Thoughts on the DFM sale and newspaper values

If reports are correct, my former company, Digital First Media, is going to sell to Apollo Global Management for about $400 million.

I’m not going to pretend I can analyze what that means for DFM, my many former colleagues there or for the news business. I hope for the sake of my many friends remaining in the company’s newsrooms across the country that the Apollo’s management will find a path to prosperity that doesn’t involve endlessly cutting staff. I hope the company will genuinely pursue the kind of digital creativity that the future demands and will have the staying power to let good ideas flourish.

Since seeing initial reports about the pending deal, I’ve wondered about the meaning of the $400 million sale price, reached in a long “auction” process that sought the best deal(s) to sell the company as a whole or in pieces.

The reported price tag is a breathtaking fall from what newspapers used to be worth, even in the past few years. I hope this means Apollo’s strategy isn’t to keep cutting staff to maintain profits. DFM doesn’t have much left to cut, and values have dropped as newspapers have been cutting. The best way to maximize this $400 million investment will be to build value by developing new revenue streams.

Comparisons of sales prices of media companies can be misleading. One sale might include more real estate, while another might include more debt or pension obligations. Successful subsidiaries can add value to a company. In a sale such as the DFM deal, which is essentially between two private equity companies, full terms may never be disclosed. You might not be comparing apples and oranges, but apples and lawn mowers.

I was not involved in the sale at all, other than losing my job last year as the company was preparing for the sale. But I understood DFM enough to know this was an extraordinarily complicated deal, with an array of factors that make it unique:

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Christensen: Disruption, like gravity, doesn’t care if you don’t think it will pull you down

Clayton Christensen, photo linked from API

Clayton Christensen‘s diagnosis of how the newspaper industry blew its Newspaper Next opportunity is dead-on.

In an interview with the American Press Institute’s Millie Tran, Christensen discusses several new disruptive challenges and opportunities in the media. But this exchange hit home with me (I added some links):

What did you think of the industry’s reception of the ambitious Newspaper Next project that you worked on with the American Press Institute back in 2006? Today, would you prescribe different things or in different ways?

CHRISTENSEN: My sense of the Newspaper Next project is that people read it as an interesting, academic exercise but somehow, whether it was our fault or theirs, the report was consumed at the level of the brain and not the heart.

Most newspapers decided that might happen to others but it doesn’t happen to us. And on a day-to-day basis, you don’t feel it until it’s over. And now there are a lot of people who are saying oh my gosh this really is happening in many ways. The degrees of freedom that are available are far more limited now than they were.

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Erik Wemple quoted me (on Jeff Bezos), so I aggregated Erik’s post

I couldn’t resist aggregating Erik Wemple’s post on aggregation and the Washington Post.

Erik, who blogs about media for the Post, contacted me yesterday asking for a reaction to this statement by the Post’s soon-to-be new owner, Jeff Bezos, founder of Amazon:

The Post is famous for its investigative journalism. It pours energy and investment and sweat and dollars into uncovering important stories. And then a bunch of Web sites summarize that [work] in about four minutes and readers can access that news for free. One question is, how do you make a living in that kind of environment? If you can’t, it’s difficult to put the right resources behind it. . . . Even behind a paywall [digital subscription], Web sites can summarize your work and make it available for free. From a reader point of view, the reader has to ask, ‘Why should I pay you for all that journalistic effort when I can get it for free’ from another site?”

It was a bizarre statement, sounding as though it came from a longtime newspaper publisher, shaking his fist at those damned Internet disruptors on his lawn, rather than coming from one of those disruptors, supposedly offering hope by bringing new ideas and a new perspective to one of the most treasured newspapers.

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Washington Post sale brings a true disruptor to the newspaper business

In my years discussing disruptive innovation while teaching Newspaper Next concepts, I often said that newspapers’ advertising/circulation blinders kept us from developing a digital marketplace such as Amazon.

Well, now, we finally have Amazon’s disruptive founder in the newspaper business, with the Washington Post’s announced sale to Jeff Bezos.

I don’t have time to analyze the deal today — and wouldn’t trust such swift analysis if I did — but I am glad to see such a disruptor coming to the newspaper business. I think we can count on the Post moving beyond the narrow advertising/subscriptions model that is collapsing.

To see Bezos bringing his disruptive approach to the newspaper of Katharine Graham, Ben Bradlee, Bob Woodward, Carl Bernstein, Dana Priest, Carol Guzy and Gene Weingarten is exciting and intriguing. I look forward to it in anticipation.

It’s not what Matt Thompson and Robin Sloan forecast in EPIC 2014, but that did forecast an amazing Amazon merger. So I’ll post it here as a reminder.

Disclosure: My wife, Mimi Johnson, published her novel, Gathering String, using Amazon’s self-publishing services.

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Google’s no threat to press freedom

I was a panelist yesterday, Wednesday, April 15, at First Amendment Day at Iowa State University. Dr. Michael Bugeja, director of the Greenlee School of Journalism and Communication at Iowa State, opened with remarks that I recommend reading first. My response follows (I ad-libbed a few lines, but mostly followed this prepared text):

I’ll start with a couple requests. If you have a cell phone, please get it out and hold it up. Now, if you have used that phone today to send or receive written communication or images, whether by text message, email or web, please open or activate your phone so that the screen lights up. Now wave that phone and look around you. (Nearly everyone in the crowd, mostly students, waved a glowing phone.)

This is the future of freedom of the press. It is healthy, it is thriving and it will not be stopped, even if the companies that own printing presses can’t find their way to a prosperous future. The light of freedom shines as bright as those lights we see throughout this auditorium.

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