Freedom Communications allowed a peek behind its pay wall Tuesday at a story announcing closure of its much-ballyhooed startup in Los Angeles after just five months.
The Los Angeles Register launched in April with promises from owners Aaron Kushner and Eric Spitz to expand across the region the community-focused brand of journalism it displays in its flagship Orange County paper. They failed.
But they don’t see it that way. In a final message, they redefined the word: “We believe the true definition of failure is not taking bold steps toward growth.” It also can be defined as not being able to pay your bills.
Freedom owed $24.7 million to creditors, according to the Los Angeles Times. Those creditors include the Times itself, which delivers the competition’s newspapers. OC Weekly writer Gustavo Arellano called the Times an “angry bill collector” and said they forced Freedom’s hand when they set a 30-day deadline to pay millions owed for distribution of the L.A. and OC papers.
Freedom sold the Santa Ana headquarters of the OC Register on Monday for $27 million, but will lease back space and stay put for now.
The company immediately began laying off workers. Some were OC journalists who had transferred to the L.A. startup, some were new hires and others were getting squeezed out of the mothership by L.A. transfers. One unnamed source told Arellano, “We're freaking out. Absolute state of chaos.”
Kushner and Spitz bought what was left of the famously conservative Freedom Newspaper chain from the Hoiles family in 2012. It, like every newspaper operation in the country, is still trying to figure out a business model that embraces digital while not abandoning print―which is still the main revenue generator―and still makes money.
The new owners immediately began an ambitious expansion. New sections, new staff and promises of growth. They moved north into L.A. and Long Beach. Community weeklies were upgraded. There was talk of perhaps buying Tribune Corp., parent of the Los Angeles Times and Chicago Tribune.
The depth of Kushner and Spitz’s pockets was questioned almost from the moment they bought Freedom. Kushner, a former greeting-card executive, was sued by the former owners in October 2013, who claimed he still owed them $17 million. While tussling with them, Kushner and his partner bought the Riverside Press-Enterprise from A.H. Belo Corp. last November for $27.25 million.
The Riverside purchase did not go smoothly. The deal was put on hold for awhile when Belo, amid rumors that Freedom was having trouble with its financing, asked for additional financial guarantees up front.
All the while, Freedom went through waves of hiring and firing (via buyouts and layoffs), adding more than a whiff of desperation to a beleaguered industry that has struggled as badly in Southern California as anywhere in the nation.
Tribune Corp. finished cutting loose its newspapers last month, stripping them of assets and burdening them with further debt.
Digital First Media, a collection of 76 newspapers run by a hedge fund, absorbed a number of Southern California dailies when it was created out of the merger of MediaNews Group Inc. and 21st Century Media last year. Now, it is considering selling a number of properties, including the Los Angeles Daily News, the Pasadena Star-News, the Torrance Daily Breeze and the San Gabriel Tribune.
In San Diego, 86-year-old insurance and real estate magnate Malin Burnham has made a bid to buy the U-T San Diego from real estate developer Douglas Manchester and perhaps turn it into a non-profit news organization.
Newspapers are hot commodities, as in hot-potato hot, not successful hot. They are being swapped around as commodities in a market that doesn’t know how to value, much less develop, them. But it does appear to be a market where the participants know how to get in, get theirs and get out. There is money to be made in the publishing business, although perhaps not by actually publishing anything.