the Daily Planet, which distributes some 23,000 free papers each week in Berkeley, CA, ran an arresting front page to kick off a PBS-style pledge drive to help offset the $3 million in losses suffered by the local couple who bought the paper six years ago to save a major source of news about their community.

I’ll tell you how the pledge drive worked out in a moment. First, the front page (click to enlarge image):

Here’s how the Daily Planet got to the point that its multimillion owners are in the position today of having to pass the hat to try to save the newspaper:

Becky and Michael O’Malley, long-time Berkeley residents who made a tidy $15 million when they sold their software company in 1996, purchased the Daily Planet at a bargain price when it was sold during the break-up of the venture-funded firm that founded it.

“We bought the paper because we were retired and thought it would be kind of fun,” said Becky in an interview last week. “I was a journalist before we started the software business and am a great believer that newspapers are essential to democracy. After all, people can’t go to every city council meeting for themselves.”

The O’Malleys, who Michael says have an “average age of 70,” never intended to make the Daily Planet into a big business.

“The $15 million we made when we sold the software company isn’t much money by today’s standards,” said Michael. “But we have a Berkeley lifestyle,” added Becky. “It doesn’t cost us that much to live.”

Although they say they would have been content to operate the paper on a break-even basis, the business lately has proven to be to be far more challenging than they had imagined.

“We rely on small retail advertisers,” said Becky. “The trouble with small retailers is that when there is a credit crunch, like there is right now, they have to factor [borrow money to buy] their inventory. They have to buy shoes before they can put them on the shelves to sell them. We are at the mercy of that dynamic. How long that is going to last, nobody knows.”

With interest rates dear and sales weak, merchants have little extra money to spend on advertising. In fact, one of the paper’s biggest and steadiest advertisers, a holistic pharmacy (remember, folks, this is Berkeley), abruptly went out of business a few weeks ago.

Another major problem, said Michael, is that newspapers “have talked themselves into a hole.” He believes newspaper advertising has fallen out of favor among merchants as the result of incessant media coverage of the problems of the newspaper business.

“People need jobs,” he continued. “Well, we’re running ads right now looking for people to sell advertising. But we don’t get much of a response, because no one wants to sell newspaper advertising. Last year, everyone wanted to work for a hedge fund. Maybe this year they will go back to wanting to work for newspapers.”

With the economy souring and losses mounting, the O’Malleys have begun wondering how much longer they can support the Daily Planet. The couple is well enough fixed that Michael says they probably would have paid as much in taxes on other investments as they have lost to date on the Daily Planet.

“We have enjoyed it, we have had a very good time and gotten a lot of respect and pleasure from our relationship to community,” said Becky. “But I don’t know how much longer we will keep doing this. The biggest issue we personally have is that it is a lot of work. But there also comes a point where prudence and our own offspring and the general state of economy make us wonder if we should continue the investment.”

Before walking away from the newspaper, they decided to see how much public support they could muster to help offset its losses.

“I certainly think it would be very dishonorable to fold without giving the public chance to buy in,” said Becky. “If the public doesn’t want, or can’t afford, to support the paper, then we may have to. We wanted to give everyone a chance first.”

In the last three weeks, the couple said, the Daily Planet has raised $12,000, including some individual donations as high as $500. “The response is a lot better than I would have predicted,” said Michael. Still, it is only 0.4% of the couple’s loss.

“We made only a little effort and had quite a show of enthusiasm,” added Becky. “My friends who know about PBS say you have to ask seven times to get a donation. But I don’t know what the future of giving will be in a bad economy – or if we will get repeat donations.”

One alternative before walking away from the paper would be charging something between $1 and $2.50 for a paper that until now has been free.

“Two bucks is nothing,” said Michael. “It won’t even get you a cup of coffee in most places. If 5,000 people wanted to pay $2, that would be great.”

What if they won’t?

“We are sort of cruising along,” said Becky, “and hoping the answer will present itself to us.”

(Disclosure: I served on the board of directors of the company that founded the Daily Planet before it was sold to the OMalleys. The original company fizzled when the various investors could not agree on a going-forward strategy. Nutty as this sounds, it is more common than you would think.)


Anonymous Anonymous said...

This is really interesting. It's become all too easy to think of newspapers as some strange hybrid of passionate journalists attached to the head of an aging (and somewhat demented) corporation. I hope you'll follow this tale, and let us know if the fundraising works (or what type of approach works if it comes to that) and the choices that have to be made along the way.

8:25 AM  
Anonymous Anonymous said...

This is enlightening. Is going online-only an option for this organization in this community?

9:22 AM  
Blogger DigiDave said...

One can also support the Daily Planet's reporting by giving a small donation to a pitch they have up:

Although I know Alan isn't a big believer in this model as well - it is another drop in the bucket and I suspect if they put up a link to this on the Berkeley Daily Planet they'd be more likely to get a donation than if they just put up the blanket call for donations they have up right now.

11:48 AM  
Blogger sally said...

And of course, I must post a comment encouraging these good folks in Berkeley to look outside the box of the simple NPR/nonprofit model and take a look at the L3C - a social enterprise hybrid limited liabilaity company — that makes it easier for foundations to make program related investments. I've written about it at the Huffington Post Chicago, here and here I have more to learn about L3Cs but I like what see because it is not about perpetual begging, even though NPR makes that honorable. .

8:46 PM  
Anonymous Anonymous said...

Having read this paper since it started under the previous owners, and been involved in many of the stories the current owners have covered I have a slightly different view of their plight. One that's further complicated by their editorials haranguing local companies for not advertising in their paper. As a friend of mine succintly stated they confused a "newspaper" with a "journal of opinion." Consequently they have only covered the comments and votes of City meetings they agreed with, they've constantly denigrated public officials who don't share their view of the world without any attempt to interview those people, and they've run this paper as their personal political megaphone. Hence they've driven away advertisers who might now be revenue for them. And driven away readers who want a balanced view of how our City's business is actually conducted. Of course, they are not the first publishers to have this problem. Just our local latest.

12:03 PM  
Anonymous Anonymous said...

That sounds exactly like most big papers. Are you sure this isn't The Dallas Morning News?

3:49 PM  
Anonymous Anonymous said...

They have done tremendous damage to other newspapers. By subsidizing the partisan Planet, they severely undercut both the independent UC Berkeley-student-run Daily Californian (now struggling, see recent USA Today article) and independent, feisty East Bay Express.

(Re my partisan comment, here is one of many articles to back it up:


This was a vanity project from the start. Truth be told, so is the Chronicle (for Hearst).

Like your blog Alan but you've picked the wrong mascot here.

1:14 AM  
Anonymous Anonymous said...

PS Both the Express and Daily Cal must fund their operations ENTIRELY from advertising. The Express no longer has New Times to subsidize/ruin it and the Daily Cal gets no university subsidy and in fact pays big rent.

1:17 AM  
Anonymous Anonymous said...

Es una pena que este tipo de periódicos locales esté a punto de desaparecer debido a la crisis económica. Acabará con todo lo bueno, me temo.
I love your weblog!

5:29 AM  

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