the audit

The OC Register‘s expansion reverses

Trouble for Aaron Kushner's contrarian bet in Southern California
January 17, 2014

The Orange County Register, the rebuilt Chevelle SS of the newspaper industry, has blue smoke coming from the tailpipe.

On Thursday, owner Freedom Communications laid off some three dozen journalists, including longtime editor Ken Brusic, who declined to implement the cuts, according to OC Weekly.

That came after months of reports and other signs pointing to problems with its finances that came even as owner Aaron Kushner continued to expand his newspaper empire, opening a Long Beach edition of the Register, announcing a Los Angeles one, and purchasing the Riverside Press-Enterprise.

That $27 million deal went through in November more than a month after it was supposed to close and days after Belo, the Press-Enterprise‘s owners, threatened to sue Freedom to complete the deal.

On Wednesday, Kushner laid off 39 at the Press-Enterprise, including a dozen copy editors, though Freedom says the paper’s newsroom count will not go down as new reporters replace copy staff. That axing came a month after Freedom cut 42 non-newsroom employees in Riverside “to consolidate functional departments.”

But whereas the Press-Enterprise layoffs aren’t surprising—part of Kushner’s strategy is clearly to create a regional powerhouse based in Santa Ana whose copy can be used by new papers in the region, reducing overhead—the Register‘s cuts weren’t part of the script. And the expansion into Los Angeles—without adding additional staff—could be taken as much as a sign of desperation as of confidence.

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At the Register, Kushner and his business partner Eric Spitz, had gone on a stunning hiring spree after they bought the paper in the summer of 2012—doubling the size of its decimated newsroom in a year.

And keep in mind, that even down three dozen or so journalists, the paper’s newsroom will still be nearly twice its pre-Kushner size and the actual paper itself nearly twice as thick.

The big question now is whether Kushner and Spitz invested too much too quickly and now need a correction or whether their entire plan simply doesn’t—and can’t—pencil out and this is just the first round of layoffs.

Kushner has said that the paper is profitable on an operating basis, but that implies that it’s not on a net basis, after taxes and interest, which are presumably sizable.

The biggest problem with Kushner’s strategy was completely ignoring the possibility of digital revenue growth. Instead of implementing the metered-paywall model that has worked so brilliantly for The New York Times and others, the Register put up a hard paywall and charged way too much for it—$30 a month.

If the latest revamp is more a regime change than a retreat, the move still raises the question of just what Kushner wants his newspapers to look like. Most of the top editors, according to Romenesko and OC Weekly, and many long-timers are out. Rob Curley, a Kushner favorite who was his first hire, and who has led the paper’s upgrading of its community newspapers, is in. But he’s not a hard-news guy.

Which is why it’s worth looking at this quote Kushner gave CNBC in October:

Freedom hopes to succeed counter-intuitively. Instead of the old adage, “If it bleeds, it leads,” Kushner and Spitz want to focus on very positive, very local news. Perhaps that’s no surprise, since the CEO came from the greeting card industry.

“In the life of a community, 20 percent of events are things that are unhappy, depressing, what you call in the newspaper business ‘hard news,'” said Kushner. “Eighty percent of life in a community is the opposite.”

I looked through my notes from my piece last year on the hope of Kushner’s “Ink-stained stretch,” and a couple of quotes that didn’t make the story stood out.

“Aaron is very careful,” Curley told me last year. “He never ever calls it an experiment. If it’s an experiment, he can fail. Both Ken (Brusic) and I share this concern. I have huge anxieties about this. If we don’t make it work it might be the last hurrah for an independent businessman to come in and invest in journalism.”

In hindsight, though, this next one is just poignant.

“In a lot of organizations like ours, people have lost both hope and sense of possibility,” Brusic told me in March. “When that happens, as you look into the future as you think about your own life and your own family, you start looking for plan B. I really admire the people who stuck with us during all that time because it was difficult for all of us. The staff, they are journalists, so they were skeptical at first. But then they began to see proof that these were not empty promises, but something they could count on.”

I have requests out for comment and will update when and if I hear back.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.