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Thursday, Jun 8, 2023

Times’ Premium to Pay Off?

Patrick Soon-Shiong took over the Los Angeles Times and several other California publications last week amid newly released financials showing he paid Tribune Publishing Co. a price well above the going rate for newspaper operations.

A Tribune Publishing filing with the Securities and Exchange Commission on June 20 showed that the properties purchased by Soon-Shiong had $63.7 million in operating income on $504 million in revenue last year.

The $500 million price tag on the deal for the Times, the San Diego Union-Tribune and numerous smaller publications comes to a multiple of earnings of about 7.8.

That compares with an industry standard for legacy print media operations of about 4.5. according to media analyst Ken Doctor, author of the Newsnomics column for the Nieman Journalism Lab at Harvard University.

Doctor said the multiple of 4.5 has been a steady benchmark since at least 2016, when Digital First Media Inc. bought the Orange County Register.

Soon-Shiong “clearly paid more than what the market would bear,” Doctor said, adding that biotech billionaire might view the Times as a premium property.

The recent SEC filing indicates that Soon-Shiong plucked the strongest financial performers from Tribune Publishing’s stable.

The California properties turned in an operating profit margin of 12.6 percent for 2017, as measured before taxes, debt service and other factors.

Tribune Publishing had an overall operating profit margin of 4.3 percent on $1.52 billion in revenue – totals that include the California publications Soon-Shiong acquired. The former owner would have seen its operating margin dip to less than 1 percent – and even sustained a net loss of $35.6 million – without the contributions of the California properties.

Forward focus

Context regarding Soon-Shiong’s purchase emerged last week as he gave a vision for the Times that is focused on editorial changes first, with business considerations to follow.

The NantWorks founder – who has assumed the title of executive chairman of the Times and the other publications in the newly constituted California Times Group – wants to stream more video content and podcasts, and generate more investigative journalism.

He has named an executive editor for the Times, tapping Time Inc. veteran Norman Pearlstine, while leaving the publisher’s role vacant.

Soon-Shiong told the Business Journal that he will “leave it up in the air” for now whether to hire a publisher, noting that he did promote Chris Argentieri from general manager to chief operations officer.

Soon-Shiong dodged a question about profitability expectations, conceding that newspapers are generally a “struggling business,” adding that he came to the deal with his “eyes wide open.”

“That’s why we need to change the business model,” he said.

The focus on editorial content could be a route to new revenue, Doctor said, especially since Soon-Shiong’s editorial checklist reads like recent changes made by the New York Times and Washington Post.

Those publications paired additional investments in coverage with a business switch that saw online subscriptions eventually supplant advertising as their biggest source of revenue.

Obstacles to overcome

The California Times Group includes community newspapers in Glendale, Burbank, La Canada and Newport Beach; another publication in Orange County; and nine weeklies and two monthlies in San Diego County besides the Union-Tribune.

Soon-Shiong said Jeffrey Light will retain his joint roles of editor and publisher of the Union-Tribune. He said he has no plans to sell the community newspapers, and instead wants to create a “unified structure” in which the publications share technology and resources.

The unification strategy includes each publication making use of a Times’ audiovisual studio in their new El Se gundo headquarters. The daily’s staff is set to move there after more than a century with headquarters downtown. Soon-Shiong has touted the power of audio, often citing the Dirty John true crime podcast that accompanied a series of Times’ articles last year.

The El Segundo office is set to open next week, and the majority of Times’ employees will move there in the third week of July.

About four-dozen employees, meanwhile, will be asked to decamp to a downtown Los Angeles office at 453 S. Spring St., which is home to the Last Bookstore.

Times’ writers unionized in January, and the Times Writer’s Guild has complained about the El Segundo move, as well as pay disparities between male and female staff members, and also white and non-white employees.

Soon-Shiong said that he is sympathetic to the union members discontent over pay disparities, and sensitive toward their longer commute to El Segundo.

But he would not say when contract negotiations would start or how they impact the newspaper’s profitability.

Tribune maneuver

Perhaps Soon-Shiong’s biggest business move since he closed the Times’ deal didn’t directly involve the California properties but took aim instead at the newspapers’ former owner.

Soon-Shiong expressed his desire to reclaim a board seat on Tribune Publishing.

“I want this board to understand that they still have a fiduciary responsibility to the rest of the company,” said Soon-Shiong, who owns 24 percent of Tribune Publishing’s shares.

Soon-Shiong clashed with Michael Ferro – Tribune Publishing’s biggest shareholder and former board chairman – and told the Business Journal he suspected that Ferro worked to delay finalization of the Times’ sale.

Ferro resigned as board chairman in March amid sexual misconduct allegations, and he originally sought to sell his 25.7 percent stake in Tribune Publishing, but the deal unraveled three weeks ago.

Messages left with Ferro were not returned, and Tribune Publishing, which has kept a tight lip amid the Times sale, declined to comment (see related item, Page 3 column).

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