In April, when Orange County Register publisher Aaron Kushner launched the Los Angeles Register, the bloom was already off the rose. (Here’s what I wrote in June.) So it’s not really a surprise that Kushner is shutting down the misbegotten daily. Andrew Khouri of the Los Angeles Times has the details.
And here’s the inevitable quote from Kushner and his business partner Eric Spitz about all those darn naysayers:
Pundits and local competitors who have closely followed our entry into Los Angeles will be quick to criticize our decision to launch a new newspaper and they will say that we failed. We believe, the true definition of failure is not taking bold steps toward growth.
On the East Coast, The Washington Post is in the midst of a revival that could return the storied newspaper to its former status as a serious competitor to The New York Times for national and international news. On the West Coast, the Orange County Register is rapidly sinking into the pit from which it had only recently crawled.
The two contrasting stories are told by the Columbia Journalism Review’s Michael Meyer, who writes about the Post in the early months of the Jeff Bezos era, and Gustavo Arellano of OC Weekly, who’s been all over Aaron Kushner since his arrival as the Register’s principal owner in 2012.
First the Post, which has been the subject of considerable fascination since Amazon founder Bezos announced last August (just a few days after John Henry said he would buy The Boston Globe) that he would purchase the paper from the Graham family for $250 million.
Bezos’ vision, as best as Meyer could discern (Bezos, as is his wont, did not give him an interview), is to leave the journalists alone and work on ways to expand the Post’s digital audience across a variety of platforms. Meyer describes a meeting that Bezos held in Seattle with executive editor Marty Baron and other top managers:
Baron says he came away from the weekend in Seattle with a clear sense of what the Post’s mission would be in the coming year: It had to have “a more expansive national vision” in order to achieve the ultimate goal of substantially growing its digital audience. Baron brought this directive back to the newsroom, and the editors set about building a plan for 2014, a year managing editor Kevin Merida dubbed “the year of ambition.” At one point in the budgeting process, Bezos even admonished the leadership for not thinking big enough. “I think that we had been in the mode of sort of watching our pennies,” Baron told me. “We were just being more cautious at the beginning so he came back with an indication that we should be more ambitious.”
Among the more perplexing moves (to me at least) that the Post has made under Bezos has been to cut deals with more than 100 daily papers across the country so that paid subscribers to those papers would receive free digital access to the Post as well. Locally, the papers include the Portland Press Herald as well as Digital First Media’s papers, such as The Sun of Lowell, The Berkshire Eagle and the New Haven Register.
Journalistically, it’s a good deal for subscribers, since they get free access to a high-quality national news source. But no money changes hands. So how is it any better for the Post than simply offering a free advertiser-supported website, as it did until instituting a metered paywall last year? Meyer tells me by email that “the reason they are doing this is for customer data. A logged in, regular user is a lot more data rich than someone who just happens across your site from time to time.” He adds:
Data is the key difference between this program and just having a free website. And another key difference to my mind is psychological. The readers of partner newspapers feel like they’re being given something that would otherwise not be free. This adds value in terms of how they view their subscriptions to their home newspapers. And also adds value in terms of how they view the Post’s content. My guess is they will use the service more as a result.
And as Meyer writes in his story, “Anyone interested in seeing how consumer data might be used in the hands of Jeff Bezos can go to Amazon.com and watch the company’s algorithms try to predict their desires.”
The story Gustavo Arellano tells about Aaron Kushner and the Orange County Register has become well-known in recent weeks, in large measure because of Arellano’s own coverage in the OC Weekly. Kushner has spent 2014 rapidly dismantling what he spent 2012 and 2013 building up.
As I wrote recently in The Huffington Post, it makes no sense to invest in growth unless you have enough money to wait and see how it plays out, which is clearly the case with Bezos at the Post and Henry at the Globe — and which now is clearly not the case with Kushner and the Register.
The Orange County meltdown was also the subject of an unusually nasty blog post earlier this month by Clay Shirky, who criticized Ryan Chittum of the CJR and Ken Doctor of Newsonomics and the Nieman Journalism Lab for overlooking the weaknesses in Kushner’s expansion. (Chittum and Doctor wrote detailed, thoughtful responses, and I’ve linked to both of them in the comments of a piece I wrote about the kerfuffle for WGBHNews.org.)
Arellano has gotten hold of some internal documents that make it clear that Kushner’s expansionary dreams were doomed from the start. He also paints a picture of a poisoned newsroom and offers lots of anonymous quotes to back it up.
“I wouldn’t say I got hoodwinked,” he quotes one former staff member as saying, “but it’s just another lesson of life: If it’s too good to be true, it is.”
I recently criticized Arellano for his overreliance on anonymous quotes, although I freely concede that I used them regularly when I was covering the media for The Boston Phoenix in the 1990s and the early ’00s. This time, he includes a clear explanation of why almost none of his sources would go on the record: fear of “reprisal or the endangerment of their buyout, which included a nondisclosure clause.” Given that, I think the story is stronger with the quotes than without.
In retrospect, it seems obvious Kushner set himself up for failure, like a Jenga tower depending on every precariously placed block. He installed himself as publisher despite having no previous newspaper experience. A hard paywall — his most controversial move — was erected to force readers to buy the print edition in an era when online content is king. To justify that, Kushner plunged into a hiring binge that saw the Register sign up hundreds of employees even though it didn’t have the revenue to pay them. To fund his vision, the sales department was tasked with selling all those points despite an industry-wide decline in print advertising during the past decade.
It’s a sad, ugly moment for a tale that began so optimistically. As for whether this will prove to be the end of the story — well, it sure looks that way, although Kushner insists he’s merely slowed down. After two years of hiring binges and layoffs, the launch and virtual folding of the Long Beach Register, and the inexplicably odd decision to start a Los Angeles Register to compete with the mighty Times, Kushner is clearly down to his last chance — if that.
A week after Aaron Kushner announced major cuts at the Orange County Register and its affiliated papers, it sounds like the wheels may be coming off. In an interview with Larry Mantle of Southern California Public Radio, Kushner kept insisting that the cuts were nothing but a temporary setback, saying:
To continue to invest and grow over the long term, we have to align our cost structure with what we now know we can achieve in revenue growth. Doing so will not be easy and will impact all of us, but it is necessary to ensure a strong and healthy future for our newspapers.
But Mantle was having none of it. He pressed Kushner on the all-but-closing of the start-up Long Beach Register and asked him if he expected his newest paper, the Los Angeles Register, to compete seriously with the Los Angeles Times. Kushner’s answers might best be described as on message to a fault, leading to this testy exchange near the end:
Mantle: I have to say, if I worked for you, hearing your description and the lack of specifics, I’d be very nervous about the future.
Kushner: Any other questions?
Meanwhile, Gustavo Arellano, editor of the OC Weekly, an alternative paper that has been so dubious of Kushner’s plans that it even has a blog category called “OC Register Death Watch,” posted a scorcher on Monday, reporting that the Register’s staff is all but fleeing toward the exits. Arellano quotes a “longtimer” as saying of Kushner, “He’s lost the newsroom. No one has any faith in him at all. People want to get the hell out while they can.”
(An aside: If everything is truly coming apart, why did the “longtimer” think it was necessary to remain anonymous? And why did Arellano go ahead and quote him anyway? Look, I’ve been there and done that. And there’s no reason to think the quote doesn’t reflect the genuine sentiment of the newsroom. But I’m more skeptical of anonymous quotes these days than I used to be, and I think readers are too.)
I continue to hope that Kushner and his business partner, Eric Spitz, can right their leaking ship. But the simplest explanation for what is happening is that Kushner never had a real plan — he simply thought that all he had to do was spend lavishly and readers and advertisers would flock to his side.
Newspaper analyst Ken Doctor, whom I would characterize as a sympathetic Kushner observer up until now, weighed in with a devastating piece last week. I linked to it then, and here it is again. I recommend it highly.
If you’re going to make an audacious bet on the future of newspapers, as Aaron Kushner did with the Orange County Register, then it stands to reason that you should have enough money in the bank to be able to wait and see how it plays out.
Kushner, unfortunately, is now slashing costs at his newspapers almost as quickly as he built them up. On Tuesday, Kushner announced that Register employees would be required to take unpaid two-week furloughs during June and July. Other cuts were announced as well. The most significant: buyouts for up to 100 employees; and one of Kushner’s startup dailies, the Long Beach Register, will more or less be folded into another, the Los Angeles Register.
Those cuts follow the elimination of some 70 jobs at the OC Register and the Press-Enterprise of Riverside in January — cuts that came not long after a year when Kushner’s papers, in a celebrated hiring spree, added 170 jobs.
In 2013 Kushner and his business partner, Eric Spitz, were the toast of the newspaper industry. In the Columbia Journalism Review, Ryan Chittum hailed their print-centric approach and hypothesized that being able to scoop up the Register debt-free might enable them to succeed where others — including Tribune Co. and the Journal Register Co. — had failed. “Kushner,” Chittum wrote, “had the benefit of buying Register parent Freedom Communications out of bankruptcy — after newspaper valuations had already fallen 90 percent in some cases.”
Spitz, in a cocksure interview last October with Lauren Indvik of Mashable, mocked his competitors for giving their journalism away online, insisting that he and Kushner had a better idea.
“The key decisions they made — and they were the worst decisions anyone has made in my memory — they made 20 years or so ago. They took their core product, the news, and priced it at free,” Spitz told Indvik, adding: “I think 20 years later the amount of revenue you can derive from advertising is less than they thought. But the bigger problem they created is telling your customer that your product has no value.”
Unfortunately for Spitz and Kushner, there are few signs that their strategy of pumping up their print editions (even improving the paper stock) while walling off their digital content behind relatively inflexible paywalls has paid off.
According to the Alliance for Audited Media, paid circulation at the Orange County Register for the six months ending Sept. 30, 2011, before Kushner and Spitz took charge, averaged 283,997 on Sundays and 172,942 Monday through Saturday. The sale took place in July 2012. That September, paid circulation actually rose, to 301,576 on Sundays and 175,851 the rest of the week. But in September 2013 it dropped below pre-Kushner levels, to 274,737 on Sundays and 162,894 the other six days. (I am excluding what AAM refers to as “branded editions” — mainly regional weeklies published by the Register. The numbers combine print and paid digital circulation, which, in the case of the Register, is negligible.)
Kushner is a Boston-area native who made his money in the greeting-card business. Before his move to Southern California, he tried to buy The Boston Globe and, later, nearly closed a deal to purchase the Portland Press Herald of Maine. So it’s interesting to note that Red Sox principal owner John Henry, who eventually won the sweepstakes for the Globe, has taken a very different approach from Kushner, sinking money into an online-only vertical covering innovation and technology as well as repositioning the paper’s venerable free Boston.com site as a “younger, voicier, edgier” complement to the Globe. Soon the Globe is expected to unveil an ambitious website covering the Catholic Church in the hopes of attracting a national and international audience.
Perhaps the most important difference between Henry and Kushner, though, is the depth of their pockets. There are limits to Kushner’s wealth, and those limits are becoming apparent as he attempts to make his newspaper mini-empire profitable. Henry, a billionaire investor, can afford to take the long view. In that respect, he is more like Amazon.com founder Jeff Bezos, who announced that he would buy the Washington Post just days after Henry said he would acquire the Globe.
Ryan Chittum, in his CJR piece, called Kushner’s approach “the most interesting — and important — experiment in journalism right now.” It would be easy and facile to make too much of Kushner’s woes. He may simply have gotten ahead of himself, and is now buying the time he needs to make sense of what he is building. Then again, if Ken Doctor is right, the end of this particular newspaper story may be in sight.
Has Orange County Register owner Aaron Kushner run into nothing more than a bit of turbulence from which he can recover? Or do the layoffs he announced last week show that his plan to resuscitate the newspaper business by hiring more journalists and doubling down on print is fundamentally flawed?
I hope it’s the former — not just because I’d like to see him prove everybody wrong (including me) about the future of news, but because I’m planning to include him in a book about a new breed of media moguls who are using their personal wealth and smarts to innovate their way toward a brighter future. (News of the layoffs was broken by Gustavo Arellano of OC Weekly, which has taken a jaundiced view of Kushner’s ownership.)
Trouble is, there have been hints previously that Kushner, 40, lacked the sheer financial firepower of Boston Globe owner John Henry or Washington Post owner Jeff Bezos. I’ll get to that in a moment. But first, a little background on what’s unfolding in Southern California.
Kushner, who bought the Register in 2012 for $50 million, was the most celebrated new newspaper owner in the country before he was eclipsed in August of last year by Bezos and Henry. “Can Aaron Kushner save the Orange County Register — and the newspaper industry?” asked the Columbia Journalism Review last May. As CJR’s Ryan Chittum explained it, Kushner’s vision was based on:
Lavish attention to the print product, including more pages and an upgrade in the quality of paper.
A move away from free or even reduced-price content online, with Internet users paying exactly the same fees as print subscribers.
An increase in the size of the newsroom staff, as he added 140 journalists to the 180 who were there when he bought the paper.
Nor was Kushner content with pumping up the Orange County Register. Last August he started a new daily, the Long Beach Register. He bought The Press-Enterprise of Riverside. And in his most audacious move yet, he announced plans to start a Los Angeles Register to compete with the Los Angeles Times, once among the best newspapers in the country and still formidable. (LA is also home to a second paper, the Los Angeles Daily News.)
Then, last week, came a significant setback. Not everyone agrees on the figures, but Ken Bensinger of the LA Times reported that Kushner laid off about 35 people at the Orange County Register and 39 at The Press-Enterprise. Register editor Ken Brusic and other top editors left. Rob Curley, who had overseen digital initiatives at papers at the Washington Post and the Las Vegas Sun, was promoted to the top position.
“We are evaluating our cost structure for the next leg of our journey in terms of covering Orange County and LA County,” Kushner told New York Times media columnist David Carr, who noted that Kushner plans to plunge ahead with his idea for a Los Angeles paper without adding any staff. Carr wrote:
By amortizing the costs of all the journalists he hired over a bigger market, he can achieve savings in terms of production while adding marginal readers and advertising.
He clearly sees himself as a smart entrepreneur making bold bets. I see a man on a wire, with millions of dollars and hundreds of jobs at stake.
As for past hints that Kushner may not be well-heeled enough to play the long game, you may recall that, several years ago, he tried to buy The Boston Globe. (The Globe’s then-owner, the New York Times Co., apparently showed no interest, and Kushner later struck out on a bid to purchase Maine’s Portland Press Herald.)
Before Kushner gave up on his Globe dream, though, Katherine Ozment wrote an in-depth profile of him for Boston magazine. Among other things, Ozment attempted to show precisely how Kushner had made a fortune in the greeting-card business, his major claim to fame up to that time. What she found was a haze of acquisitions, layoffs and charges (which Kushner denied) that he was late in paying artists, sales reps and the like.
Eventually Kushner left his company after some sort of falling-out with the investors, though he told Ozment he remained part of ownership. “I had a vision for the business, and they had a very different vision, and they controlled the working capital, so we decided to move on,” he said.
Despite that possible warning sign, it has to be noted that the Orange County Register remains a much more richly staffed paper today than when Kushner bought it. In a memo to his staff published by the blog LA Observed after the layoffs were announced, Kushner wrote that he now has 370 journalists — uh, make that “content team members” — covering Orange County and Los Angeles County, up from 198 a year and a half ago.
An optimistic take would be that Kushner got ahead of himself and is now retrenching, but not retreating. No doubt we’ll know a lot more as 2014 unfolds.
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