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Update: The sale was finalized early Wednesday morning.
The business of local news in Southern California has been tremoring from repeated nightmares the past several weeks.
Tuesday brought a splash of cold water. News broke that billionaire Patrick Soon-Shiong was prepared to buy the San Diego Union-Tribune and the Los Angeles Times for $500 million. The deal is not final.
The ownership change wouldn’t guarantee anything, but it would be a giant change from the current course. In June 2016, Tribune Publishing, which owned both papers, rebranded itself as Tronc, promising yet-to-materialize riches through machine learning and an emphasis on video content.
The sale would also be yet another upheaval at the Union-Tribune, which would have its fifth owner in the last decade.
The LA Times business editor, Kimi Yoshino put the size of the deal into context, writing on Twitter that Soon-Shiong is looking to buy the LA Times and U-T for $500 million, while tronc (including eight major metro newspapers) has a market cap of $608 million.
Tronc has offered a series of embarrassments, but fundamental problems remain in the news business and it’s not at all clear what Soon-Shiong thinks about the Union-Tribune as an independent entity or San Diego as a distinct region.
The sale could make it possible for a local ownership group to make a play for the U-T, though the size of Soon-Shiong’s investment would make a smaller sale of the U-T difficult unless he took a major loss.
Soon-Shiong would be the fifth owner of the Union-Tribune of the last decade. The Copley family owned the newspaper for many decades before selling it to the firm Platinum Equity in 2009. Platinum re-engineered the entire operation and accelerated the incredible shrinking of its staff. It returned the paper to profitability and sold to local hotel industry magnate and developer Doug Manchester in 2011.
Manchester and his mercurial partner, John Lynch, led the newspaper until 2015. They also acquired several other local newspapers, including the North County Times, which they quickly dissolved. Manchester sold the paper — excluding its longtime headquarters — for a profit to the Tribune Company. The old headquarters was later sold.
Austin Beutner, the then-LA Times publisher, led the operation for a short time, planning to operate the LA Times and U-T as the so-called California News Group.
But then in yet another dramatic upheaval, Beutner was forced out of Tribune Publishing. In 2016, Tribune rebranded as tronc and released flowery, if inscrutable, visions about the new media company it was creating. That year, when faced with a hostile takeover from Gannett, tronc attracted a major investment from Soon-Shiong.
Soon-Shiong had long been interested in purchasing the LA Times.
“It takes a special combination of integrity, restraint, resolve and imagination to lead these companies today. I think Patrick could be a good owner for us, if there is a deal,” said U-T publisher and editor in chief Jeff Light, in a statement.
Light first came to the paper when Platinum Equity purchased it in 2009. After Beutner’s demise, tronc promoted Light into the role of publisher and editor in chief. Tronc also re-established the paper’s name as the Union-Tribune. Manchester and Lynch had changed it to U-T San Diego.
Light also added this:
“Putting Southern California together in a media company is a very compelling proposition,” he wrote.
Indeed, the first thing Tribune did when it took over the U-T was shutter the paper’s printing plant, laid off its workers and moved printing to Los Angeles, where the Times is published every day. The company now ships the Union-Tribune south every morning. The logistics created earlier deadlines and caused adjustments.
Tronc tried and failed to bring the O.C. Register into the fold. It was all part of a strategy to save as much money as possible as newspapers continued to withstand a major economic disruption.
All newspapers are marching toward a cliff — as advertisers leave in droves to online platforms like Google and Facebook. Newspapers’ revenues have been plunging since early in the 2000s. At some point, for each of them, the revenues will cross the threshold where it is no longer worth it to print the papers every day.
Until then, each newspaper is scrambling to build a business model based largely on digital advertising and subscriptions. National newspapers like the Washington Post and New York Times have had some success, but they reach vast audiences across the country. By persuading millions of people to purchase digital subscriptions, they can raise significant revenue to fund newsroom operations.
Other newspapers have much smaller, regional readerships. As they try to invent their futures, they are also trying to push that cliff off by cutting costs as much as possible.
This has led to massive consolidation and the kinds of decisions that led to moving the U-T’s printing operations to Los Angeles.
“The principle is ‘clustering’ or ‘megaclustering’ in the newspaper business. Put together close-by or contiguous newspaper properties, and save on as many of the old print expenses — printing, distribution — as you can,” wrote Ken Doctor, a news industry analyst who has written extensively on tronc and the LA Times, in an email to Voice of San Diego.
At some point, they won’t be able to make the paper smaller or cheaper to print and will have to cut the number of days it prints.
“If there was any discernible plan at tronc, it depended on the idea of scale. Selling the LA Times means that idea has gone bust,” wrote media analyst Jay Rosen on Twitter.
Forbes estimates Soon-Shiong is worth $7.8 billion, making him one of the 200 richest people in the world. His fortune comes from a cancer drug, helping to make him perhaps the world’s richest doctor.
But he’s also talked about a “vision machine” that he’s said amounts to a high-tech seeing-eye dog. He’s talked about bringing this technology to the aid of the ailing newspaper industry, which he’ll now be a major player in.
A demonstration video from his company, Nantmobile, shows a person waving an iPad and an iPhone over a print copy of the Los Angeles Times to view videos related to stories and advertisements that appear in the paper.
“You’d be bringing to life whatever you see on the newspaper,” Soon-Shiong told Bloomberg News in 2016. “Every page, every picture, every commercial is merely a TV channel activated by the picture itself through machine vision recognition.”
But it’s not clear why anybody would want to buy a print newspaper to view videos on their phone.
Soon-Shiong is no stranger to critical press; Politico published a lengthy investigation last spring that suggested Soon-Shiong was using his charity work to boost the bottom lines of his for-profit businesses.
While many at the U-T may find great relief in the news that the dramatic and awkward ownership of tronc is moving on, it’s still unclear what the future of the paper is locally.
The paper could thrive under a California umbrella. Or it could lose its local distinction even further, much like the North County Times melted into the U-T itself.
Doctor said that the U-T and LA Times make up half of the nationwide media company’s revenues.
“Remember that it wasn’t Tronc that bought the U-T and combined. It was previous management — and that management may well return. So, greatest likelihood: the combination continues,” Doctor wrote in an email.
But, Doctor thinks the focus of new ownership of the U-T and LA Times will clearly be on Los Angeles. Maybe even Beutner will return.
In 2014, Manchester started to put up signs that he may entertain offers to unload the U-T. That year, a group of philanthropists led by Malin Burnham went around town trying to build up support for a plan to purchase the paper and create a nonprofit ownership structure for it.
It’s unclear if Soon-Shiong has a vision of scale for California papers, or if he would want to focus only on Los Angeles.
These are all questions we’d love to ask him. A message sent to his company was not yet returned.
Ry Rivard contributed to this report.