Monday, September 8, 2014

Tribune Lovers and the Paper's Attorneys Tangle In Court Over JOA

Posted By on September 8, 2014, 8:01 PM

click to enlarge newspapers.jpg

A federal judge on Monday ruled that a lawsuit challenging a revenue sharing agreement between the Deseret News and The Salt Lake Tribune that vastly reduced the latter paper’s share of revenue, could move forward.

The suit was brought by Citizens for Two Voices, a pro-newspaper group that has sharply criticized the deal, known as a joint operating agreement (JOA), which was hammered out by the two rival newspapers in October, 2013.

For more than six decades, the two newspapers have shared distribution, printing and advertising responsibilities. They also have shared revenues, and, until last year, the Tribune commanded the lion’s share.

But the new deal, negotiated by the Tribune’s current New York City-based hedge fund owners, Alden Global Capital, and the LDS Church, which owns the Deseret News, came to an agreement that hacked the Tribune’s share of revenue down from nearly 60 percent to 30 percent—a drastic slip that opponents of the deal say will kill off the Tribune.

“We think it’s imminent,” Karra Potter, an attorney representing Citizens for Two Voices, told U.S. District Judge Clark Waddoups of the Tribune’s health. “It’s hemorrhaging; it’s no longer self sustaining.”

Citing antitrust violations, the group has sought an injunction that would invalidate the JOA. In response, attorneys for the Tribune and the Deseret News sought to have the suit tossed out. But Waddoups, despite saying he found the newspaper’s arguments to be strong, said he believed secret elements of the deal should be aired out in court before the case is closed.

Over its more than six decades of existence, the two newspapers have occasionally renegotiated the JOA, which was formed to ensure that the two newspapers wouldn’t undercut each other out of business. What made last year’s renegotiation stick out is that the Tribune sold its interest in the presses that print its paper and the lion’s share of its revenues. Even though many of the terms of a JOA are supposed to be made public, the amount of money the LDS Church paid to the hedge fund was undisclosed, though some estimate it at $15 million.

Another provision in the JOA, which first appeared more than a decade ago, gives the Deseret News veto power over who can own the Tribune. This veto power, opponents of the JOA say, has been used at least once in recent months to thwart the sale of the Tribune.

Joan O’Brien, a former Tribune reporter and co-founder of Citizens for Two Voices, says she’s looking forward to finding out more about the deal, specifically in regards to what the Deseret News paid for the little that remained of the Tribune’s hard assets. And with the lawsuit moving forward, she believes these details will be revealed.

Waddoups’ courtroom made for a surreal scene. On one side, a gaggle of the Tribune’s attorneys argued that the new terms of the JOA amount to little more than a “nuanced business decision” that has given birth to a new “economic model.” As such, the courts have no right to intervene in what amounts to a big bet by the Tribune on so far non-existent digital profits.

On the other side of the aisle, newspaper lovers argued that the deal will surely kill the Tribune unless it is dismantled.

Richard Burbidge, an attorney for the Tribune, pointed out that in exchange for its print revenue, the Tribune gained control of all of its digital revenue—a big gamble on the “future.”

“We have made the business decision,” Burbidge said. “A lot is at stake. There’s no guarantees.”

In a prepared statement, Deseret News officials called the ruling a "normal step" in the judicial process. 

The statement also characterized the JOA as a sort of opportunity for the Tribune to scoot into its new future.

"More over, the transaction allowed the Tribune the ability to reinvent its business model and invest in digital," the statement says. "The Deseret News reaffirms its commitment to two strong newspapers in Salt Lake."

Over the last several years the Tribune has undertaken vast layoffs. Since the new JOA went into effect, more than two dozen staffers have been shown the door. In addition to selling its interest in the printing presses, it sold its building on Main Street.

Although many newspaper analysts insist the future for newspapers is in the digital world, this new world has so far proven to be unprofitable.

As the Tribune continues to hemorrhage (statistics on its actual financial standing aren’t public, but as the lawsuit moves forward, numbers should surface), the debate will rage about why the Tribune’s owners and the LDS Church negotiated such a deal. Both sides have denied that they want the state’s largest newspaper to fold.

Burbidge argued that antitrust suites of this nature aren’t typically brought until the entity being discussed is run into the ground—a statement Potter seized in her own arguments.

“I don’t believe that the rules require that we wait until the Tribune has gone under, has died,” she said.

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