David Black has a boat named Esperanza – “hope,” in Spanish. Many would say the name would be better suited for his business strategy, one pinned firmly on the future of newspapers.
He loves details, isn’t flashy and likes a good yarn, much like the 158 publications put out by Black Press Ltd., a motley collection of generally small papers mostly in British Columbia and Washington state. He runs them lean – and they make money.
About a year ago, the ever-ambitious Mr. Black (no relation to the one-time media baron now jailed in Florida) was on the expansion hunt. And so was Platinum Equity LLC, a conglomerate out of Los Angeles, a specialist in rejuvenating businesses that have hit hard times and owner of everything from telecommunications to fibreglass and crane rentals.
In March, with Mr. Black on board as an investor and adviser, Platinum Equity bought The San Diego Union-Tribune, a 141-year-old paper where advertising revenue had fallen 40 per cent in the past three years as the southern California city was ravaged by the burst real estate bubble and battered by recession.
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It is here David Black sees a future for newspapers. He believes in an old-fashioned recipe, that a local paper has a unique role for advertisers, especially the likes of furniture stores and auto dealerships. There is still value in a full-page ad, even for beaten-down city papers. When the economy comes back, papers will get back on their feet too, the idea goes.
Mr. Black and Platinum don’t have dreams of editorial expansion. Mr. Black’s papers are mostly of the decidedly no-frill variety, and, in one example, there are no plans to resurrect the Union-Tribune’s Washington bureau, which was shuttered last year. “In a perfect world, you have bureaus in several places but that perfect world isn’t going to happen, I don’t believe, where you have money to burn in editorial,” Mr. Black said in an interview.
The 63-year-old isn’t so much a newspaper man as a businessman running newspapers. Making money is the challenge he relishes, and he continues to make it when many others in the industry are failing. Born in Vancouver, educated in engineering at University of British Columbia and business at University of Western Ontario, Mr. Black bought his first newspaper in 1975 when he was 29, the tiny Williams Lake Tribune in the central interior of British Columbia.
More than three decades later, from his headquarters in Victoria, Mr. Black watches the industry suffer. Losses pile up at print publications and no one makes money online – or has a good idea where a profit will eventually come from, because everything is given away free and advertising revenue doesn’t support it. Big-name papers are failing in the United States and bleeding in Canada.
Now, with bondholders in charge of CanWest Global Communications Corp., a re-ordering of this country’s media landscape looms as some analysts predict the media giant will sell its 13 dailies and 26 community newspapers.
Mr. Black could be a key player.
Black Press is projected to be profitable this year – annual revenue of about $500-million and 2.8 million in circulation – and he often further bolsters his position through partnerships.
Earlier this decade, he sold 19.4 per cent of Black Press to Torstar Corp. to expand his company. In 2006, he worked with Onex Corp. on what turned out to be a failed attempt to buy two Philadelphia dailies (Mr. Black demanded cuts the union didn’t want; those papers this year went into bankruptcy protection).
And, this year, working as an individual, rather than through Black Press, he’s in San Diego with Platinum.
Few see a profitable future for newspapers. The Union-Tribune sat for sale for almost a year as other papers, like the 146-year-old Seattle Post-Intelligencer, went out of business. Warren Buffett, whose Berkshire Hathaway Inc. owns a stake in Washington Post Co., said in May he would not pay any price for most papers and forecast the possibility of “unending losses.”
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Mr. Black’s belief in the business is unshaken. This is a business cycle, severe, but not a whole new world, he said, particularly for community/suburban papers and small-town publications that make up Black Press, businesses that are better insulated from digital media. As for large urban dailies, he believes their costs are too high, given that websites such as Craigslist.com have gutted classified ad revenues.
“The Internet no doubt has had an effect, and will have an effect, for community papers, but I don’t think it’s an enormous effect,” Mr. Black said. “Community newspapers are still the best place for retailers to advertise. They get the most response for their dollars.
“For the big metros, it’s different. They were living off their classifieds. They have to reinvent themselves.”
Louis Samson, Platinum’s principal on the San Diego deal, was introduced to Mr. Black through an investment banker. Mr. Samson and Platinum had been looking for the right newspaperman to work with. The connection with Mr. Black was immediate, and strong.
Mr. Samson admired Mr. Black’s business acumen and his record at Black Press, where budgets are kept tight and products are straightforward. There are not overly ambitious, they do what they do well, which generally is local news in a small community or suburb.
“David looks at problems differently, always thinking about the next move,” says Mr. Samson. “From a business standpoint, he’s willing to think about how to reorganize things.”
In newspapers these days, reorganize means cuts: wage cuts, staff cuts, pension cuts. It is what Mr. Black did in Akron, Ohio, where Black Press bought the well-regarded Beacon Journal in 2006 for $165-million (U.S.). The editorial staff was slashed by a quarter – 40 out of 161 – after the deal closed.
Though Mr. Black said the paper is still making money, Black Press has had to take a $100-million writedown on the investment, which pushed partner Torstar to reduce the value of its stake in Black Press to a glaring zero.
Mr. Black and Mr. Samson are realists. They see the commoditization of information. They know profit margins will be lower than in the past. “You have to make it profitable and put it in a position to thrive,” Mr. Samson said.
For Mr. Black, a father of four, with three grandchildren, this push toward big-name newspapers might have never happened. He might have been half-retired, sailing and golfing, but in 2005, personal tragedy struck. His wife, Annabeth, who worked closely with her husband in the running of Black Press, was diagnosed with pancreatic cancer. A year later, she was dead and Mr. Black’s parents also died around the same time.
“I threw myself in the business,” Mr. Black recalled. “I didn’t know what else to do.”
He made the Akron deal and then in 2007 battled Quebecor Inc. for Osprey Media Income Fund’s 54 papers in Ontario but ceded the deal when partner Torstar balked at raising the bid.
“David’s got a great nose for making money and he’s fearless doing it,” said friend Robert Prichard, a former chief executive officer of Torstar and Toronto Star publisher who himself was battered by the business during his time at the helm.
“He’s always pushed himself to go further, and farther. He’s never afraid of a fight, and fights to win.”
The Platinum connection could foreshadow what happens in the Canadian media business. Banks aren’t keen to lend money to buy newspapers, so it is private equity money that analysts believe will be a force in the shakeout of the industry. Platinum, run by 44-year-old billionaire Tom Gores, one of the youngest on the Forbes rich list, owns about two dozen businesses, with estimated total revenue of $13.5-billion. Platinum’s latest push is to buy part of Delphi Corp., the bankrupt auto-parts maker.
Mr. Samson said Platinum has looked at most newspaper assets that have come up for sale and wouldn’t limit its hunt to the United States.
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Unlike earlier, flamboyant Canadian media barons – including Izzy Asper, the patriarch who built CanWest and died in 2003, or the aristocratic Conrad Black – David Black is a shy, smart college-professor type. He speaks softly, is content to keep a low profile, likes the quiet on the water when sailing.
In business, he hits hard when there’s an opening. And a bunch of openings could emerge shortly.
While Mr. Black does see better prospects at smaller papers, he is interested in larger ones, too. “I’m fairly agnostic [about size],” he says.
“Where there are opportunities, there are opportunities.”
By David Ebner
July 26, 2009
source: theglobeandmail.com