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Thursday, December 19, 2013

Making the Providence Journal relevant to South County – and Rhode Island –again

ProJo’s Dallas owners want to dump the paper – is this a problem or opportunity?
By Will Collette introducing columns from RI’s Future by Tom Sgouros and Samuel Howard

Before moving to Washington in 1978 for a 25-year exile, Cathy and I loved the Providence Journal despite the conservative politics of its crotchety East Side owners. Its news coverage was solid and it was one of the best mid-sized city papers in the country. It was one of the first newspapers to blanket its readership area with local bureaus and had an outstanding DC news team that even broke big Watergate stories.

When Cathy and I came back home to Rhode Island in 2002, the Journal was just a shadow of itself.

Its Dallas-based owners, the Belo Corp., not only infused their own brand of Texas conservatism on the paper, but they drove off or sacked their best personnel. Plus, they closed their news bureaus, including of course, their South County office. Maria Armental, one of the last to run the South County Bureau, was among those just laid off in the BeloJo’s latest round of cuts.

We stopped subscribing. For a while, we could get what we needed on-line, but even that is now sharply restricted by the BeloJo’s paywall. Great business model they’ve got – get rid of your best staff, cut back coverage, flaunt your Red State politics in the bluest of Blue States, restrict web access and then wonder where all the subscribers and advertisers went.

The news that the Belo idiots in Dallas now want to sell the Journal is, I believe, potential good news. The only way it could get worse is if the Journal simply folded.

Since the news of Belo’s plan to sell the Journal went public, two of my favorite columnists at Rhode Island’s Future have written pieces, re-printed below, on ways to make lemonade out of the lemons the Belo people have left us.

First, from Samuel Howard….

How to buy the Providence Journal, and why

By Samuel G. Howard on December 4, 2013

With the news that The Providence Journal is up for sale, there’s a lot of people trying to suss out who will be the new owner, with famous rich people being thrown out as names.

One name I suggested was the people of Rhode Island. Maybe a “Make The Journal Your Own” campaign or something.

The problem is, of course, that you still need some rich civic-minded millionaires. If the sticker price for The Journal is say, $30 million, then you need 30,000 people to average a payment of $1000. It’s not impossible, but it’s not likely.

This type of arrangement, where a group of people get together and buy a corporation is more typical of sports. In America, the most prominent example is the Green Bay Packers, who have been a nonprofit corporation since 1922 and have 5,014545 shares of stock owned by 364,114 stockholders, according to the team’s website.

Their history of being owned by their supporters is a bit different, it took benevolent local businessmen to ensure that that would happen.

I certainly feel like news media is a more important investment than a football team, especially in Rhode Island. The value would be that the entirety of The Journal would be beholden to Rhode Islanders; instead of to some single entity, whether a faraway private corporation or an extremely rich owner and their family. They’d have a board of directors picked by the shareholders, and the corporation could even have a rule that no single person could own a controlling majority of the stocks.

Could you make money? That’s ultimately the question, and the argument might be that the concern for these new citizen-owners wouldn't necessarily be a return on investment in financial terms, but rather in news terms. There’s no mistaking that The Journal has been gutted over the years; the physical paper’s shrunk as fewer and fewer journalists are working for it.

This isn’t a solution for news media though. One of the more interesting things said by the authors of Dollarocracy at a talk I attended earlier this year was that for too long we’ve thought of news media as a business because advertising has been investing in it. But as they went on to say, this wasn’t because advertising loves news, it’s because the eyeballs were there.

In the modern era, where you can go to Google or Facebook and purchase a demographic (16- to 32-year-olds who love skateboarding-dogs), why bother making your demographic New York Times readers or Providence Journal readers?

The authors had an idea for a citizen voucher to fund news, based off of an idea that came out of the Center for Economic and Policy Work for a “Artistic Freedom Voucher” which was aimed at working around America’s restrictive copyright laws. This puts news outside of the profit-making scheme and into the publicly-financed realm. That might be an interesting policy decision for Rhode Island, but in the here and now, I don’t think it’s likely.

If The Journal was also printing money along with newspapers, I don’t think A. H. Belo would be selling it right now.

Samuel G. Howard - A native-born Rhode Islander, educated in Providence Public Schools, went to college in North Carolina and a political junkie and pessimistic optimist.

The possible sale of the Providence Journal is a perfect opportunity to examine what has often seemed to me to be about the lowest-hanging economic development fruit — that we continue to ignore.

Back in the misty dawn of time, also known as the 1980s, when Mario Cuomo was Governor of New York and liberals weren’t afraid to support good policy just because it was a good idea, the Empire State Development Corporation established an office of employee buyouts.

They realized that it’s hundreds of times easier to keep a business going than to start a new one, and that sometimes the best buyers for a company are the people who already know how it works. The idea was to provide low-cost financing to groups of employees who wanted to keep a business going when the owners wanted to sell or retire.

The office existed for a few years, did good work retaining lots of small businesses, and then George Pataki was elected governor. That Republican had run against exactly the kind of economic intervention implied by the employee buyout program, and so the program was jeopardized.

For a while, the office continued its existence by going underground. ESD directors renamed it the Office of Business Succession and had it offer more general succession planning, where employee buyouts were only one among the options. But the financing piece was difficult to implement under the new regime, and without that, it became little more than a referral service to business consultants. The program exists today as only a fond memory among elder ESD staff.

Employee-owned companies are an old idea, but a good one. The worker co-ops of Mondragon, in Basque Spain, were founded in the 1940s, and have been the centerpiece of a vigorous industrial economy ever since. Similar organizations existed over a hundred years before, in England and Scotland.

These days, they are an important part of an industrial renaissance in parts of the midwest, where the idea appears to have caught on. Ohio State now runs a coop development center to provide technical assistance to establishing such businesses, and the University of Wisconsin has a Center for Cooperatives that does the same, plus research into the topic.

Years ago, I worked for a little while at just such a company. The Worcester Company, of Centerdale, was among Rhode Island’s last textile companies. When the owner wanted to retire in the 1970s, rather than sell his factory to someone who would move production to North Carolina, he financed an employee buyout.

About 400 people worked there, and every morning would file in to work through a door marked “Owners Entrance.”  They had monthly business meetings where dozens of people would meet to hash out strategies and opportunities. They made mostly high-end woolens, and by exploiting a high-cost niche at the top of the market, were holding their own, paying all their employees decent wages and even turning a small profit.

Unfortunately, though the company made money, it was not enough to service the high-cost debt that was all they could find. With no help available within the state (or from the state), the company sold a 25% stake to British investors in exchange for a line of credit.

After a few years, those investors saw higher returns available elsewhere and demanded to sell their share. The state stood by, offering nothing at all, while a profitable company, with 400 employees, was forced into liquidation, and now the rotting hulk of its factory sits at the heart of Centerdale.

We’ve lost a lot of manufacturing, but at least some other businesses have grown up. Every one of those existing businesses would be easier to keep than to replace, and lots of them are owned by people who are at least thinking of selling or retiring, if they are not actively doing so right now. 

Statistics are hard to come by, but it’s relatively clear that less than a third of privately-owned businesses continue into a second generation, and many fewer than that pass into a third.

Paying some attention to these businesses would be easy and inexpensive. Creating a central marketplace for business owners who want to sell out would take very little effort, and reliably save a lot more jobs than investing in any startup could. In his short-lived run for Secretary of State, Ed Pacheco spoke about how that office—already in at least annual contact with all the corporations in the state—could readily assume such a role.

The business for sale that’s in the news right now is the Providence Journal. Back when it was a family-owned affair, it might have been an excellent candidate for such an employee buyout. These days, after more than a decade of bumbling management and, well, rapine, by its Dallas owners, it’s not quite so clear. (Especially since such a transaction usually requires an accommodating seller willing to wait while the pieces are assembled.)  The paper’s value 15 years ago was in its staff and its circulation, and both of those have been decimated by management.

Even so, at a small fraction of the size they used to be, the Journal has several times as many reporters as any other news organization in the state. The paper dominates the local news scene, still setting the agenda for the other media in the state. Many tens of thousands of people see it every day.

There is important value there, and it seems conceivable that some non-profit form of ownership — maybe even a co-op — would be a useful way to preserve the paper, and its role in shining bright light on matters others try to keep hidden.

It’s doubtful that it would be a good idea for the state government itself to get involved in preserving a newspaper that needs to retain its independence in order to be a trusted voice. But our community does clearly have an interest in an informed public, and finding a way forward to keep the Journal ownership local and responsible should be at the top of the agenda for everyone concerned about the future of our state.

Tom Sgouros  is a freelance engineer, policy analyst, and writer, easing back into blogging after a leave to work on a book about finance (stay tuned!). Reach him at