Friday, February 7, 2014

Rieder: A major bet on print journalism in LA

Aaron Kushner, whose enthusiastic commitment to investing heavily in print journalism in the digital age gives new meaning to the term "counterintuitive," is making his boldest bet yet.

The budding newspaper mogul, who got into the newspaper business in July 2012 when he acquired Freedom Communications and its flagship Orange County Register, says he's about to launch a new paper in Los Angeles.

Simply buying a newspaper at a time when print circulation and ad dollars are declining and executives are frantically struggling to plot a future in the digital world is an act of courage. Fresh from buying the Register, Kushner doubled down in November when he acquired the Press-Enterprise in Riverside, which like the Register is based in Southern California, from A.H. Belo Corp.

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Challenging an existing paper on its home turf, even in much headier times, is a whole other level of audacious. Hardly anyone tries it, and virtually no one pulls it off. Yet Kushner showed his eagerness to do just that in August when he started up the Long Beach Register to challenge the Long Beach Press-Telegram in that Southern California city.

But that's child's play compared with starting up a paper in the nation's second-largest city, sprawling, complex L.A. And taking on the Los Angeles Times — which remains one of the nation's best dailies despite years of devastating budget cuts and the massive financial problems of its parent Tribune Co. — doesn't make things any easier. Not to mention the presence of MediaNews' Los Angeles News Group and its nine dailies.

Longtime newspaper analyst John Morton makes clear the enormity of the challenge Kushner is undertaking.

"The newspaper graveyard is full of start-ups that attempted to establish a competitor for an entrenched daily, especially in cases where the established daily is of reasonably high quality, like the Los Angele! s Times," he says.

Morton says start-ups in competitive markets that have endured "usually have done so because their owners have great financial resources and are willing to lose money indefinitely for reasons of ideology or some other compulsion; The Washington Times is an example."

In one rare instance, the insurgent Anchorage Daily News put the lackluster Anchorage Times out of business, but only after years of bleeding tens of millions of dollars.

Despite the grim history, the irrepressible Kushner downplays the immensity of his latest foray. He portrays it rather as a natural evolution of what he has done so far.

After buying the Register, Kushner opened up his wallet, adding an astonishing 200 journalists to the roster and significantly beefing up the size of the print paper. He says his papers are all about community building. And he believes that if you have a strong product, readers and advertisers will come.

While many legacy news outlets have cut back on their print offerings to concentrate on their digital operations, Kushner sees that as a mistake, given that the lion's share of revenue continues to come from the retro old print product.

The next step was launching the new paper in Long Beach, about 20 miles from the Register's home base in Santa Ana. And, significantly, located in Los Angeles County. Soon, all of Los Angeles County will targeted by the new Los Angeles Register.

"We're in growth mode," Kushner says. "We look forward to bringing our political perspective and model of community-building journalism to Los Angeles County." The Register's editorial page philosophy is all about free markets and personal freedoms and is well to the right of the Times'.

Kushner plays down the possibility that his ambitious plans could seriously overextend his empire.

"We have a very strong core in Orange County," the former greeting-card magnate says. "Building on that foundation is how you build a business."

The Register has a bit of a ! head star! t since it already covers the L.A. sports teams. But to wage a serious battle in a market as large and diverse as the City of Angels will require a substantial commitment of firepower. Asked how big a staff he anticipates, Kushner responds that the "logistics" remain to be worked out. The invasion force will be a mix of current staffers and new hires.

But one thing's for sure: A guy who has added 200 journalists to the staff of an existing newspaper is not addicted to small ball.

John Paton, the CEO of Digital First Media, which oversees the operations of the Long Beach Press-Telegram and the rest of the Los Angeles News Group, is an outspoken skeptic when it comes to Kushner's approach.

When I asked him what he thought about Project L.A., Paton responded via e-mail with pointed questions.

"What are the strategic and operating principles that make Mr, Kushner believe he can produce a product in Los Angeles County with more penetration than the Los Angeles Times and all of our dailies combined?" he asked. "Does Mr, Kushner think he can out-cover all of the very distinct communities that make up LA County better than the established and trusted players?"

He added dismissively, "If print first worked, everyone would be doing it."

And that's they key question: Will it work? Kushner's approach is so radically different than what pretty much everyone else is doing. It's refreshing, an exciting gamble. But does it make any sense?

Kushner's company is private, so he doesn't have to release a lot of financial specifics. And while he says "I like the trajectory," he concedes the paper isn't meeting the aggressive budget targets it set for itself. He recently told a town hall meeting that the revenue picture would be brighter in 2014 and the paper will become "permanently profitable."

The Register began charging for digital content in April. A spokesman says there's no word yet on whether a similar approach will be taken in Los Angeles.

As for how it will al! l play ou! t, newspaper analyst Morton says Kushner has two big things going for him: "his enthusiasm and his deep pockets."

"We'll have to wait and see," he adds, "how long the former lasts as the latter get shallower."

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