On the Media: Consolidation seen as inevitable for Southern California’s newspapers

Not so many years ago, it wasn’t very hard to understand ownership of Southern California’s newspapers. The Chandlers had the Los Angeles Times, the Hoiles family controlled the Orange County Register, the Copleys reigned at the San Diego Union-Tribune and MediaNews Group, a chain run by William Dean Singleton, owned a passel of suburban dailies.

Now those durable names have sold out or, in the case of Singleton in recent weeks, been pushed aside. The companies that bought the papers have fallen into deep financial distress. All but the Union-Tribune have been forced to file for bankruptcy.

Now investment houses that ultimately control the newspapers and local managers have come to the same conclusion: Their newspapers will survive, and possibly thrive, only if they are joined together under common ownership.

The first step toward consolidation appears on the near horizon, as the company that owns the Orange County Register — Freedom Communications — has put the paper and its other newspapers and television stations up for auction, according to several people close to the situation. Leading contenders to buy the Register appear to be MediaNews, with nine dailies in the area, and the companies that own the L.A. Times and the Union-Tribune.

Executives in the thick of the deal expect bids to be submitted by early next month and a decision made not long after that. But there are many complications. A deal for the whole company is possible, but it’s more likely Freedom will be sold in chunks, according to those involved, who asked not to be named because they were not authorized to speak publicly about the situation.

The Irvine-based company has 32 other dailies, 70 weekly newspapers and eight TV stations. Different suitors are likely to be attracted to each of those segments. Returns from TV have been the best, presumably making the stations an easier sale. The papers are a mixed bag and would likely draw most interest from regional players.

Publishing executives and financial managers who own parts of the region’s dominant newspaper companies believe that the sale of the Register will be just the first in a series of consolidations. They predict that eventually could result in what once would have been unthinkable — a single owner for most of Southern California’s substantial daily newspapers.

“Someone buys this and then they have the leverage to buy something else,” said a representative of one prospective buyer, who also asked not to be named. “I haven’t met anyone who doesn’t think this is the way it has to happen — more consolidation.”

Myriad hurdles to common newspaper ownership remain. Not the least of the possible impediments to any combination with The Times is the fact that the paper’s parent, Tribune Co. of Chicago, remains mired in a contentious bankruptcy that’s not likely to be resolved before this summer.

The company’s creditors have to be persuaded that a deal makes sense and that they would stand to gain. Yet the company’s managers took in one of Freedom’s presentations — made in January at an Orange County hotel — and the seller continues to view Tribune as a potential buyer.

Tribune has demonstrated the capacity to make deals during the bankruptcy. In December, for example, Tribune Media Services acquired CastTV, a company that devises technologies for video search, indexing and data.

A spokesman for Freedom Communications did not deny that the auction was taking place. Tribune officials declined to comment, while those at MediaNews and Platinum Equity, owner of the Union-Tribune, could not be reached.

The combination of two big newspaper operators would draw attention from the Justice Department, which would want to determine whether any deal unfairly limited media competition in Southern California.

The newspaper business faces such serious challenges, particularly falling revenue as readers shift to the Internet, that the legal barriers to a merger would be considerably less than before. At least that’s the view of those eyeing a bid on the Register, who says it could be more palatable for regulators to put two papers together if they might not survive without a merger.

Old rivalries and political dissonance — the liberalism of The Times’ editorial pages versus the libertarianism of the Register — appear to have washed away amid concerns for mutual survival.

A merger between the Register and either The Times, Union-Tribune or MediaNews would have the same broad outlines: The individual newspapers would maintain their identities, names, news staffs and editorial boards, in an effort to hold on to loyal readers. They would combine all other operations: ad sales, printing, distribution, human resources and publicity.

Papers have already combined some of those functions — for instance, joining forces to save money on delivery costs. But their owners believe they could cut a lot more if they merged. They also believe they could provide a more powerful, broader vehicle for advertisers, both in print and on their websites.

A group of hedge funds, which have scooped up much of the debt in these print companies, are intent on driving consolidation. Alden Global Capital, Oaktree Capital Management and Angelo, Gordon & Co. are among the funds that have significant, though not controlling, stakes in Southern California’s biggest newspaper companies.

“They invested dimes on the dollar to get into these companies. Their game is to lift the value and get out,” said one Freedom executive, who asked not to be named.

Such consolidation previously has been a factor in the reduction of news staffs. The MediaNews papers once run by Singleton — who late last month became executive chairman of the board, a move widely seen as taking him out of power — have sharply trimmed staffs so there are no overlapping beats for the chain’s local papers: the Daily News in the San Fernando Valley, Long Beach Press-Telegram, Pasadena Star-News, Daily Breeze of Torrance, Whittier Daily News, San Gabriel Valley Tribune, Inland Valley Daily Bulletin, Redlands Daily Facts and San Bernardino Sun.

Journalists have bemoaned how the compacting has reduced the diversity of voices. Where once several reporters from those papers covered the Los Angeles County Board of Supervisors, for instance, now a lone reporter writes for all the publications. The same is true on other regional beats and sports coverage, leading to fewer reporters in local press boxes.

Reportedly, even some of the hardened number crunchers at the hedge funds realize that news staffs can’t be reduced much more. “They see that you can’t take much more cost out of the editorial side of the newspapers,” said the Freedom insider. “If you do, you don’t have a newspaper anymore.”

With their businesses flush and growing decade by decade, Southern California’s pioneering newspaper families would have rather returned to their Eastern roots than join forces in the land of milk, honey and media monopoly. Now the landscape is much more treacherous. Their faceless replacements see no choice other than making common cause.

At best, they could jolt new life into the newspaper business. At worst, they hang together, rather than hang separately.

james.rainey@latimes.com

Twitter: latimesrainey