Denver Post Intent On Fratricide

The owners of the Denver Post have declared an intent to buy the half of the Denver Newspaper Agency now owned by the owners of the Rocky Mountain News if the Rocky is sold, under right of first refusal provisions in the Joint Operating Agreement under which Denver's two daily papers operate.

The DNA prints both papers and secured advertising for the papers, and then pays half of the profits from these business operations to the Denver Post, and half to the Rocky Mountain News, from which each paper pays for its newsroom operations and makes a profit, if possible.

The Denver Post plan is effectively a poison pill designed to discourage bidders who might be interested in taking control of the Rocky. Without the DNA, the new owners of the Rocky would have to rebuild printing and advertising operations from scratch. An extended deadline by the owners of the Rocky to receive bids on purchasing the opeartion runs this week, and the paper could terminate operations or announce plans for winding up the almost 150 year old paper any day now.

The Post would then merge the Denver Post and the DNA, and would seek concessions from the unions at each entity in a bid to become profitable. "In December, Dean Singleton, publisher of The Post, requested $18 million in concessions from agency union employees and $2 million from Post union employees." The owners of the Post are betting that the only way that they can survive is by securing a near monopoly on the paid daily newspaper in metropolitan Denver, and that it will capture most of the Rocky's readers. The Post has already started to borrow money ($13 million) from the DNA to make payroll.

FWIW, David Milstead at the Rocky Mountain News predicted in his business column last week that the demise of the Denver Post would follow a year and a half or so after the death of the Rocky because it would fail to pick up newspaper readers that used to read the Rocky.

I think he's wrong. Other markets that have lost a "second" newspaper don't have materially lower numbers of newspaper subscribers per capita than the increasingly small number of markets with more than one daily newspaper. And, the distinction between the Rocky's metro Denver oriented, picture heavy, tabaloid format and the more traditional Denver Post which has a statewide focus, is smaller than the distinction between the morning and afternoon papers that prevailed in the last big round of newspaper failures.

Admittedly, in 2008, the DNA didn't produce enough revenues to fully fund one of its two newsrooms, let alone two. But, in round numbers the DNA had $10 million of profits, and each of the newsrooms cost $20 million to operate. If one of the newsrooms close, the $30 million combined loss drops to about $10 million, and the loss per daily circulation falls even further as Denver Post circulation goes up. With modest price increases for advertisements, subscriptions and newsstand purchases, and some of the requested concessions from workers, the Denver Post will probably survive.