The Loan, Own, Bankrupt Model for Publishing
April 27, 2013
Author’s Note: I was not going to make a big deal about the death of my father. He had a long, productive life. He was a pal to some heavy hitters in Illinois politics. He had a couple of good jobs. He worked hard. My family, lawyers, and advisors made the tasks associated with this life event less burdensome. There was one problem, however. The Peoria Journal Star failed to publish my father’s obituary on time. I was not going to discuss this procedural failure on the part of GateHouse Media’s newspaper until I read the article in the Wall Street Journal about companies which allegedly loan themselves money and then own the company to which the money was loaned. When the company in the loan-own mode gets into trouble, some financial tap dancing is in order. After reading the Wall Street Journal story, I decided to capture some thoughts. What’s this have to do with search? Two things: Try to find an obituary when it is not in a system is tough. Second, the modern approach to management often leaves the customer adrift. In my opinion, this is not good. Feel free to skip the write up.
Part I: The Financialing
On most days, I don’t think too much about textbook publishing, newspaper publishing, or loaning myself money and then declaring myself bankrupt. Publishing once was an interesting business, but putting ink on paper seems a bit retro for me. Isn’t digital where it is at?
A publisher who hits upon the clever idea of loaning oneself money, spending it, and then going broke is very 2013ish. The notion strikes me as an idea crafted by a couple of MBAs, a handful of attorneys, and a person suffering from sleep deprivation. I thought publishers published. Not now if the Wall Street Journal’s story is any where near accurate.
I read “Buyout Firm Gathers Cengage Debt” in the April 27, 2013 Wall Street Journal, page B2. If you are a savvy MBA you may be able to locate the story at this link. If not, be prepared to pay up. I did. (No, gentle reader of my personal blog, I do not update links in order to curry favor with the Google. You want good links, go elsewhere, please.)
The main point of the story is that an investment/financial type of firm is “both an owner and senior creditor of Cengage.” If you know your history of professional publishing and its wheeling and dealing, Cengage was once a separate firm and then once a chunk of the Thomson Reuters’ outfit. Thomson Reuters is interesting because it has run a number of senior managers though its executive suites and maintained flat revenues and modest profits for several years.
I think the way this owner and creditor thing works is that one part of a big investment/financial outfit buys a stake in something and another part of the big investment/financial outfit loans the recipient of the money some cash. In short, the big investment/financial outfit both owns the recipient of the money and is a creditor who wants money back.
Got that. I sort of do.
Part II: The Unveilingness
But what’s fascinating to me is a series of comments in the original write up and a reference to a publishing company with which I did business on April 9, 2013. Let’s look at these two blips on my aging radar screen.
Here are the quotes I marked in my dead tree copy of the venerable Wall Street Journal, which I think was or is a Rupert Murdoch property:
- “[APAX] the private equity-firm’s potentially conflicting roles as an owner and creditor”. I like the potentially conflicting, don’t you?
- “Some lawyers say wearing both owner and creditor hats can undercut the goals of bankruptcy law.” What are those goals, by the way? Undercut is an interesting word too.
- “By tacking on a debt investment, a private-equity owner can keep control of a company while sometimes using bankruptcy or other means to cut jobs, cancel contracts, or offload pensions and other obligations.” Seems reasonable to take these steps. Hey, it’s just business in 2013.
On April 9, 2013, I arranged for a mortuary to place an obituary for my father in a company mentioned in this April 27, 2013, Wall Street Journal story. The Peoria Journal Star is owned by GateHouse Media, Inc. GateHouse I learned is one of the outfits which may be both a creditor and an owner of properties which are facing financial headwinds. GateHouse Media’s tag line on its Web site says, “We can.”
Well, maybe the company can be listed in the owner-creditor story in the Wall Street Journal. The company may be able to chop staff. And, for sure, the company can mishandle an obituary like nobody’s business.
The Wall Street Journal article pointed out that some firms use various methods to lessen the financial pain. One of them, cited above, is dumping employees. The elegant phrase is “cutting jobs.”
Part III: The Pay Downing
How does this work out in real life?
Well, the Peoria Journal Star’s obituary desk is staffed on what struck me as somewhat loose hours. One person whom I finally reached by calling the City Desk at the Peoria Journal Star said, “I think someone will come in around 9 am.” Another person told me, “There have been many staff reductions at the paper. Most people wear two or three hats.” A bit of Web surfing revealed that the Peoria Journal Star’s obituary “desk” is actually part of the advertising department and that members of the family could not submit obituaries. As it turns out, a member of the family wondering why the obituary did not appear on April 22, 2013, was published only after the mortuary contacted the Peoria Journal Star’s obituary desk a second time on Monday, April 22.
What I got was, “We made a mistake. Sorry.” I concluded that the job posting below delivered a “rock star” with modest musical talent:
Yep, very smooth, particularly at a time when family concerns were a tick above normal. But who is the Rock Star:
Individuals in the Rock Star pool include kferguson@pjstar.com and gpiper@pjstar.com. Where were these folks when the obituary for my father failed to run? Why did the mortuary have to call, fax, call, and fax multiple times to get the obituary in the newspaper. Do mortuaries make crank calls and send faux faxes to amuse themselves?
What my brush with GateHouse’s Peoria Journal Star suggested to me was:
- A company which loans itself money and then runs into financial trouble is trying to be clever without applying equal effort to running a business like the Peoria Journal Star. In my world, cost cutting is not good management. Cost cutting is evidence of management missteps. When the Wall Street Journal, touched by Murdoch, flags a behavior as controversial, that’s a yellow highlight on management practices in my book.
- The failure to be organized when a customer buys something is a sign that entropy, indifference, or disorganization is the company’s foundation. Maybe I am being harsh, but when I pay a mortuary to place an obituary and then pay people to follow up and then have to intervene and get my attorney to find out where the obituary is in the process—I am not a happy camper. I find quick apologies facile, almost smarmy. Why not operate to serve the paying customer and skip the velvet friction?
- Customers and perhaps students who have to pay lots for “information” are just not important any longer. If the customer is not job one, maybe some thought should be directed at earning revenue, growing a business, and delivering products and services which people use to solve problems instead of illustrating dysfunctional methods?
Part IV: The Lessoning
Let’s tie up these threads.
The Wall Street Journal describes how a company can loan itself money and then fail. The process seems unusual to me. A company practicing this own and loan method is unable to operate as a customer responsive business. In case you have forgotten, that’s the reality of the Peoria Journal Star and its handling of a for fee obituary. Finally, trying to understand a management environment in which a management team wants to have its cake, eat it, and get paid to think big thoughts is disturbing to me.
If you want to complain, please, don’t write me or call me. I am now practicing the method of the Peoria Journal Star by providing no human answered telephone, no email to the obituary department, and no direct means of finding out why an ad was muffed.
I assume the Rock Star GateHouse sought in mid 2012 is on the job, headphones on, grooving to Pearl Jam’s indifference. My father was a hard worker. At the memorial service, one theme emerged: He delivered on what he said he would do. Too bad the information about the memorial service did not run on time so his many friends and colleagues could have reflected on how old fashioned business principles worked without the loan-own type of cartwheels.
In today’s publishing world, those principles seem to be of lesser and lesser importance. Too bad.
Stephen E Arnold, April 27, 2013
Comments
-
- Subscribe to Beyond Search
Feature archive
News archive
-
