Scripps, MediaNews Group seek to create JOA in Denver

Thu, June 01, 2000 by Tim Stautberg

DENVER, May 11, 2000 ЎV The E.W. Scripps Company and MediaNews Group Inc. have agreed to form a jointly owned company to produce and market DenverЎ¦s two Pulitzer Prize winning newspapers and secure both newspapersЎ¦ future well into the 21st Century.The 50-year agreement calls for the creation of a new entity called the Denver Newspaper Agency L.L.C., owned 50 percent by MediaNews and 50 percent by Scripps. The agency will be responsible for all business functions for the Denver Rocky Mountain News and The Denver Post, including advertising and circulation sales, production and distribution. The News and The Post will maintain completely separate and competitive news operations.Scripps (NYSE: SSP), the parent company of the News, and MediaNews, the parent company of The Post, will contribute most of the assets of the News and The Post to create the agency. Scripps also will make a one-time cash payment of $60 million to MediaNews to reach its 50 percent share.The agency will be governed by a four-person board of directors, with Scripps and MediaNews each appointing two members. The board will select a chief executive officer to run the agency.Scripps and MediaNews are seeking to create the Denver Newspaper Agency under the provisions of the Newspaper Preservation Act of 1970, which allows for the combination of business functions if at least one newspaper in a market is in probable danger of financial failure. Such an agreement is known as a joint operating agreement, or JOA, and requires the U.S. Attorney GeneralЎ¦s approval. The Newspaper Preservation Act was created to preserve editorially independent and competitive newspapers in the United States. There are 13 cities in the country with joint operating agreements, which allow two newspapers to combine business, production and advertising functions as long as they maintain separate and competitive news and editorial operations.Scripps and MediaNews plan to file an application for the Denver JOA with the U.S. Department of Justice tomorrow, declaring that the News is in probable danger of financial failure. Since 1990, the News has accumulated operating losses of $123 million. The Post has been consistently profitable over the same period of time.Ў§The substantial investment by Scripps in the News over the years has rewarded the Denver community with one of the finest and fastest growing newspapers in the country,ЎЁ said William R. Burleigh, chairman and CEO of Scripps. Ў§But that growth has come at tremendous cost to Scripps and its shareholders. Unfortunately, the simple reality of newspaper economics makes it clear that the hard fought battle for market share cannot be sustained for the long-term. We believe the joint operating agreement proposed here today is DenverЎ¦s best hope for preserving its rich newspaper heritage, of which the News has been an integral part for more than 140 years.ЎЁWilliam Dean Singleton, vice chairman, president and CEO of MediaNews, said, Ў§Our employees, our readers and the entire Denver community will benefit from this agreement, and we are confident that it will be approved quickly as meeting the letter and spirit of the Act. These agreements have proven a successful means in other major markets of positioning outstanding newspapers to remain strong and editorially independent in a time of intensifying competition from other media.ЎЁNewspapers to Publish Separate Morning Dailies and Joint Weekend EditionsAfter the JOA is approved, the News and The Post will continue to publish separately on weekday mornings. Both newspapers will be published in their current formats Monday through Friday, The Post as a broadsheet and the News in tabloid format. On weekends, the newspapers will publish a combined edition in broadsheet format under a joint masthead and containing editorial pages and content from both The Post and the News. The News will be responsible for the preparation of the Saturday editions and The Post will be responsible for preparation of the Sunday editions.Until the JOA is approved, the News and The Post will continue to operate as entirely separate and competitive entities.It is currently anticipated that a minimal number of jobs will be lost after the approval and implementation of the JOA. Employment-related operating efficiencies are expected to be achieved more through attrition than layoffs. Ў§Denver is a terrific two-newspaper town and this joint operating agreement will preserve the regionЎ¦s healthy diversity of news and opinion for at least five decades,ЎЁ said Burleigh. Ў§This new business relationship will allow our readers to continue to enjoy their favorite reporters, columnists and features, as well as our lively and respected approach to covering our community. The News is one of the nationЎ¦s outstanding newspapers, as demonstrated by its recent Pulitzer Prize, and this arrangement will make it possible for us to maintain this high level of journalistic excellence.ЎЁSingleton added, Ў§This arrangement will be extremely positive for readers, advertisers and employees. It makes Denver a bright exception to so many other major markets where economic reality robbed these cities of competitive newspaper reporting. Keeping both newspapers in this market will ensure advertisers of the maximum possible readership of their commercial messages. Publishing both newspapers will assure employment to substantially more employees than if the market were reduced to one newspaper, as has happened in so many cities.ЎЁThe News, which was founded in 1859 and is the oldest continually operating business in the city of Denver - and the second oldest in Colorado - was acquired by Scripps in 1926. The Post was founded in 1892 and acquired by MediaNews in 1987. The News has daily circulation of 446,465 and 552,085 on Sundays. The Post has daily circulation of 413,730 and 558,560 on Sundays.The E.W. Scripps Company operates 20 daily newspapers, including the Denver Rocky Mountain News and the Boulder Daily Camera; 10 broadcast television stations; three TV networks, Home & Garden Television, Food Network and Do It Yourself; and a TV programmer, Scripps Productions. The company also operates United Media, a worldwide syndicator and licensor of news features and comics, and the Scripps Howard News Service. Scripps operates 31 revenue-producing Web sites, including hgtv.com, foodtv.com, diynet.com and comics.com.MediaNews Group, Inc. is the nationЎ¦s seventh largest newspaper company. MediaNews publishes 51 daily newspapers and 127 non-daily publications in 13 states with daily circulation of more than 2 million, and non-daily circulation in excess of 2 million. MediaNews is a privately held company with headquarters in Denver. Its flagship newspaper is The Denver Post. ### Contacts: Tim Stautberg, The E.W. Scripps Company, 513-977-3826 email: stautberg@scripps.com Tom Botelho, MediaNews Group, Inc., 303-820-1392 email: tbotelho@denverpost.com DENVER NEWSPAPER AGENCY QUESTIONS & ANSWERSFollowing is a list of questions and answers which amplifies the decision by The E.W. Scripps Company and MediaNews Group Inc. to enter the Denver Rocky Mountain News and The Denver Post into a joint operating agreement.1. Does this mean there was a winner in DenverЎ¦s long newspaper war?Of course this is a question that is open to much interpretation. It is the opinion of management at Scripps and MediaNews Group, however, that both newspapers and the entire Denver community emerge as winners with the creation of the joint operating agreement, which Scripps and MediaNews Group enter as equal ЎV 50/50 - partners. 2. What is a Joint Operating Agreement?A joint operating agreement is an arrangement whereby two newspapers in a single market share business functions and facilities while maintaining independent and competitive editorial operations. Such arrangements are allowed under the provisions of the Newspaper Preservation Act of 1970, legislation that preserves competitive newspaper reporting. Newspapers are allowed to enter into joint operating agreements with the approval of the U.S. Attorney General provided one of the newspapers in a market is determined to be in probable danger of financial failure. Scripps and MediaNews Group plan to file an application tomorrow with the U.S. Department of Justice in Washington D.C. seeking to create the Denver JOA and declaring that the News is in probable danger of financial failure. 3. How long do you believe the approval process will take?The timing is up to the Attorney GeneralЎ¦s office. 4. How will this JOA be structured?Scripps and MediaNews Group are seeking to create a new company, called the Denver Newspaper Agency, which for a period of at least 50 years will manage the business operations, printing, advertising and circulation sales, and distribution of the News and The Post. Scripps and MediaNews Group will own equal shares ЎV 50 percent each ЎV of the new company. Both Scripps and MediaNews Group will contribute a majority of the assets of the News and The Post to the agency. Scripps also will make a one-time cash payment of $60 million to MediaNews Group to reach its 50 percent share. The agency will be managed by a chief executive officer selected by a four-member board of directors. Scripps and MediaNews Group will each appoint two members to represent their respective companies on the board. In short, Scripps and MediaNews Group, have to agree on the CEO. Scripps and MediaNews Group have agreed that every effort will be made to arrive at mutually agreeable decisions and that the agency will be operated as a stand-alone venture, not as a subsidiary of either Scripps or MediaNews Group.The News and The Post will maintain competitive editorial operations, responsible for news coverage and setting editorial policy, entirely independent of each another. The two newspapers will continue to publish Monday through Friday mornings in their current formats, the News in its tabloid format and The Post as a broadsheet. On weekends, the newspapers will publish a combined edition in broadsheet format under a joint masthead and containing editorial pages and content from both the News and The Post. The News will be responsible for the preparation of the Saturday editions and The Post will be responsible for preparation of the Sunday editions.5. How much will you save on expenses by combining operations?It is too early to make such projections. Decisions that might result in cost savings and operating efficiencies will be made by the CEO of the Denver Newspaper Agency. 6. Will the News and The Post consolidate any newspaper operations before the JOA is approved? Absolutely not. Until the application is approved by the Attorney General, both newspapers will continue to compete vigorously, just as they do today. 7. Does this mean that the News and The Post will raise the price of the paper once the JOA is approved?Subscription rates in the Denver market are significantly lower than in markets of comparable size. However, it would be premature to speculate on what will happen to circulation rates prior to the approval of the JOA. 8. Will subscription rates increase during the period that the application is under review?Both papers will continue to compete aggressively during this period. All business decisions will be considered as they normally would in a competitive marketplace. 9. If the News and The Post no longer compete for advertising, does this mean that ad rates will go up after the JOA is approved?The CEO of the agency will be responsible for establishing rate plans that are reasonable and fair. Again, Denver advertisers have an ever-growing number of options in a vibrant and competitive media marketplace. The CEO of the agency will be motivated to ensure that advertisers continue to see exceptional value in newspaper advertising. 10. Scripps also owns the Daily Camera in Boulder. Will the JOA affect the operation and ownership of the Daily Camera by Scripps? No. The Daily Camera is not a party to the joint operating agreement.11. How many employees will lose their jobs as a result of this JOA? It is hoped that once the joint operating agreement is approved and the Denver Newspaper Agency is created that there will be a minimal loss of jobs. It is currently anticipated that any need to eliminate positions will be done primarily through attrition. It is the current opinion of Scripps and MediaNews Group that the structure of the joint operating agreement will preserve the maximum number of jobs. The News and The Post will continue to have completely separate and independent newsrooms. Because the News and The Post will publish in the mornings in their current formats ЎV the News in its tabloid format and The Post as a broadsheet - both production facilities will be needed. 12. In what areas do you expect to reduce employment levels? Obviously no final decisions on employment levels can be made until the JOA is approved and the new Denver Newspaper Agency CEO is selected. Job losses are expected to be minimal, and attempts will be made to achieve most of them through attrition. Editorial staffing levels are not likely to be affected by the JOA.13. Will salary levels or benefits change? The agreement provides for the Agency to make every effort to maintain both salaries and benefits at comparable levels for employees becoming part of the agency. 14. How many other Joint Operating Agreements are in existence? JOAs are in existence today in 13 metropolitan markets, including Detroit, Cincinnati, Seattle, Las Vegas, Honolulu, San Francisco and Salt Lake City. 15. Does the JOA create a monopoly for the News and The Post in DenverЎ¦s media market?No. The media market in Denver is not limited to the News and The Post. It includes 14 broadcast television stations, 37 radio stations, cable and satellite television services, and the rapidly growing presence of the Internet. It also includes five direct mail companies, multiple independent telephone directories, approximately 20 mainstream weekly newspapers, numerous ethnic weekly newspapers, a business journal, a major alternative weekly and dozens of other weekly and monthly niche publications. This proliferation of media and resulting competition is intensifying. The joint operating agreement will preserve competitive daily newspaper reporting and preserve a reliable platform for advertisers to communicate with their customers in an increasingly fragmented media marketplace. 16. Why is the News considered in probable danger of financial failure? Since 1990, the News has sustained $123 million in cumulative operating losses. Despite prudent efforts by the News to improve its profitability by sustaining and growing circulation and advertising share in the Denver market, the News has been unable to convert significant market share gains into operating profits.While the News has recently gained the daily circulation lead in the market and has narrowed The PostЎ¦s circulation lead on Sundays, The Post continues to capture a larger share of the marketЎ¦s total advertising revenues. In view of sustained losses, which appear to be irreversible, the News has declared itself in probable danger of financial failure. 17. Will you shut down the News if the JOA is not approved? Scripps and MediaNews Group are confident their application meets all the requirements of the Newspaper Preservation Act and will gain approval.18. Why donЎ¦t both newspapers publish in a broadsheet format and save money on production costs?Given the sizable circulation of both morning newspapers, both production facilities will be needed to accommodate the volume. Beyond that, local readership studies have shown that the overwhelming majority of readers of the News prefer the tabloid format.19. Why is Scripps entering into a Joint Operating Agreement with MediaNews?Scripps has made a significant investment in the News over the years, rewarding Denver with one of the finest, and now fastest growing newspapers in the country. That growth, however, has come at a tremendous cost to Scripps and its shareholders. Since 1990, the News has suffered combined operating losses of $123 million in its efforts to sustain and grow its share of the Denver newspaper market. The reality of newspaper economics makes it clear that the battle for share simply cannot be sustained long-term. The sustained and irreversible losses, absent relief in the form this agreement, put the News in probable danger of financial failure, which in turn threatens to silence competitive newspaper reporting in Denver. It is the opinion of Scripps and MediaNews that a joint operating agreement is the best option available to preserve DenverЎ¦s rich heritage of competitive newspaper reporting.20. How and why did you arrive at a 50-year life? Scripps and MediaNews Group agreed that it is important to assure the Denver community that it will benefit from two award-winning and editorially competitive newspapers well into the 21st century. MediaNews Group and Scripps view the agency as being in the best interests of subscribers, advertisers, most employees, and shareholders and believe that it is necessary to have a long-term commitment for all interested parties to receive the full benefit of the arrangement.21. Who will pay for capital expenditures and other major investments once the JOA is approved?Additional investments will be made by Scripps and MediaNews Group on anequal basis.22. How can the News be in probable danger of financial failure when it recently posted such strong circulation gains?The strong circulation gains are the result of a focused strategy by the News to increase its share of DenverЎ¦s newspaper advertising market. The News has been unable to convert its significant market share gains into operating profits.23. How much exactly is the News losing every year?The filing of this application is not based on the financial results of any single year. The News has lost $123 million, or an average $12.3 million a year, since 1990. 24. How does operating performance at the News compare to The PostЎ¦s? The Post has been consistently profitable since 1990.25. How will the JOA affect unions at both newspapers? Both The Post and the News expect to work closely with their unions, as in the past, in a spirit of cooperation and partnership. Both newspapers will bargain in good faith with all unions regarding any contracts that might expire during the period of time between the filing of the application and the Justice DepartmentЎ¦s approval.26. The Guild contract at the News expires in October? Will this application have any impact on the negotiations? It will be business as usual at the News until the JOA is approved, and the News will bargain in good faith with the Guild. 27. Where will the Denver Newspaper Agency be headquartered? In the Denver Rocky Mountain News building at 400 W. Colfax Ave. The PostЎ¦s newsroom will remain at 1560 Broadway Ave. 28. Will any facilities (printing, administrative) operated by the News and The Post be closed?There are no current plans to close any production facilities. Because it publishes in a tabloid format, the News will continue to require a separate production staff and facility from The Post. The business staffs will be consolidated in a location to be determined by the CEO of the Denver Newspaper Agency.# # # Contacts: Tim Stautberg, The E.W. Scripps Company, 513-977-3826 email: stautberg@scripps.com Tom Botelho, MediaNews Group, Inc., 303-820-1392 email: tbotelho@denverpost.com DENVER ROCKY MOUNTAIN NEWSwww.rockymountainnews.comOWNERSHIP„« The E.W. Scripps Company MANAGEMENT„« Larry D. Strutton, publisher and chief Executive officer„« Robert W. Burdick, president and general manager„« John R. Temple, editor„« Deborah Goeken, managing editor EMPLOYEES 1,785 (includes part-time) FREQUENCY/FORMAT Morning regional daily, tabloid format CIRCULATION „« Daily average: 446,465 (for six-month period ended March 31, 2000)„« Sunday average: 552,085 (for six-month period ended March 31, 2000) Source: Audit Bureau of Circulations FAS-FAX Report FACILITIES„« Headquarters: 400 W. Colfax Ave., Denver „« Production Facility: 5990 N. Washington St., Denver AWARDS/HONORS„« 2000 Pulitzer Prize for Breaking News Photography „« 2000 General Excellence Award, Colorado Associated Press Awards„« 2000 General Excellence Award, Colorado Press Association Awards„« 1999 Best Large Newspaper, Associated Press Colorado Journalism Awards HISTORICAL DEVELOPMENT Founded in 1859 by William Byers, the Denver Rocky Mountain News is ColoradoЎ¦s second oldest continuously operating business and the stateЎ¦s oldest daily newspaper. The paper began publishing daily editions in 1860 and was purchased by Scripps Howard from owner John Shaffer in 1926. In 1942, the Rocky Mountain News was redesigned and changed from a broadsheet to a tabloid format. E.W. SCRIPPS The E.W. Scripps Company operates 20 daily newspapers; 10 broadcast television stations; three TV networks, Home & Garden Television, the Food Network and Do It Yourself; and a TV programmer, Scripps Productions. The company also operates United Media, a worldwide syndicator and licensor of news features and comics, and the Scripps Howard News Service. Scripps operates 31 revenue-producing Web sites, including hgtv.com, foodtv.com, diynet.com and comics.com. THE DENVER POST www.denverpost.com OWNERSHIP „« MediaNews Group, Inc. MANAGEMENT„« Gerald E. Grilly, president and publisher„« Glenn Guzzo, editor„« Jeannette Chavez, managing editor EMPLOYEES 1,870 (includes part-time) FREQUENCY/FORMAT Morning regional daily, broadsheet CIRCULATION„« Daily average: 413,730 (for six-months ending March 31, 2000)„« Sunday average: 558,560 (for six-months ending March 31, 2000) Source: Audit Bureau of Circulations FAS-FAX Report FACILITIES„« Headquarters: 1560 Broadway Ave., Denver„« Production facility: 4499 Fox St., Denver AWARDS/HONORS„« 2000 Pulitzer Prize for Breaking News Coverage„« 1999, 2000 Best of Colorado Award, Colorado Press Association „« 1998 ColoradoЎ¦s Best Online Daily Newspaper, Colorado Press AssociationHISTORICAL DEVELOPMENTSThe Denver Post was founded in 1892 as a weekly newspaper and began publishing on a daily basis in 1895, the same year it was purchased by Harry Tammen and Frederick G. Bonfils. In 1980, the Times Mirror Company bought The Denver Post from the Bonfils family and, in 1982, the publication switched from an evening newspaper to a morning newspaper. In 1987, William Dean Singleton and Richard B. Scudder, the owners of MediaNews Group, purchased the Denver Post from Times Mirror.MEDIANEWS GROUP, INC.Founded in 1983 by William Dean Singleton and Richard B. Scudder, MediaNews Group, Inc. is the nationЎ¦s seventh largest newspaper company. MediaNews publishes 51 daily newspapers and 127 non-daily publications in 13 states with daily circulation of more than 2 million, and non-daily circulation in excess of 2 million. MediaNews is a privately held company with headquarters in Denver. Its flagship newspaper is The Denver Post.