Bankruptcy filing squeezes free daily

Fifteen years after it started, there is cause for concern about the future of California's first and most successful free daily, the Palo Alto Daily News. Its owner, MediaNews Group, has made several damaging changes and now has filed for Chapter 11 bankruptcy.

For many years, the Daily News was the poster boy for free daily newspapers. The Daily News grew and dominated its marketplace south of San Francisco. It was acquired by Knight Ridder for $25 million in 2005 — a record price for a paper its size.

The timing of the paper's owners to sell was fortuitous. A year later, shareholder revolt later that year forced Knight Ridder to sell off its papers and shut down. The Palo Alto paper was shunted off to MediaNews, a chain known more for cost cutting than great journalism. Not surprisingly, the Daily News closed the sister editions it has started in Berkeley, San Mateo, Burlingame, Redwood City and Los Gatos. It also stopped printing on Sunday and Monday.

In the past year, the Daily News dropped its distinctive page size (16 inches deep by 10 3/4-inches wide, known as a long tab). First it went to a short tab, which is almost a square (11-1/4 by 11-3/8 inches). Then, as free-daily.com reported, MediaNews chief executive Dean Singleton became irate when he learned of the change. He ordered the paper become a broadsheet, like its other newspapers in the Bay Area.

Now MediaNews is in bankruptcy court in Delaware, hoping a judge will reduce its debts from $930 million to $178 million. The filing is a "prepackaged" bankruptcy where the creditors (mostly banks) agreed upfront to allow the debt-reduction deal. The company's two top executives, CEO Dean Singleton and President Jody Lodovic, will be paid up to $1.49 million and $2.25 million, respectively, if the bankruptcy plan is approved March 4, according to the San Francisco Peninsula Press Club.

Once the bankruptcy is over, and huge debt-service payments are no longer an issue, MediaNews will be expected to produce profits that are within industry averages. Assets that don't produce profits will be closed.

Cost-cutting has crippled the Daily News, and it remains to be seen if its new format is a success. Given the need of Singleton and Lodovic to impress their owners with profits, one wonders how much time the Daily News will have to return to health.

Newspapers owned by MediaNews have avoided reporting information concerning its bankruptcy filing (Example 1, Example 2). Ironically, two of the most insightful stories about the case ("Post owner: don't shut off our phones" and "Execs cash in on Post parent bankruptcy") have been printed in the Denver Daily News, owned by the original owners of the Palo Alto Daily News, Jim Pavelich and Dave Price.

Portland (Maine) free daily is intensely local

A veteran of the free daily industry has started a paper in Portland, Maine, that is intensely local. Of the issues we've seen of the Portland Daily Sun, every story on the front page has been local, and the body of the paper has been dominated by local copy. This is a different breed from the commuter free dailies that rely on wire copy. It is obvious that the editor, Curtis Robinson, lives, breathes and eats local news.

Robinson (left) helped free daily pioneer Jim Pavelich start the Summit Daily News in August 1989. He went on to the short-lived Ventura (California) Today. Later he was editor of the Aspen (Colorado) Daily News. Then he helped to start an independent Sunday-only paper in the valley that includes Aspen.

The Portland Daily Sun began in February 2009 and has a daily circulation of 14,000. It publishes Tuesday through Saturday. Robinson is partners with Adam Hirsham and Mark Guerringue of the Conway Daily Sun, a free daily community paper that has operated since 1989. The Conway paper's press prints the Portland paper. Hirsham and Guerringue are investors in free dailies in Berlin, N.H., and Livonia, N.H. Those papers also have the word "sun" in their name, suggesting the sun is rising all over New England.

Free-Daily.com asked Robinson the following questions:

Free-Daily.com: Why Portland?

Robinson: I have some family here (I'm a widower with a five-year-old son) and it scored in the 90 percent range for launching a free daily, and I wanted to do something East Coast, but I looked at six finalists before deciding ... and the real thing is that I just fell in love with Portland, a diverse, progressive urban area in a state that is perhaps less so — and love of place always helps if you're about to work 60-hour weeks. I also had the chance to partner with a couple of free daily veterans — they own three free dailies in New Hampshire, and one of those is in North Conway, about an hour from Portland. We're a separate setup, but really benefit from their established business practices, and of course the press. So it just felt right.

Free-Daily.com: What makes Portland a good place to start a free daily?

Robinson: Alchemy of people, place and such. I've developed a 25-point checklist and consult with people about this all the time — I'll get three or four calls a month now about free daily launches and that's always an early question. But it starts with independent businesses and walkable areas and then it gets tricky ... oddly, there's a huge debate about competition, print vs. all these local web sites and other factors. Then you walk around and get a "gut" feeling — beware of chain stores.

And part of that discussion is size — if you buy into the idea of micro-dailies, then how large can a city really be? Is a 15-25K daily circulation culturally relevant in a city of a million people? If you go bigger, can you keep rates low enough to be locally serving, or do you nudge into what amounts to regional merchants — again, people break all kinds of ways, but it's important to match that vision to your wallet.

Free-Daily.com: How many people do you have on your staff?

Robinson: We have three reporters, a half-dozen regular local contributors, three sales folks, and we use a local distribution company that was just a freakin' miracle dropped from above. I'm not sure third party distribution would be part of a "model" launch, but it really worked this time around. You just get lucky some days.

Free-Daily.com: In terms of sales, what area or vertical have you been most successful in, and which one has been the toughest?

Robinson: I never, ever feel 100 percent certain what the hell a "vertical" is — it seems to vary by who is doing the marketing. We've done well with restaurants and such, and the hardest is of course the agency accounts — just like every other free daily launch. And of course there are the typical reasons for that — but we've already had a major bank buying ads off its own push — that's what it takes. It was like that when we launched the Summit Daily News in 1989 (I've been at this a while) and it will be like that for a long time. Real Estate seems to be coming around — they are looking for good value.

Free-Daily.com: Have you broken even yet, and if not, do you have an idea when that will happen?

Robinson: We're on target to be what we call "cash flowing" in the spring, meaning we will pay our bills with what comes in ... accountants will explain that that's far, far different from "profit" and they're right, but on the path to sustainability it's one of the true milestones. Jim Pavelich of free daily fame (Vail, Palo Alto, San Francisco) once told me that the only reason to do the first year of a free daily is to get to the second year.

BTW — This is my third free daily startup — starting with the Summit Daily News (Frisco, Colorado) in 1989.

Free-Daily.com: Regarding news, what's the biggest controversy your paper has covered (or ignited)?

Robinson: We get one or two good "gets" every week or so — I have very experienced reporters — and we actually launched with a major story about an emergency response on one of the Portland city islands, where neighbors had to help treat the victim and a bystander drove the ambulance to the emergency response boat, all because of a staffing policy and communications glitch. We've stayed with that story and others.