Judge approves sale of 2 Southern California newspapers

AP News
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Posted: Mar 21, 2016 5:20 PM
Judge approves sale of 2 Southern California newspapers

SANTA ANA, Calif. (AP) — A federal bankruptcy judge approved Digital First Media's $52.3 million purchase of the Orange County Register and another Southern California newspaper on Monday after a whirlwind week in the courts triggered by government concerns of a news monopoly.

Freedom Communications decided over the weekend to sell the Register and Press-Enterprise of Riverside to Digital First after another judge blocked a higher bid by the owner of the Los Angeles Times.

The move will give Denver, Colorado-based Digital First, which publishes the Los Angeles Daily News, a total of 11 daily newspapers in Southern California and more than a dozen community weeklies in a four county-region also covered by Tribune Publishing Co.'s Los Angeles Times.

"Ultimately, readers and advertisers benefit most when there is competition," Ron Hasse, president and publisher of Digital First's newly-named Southern California News Group, said in a statement. "We are dedicated to bringing stability and a renewed sense of purpose to these two great newspapers."

Tribune bid $56 million for the papers last week at a bankruptcy auction. But the Justice Department filed an antitrust lawsuit saying if the deal went through, Tribune would have a virtual monopoly by owning the four largest daily newspapers in Southern California.

Tribune — which also owns the San Diego Union-Tribune — argued that government regulators have an "antiquated" understanding of the media market in a digital age, but a federal judge issued a temporary restraining order late Friday.

In recent years, newspapers have seen revenues dwindle amid rising competition from websites for advertising and readers. Companies such as Tribune and Digital First have sought to save money by consolidating operations such as printing and distribution. The Justice Department position in Freedom's case — while not fully tested by the courts — raises questions about how much they'll be able to do that, media industry experts said.

"It would seem to signal that after not doing much of anything, Antitrust is at least paying attention to these situations," said Rick Edmonds, media business analyst at The Poynter Institute.

The question for readers is what kind of news coverage they can expect in the two suburban Southern California counties, which are home to more than 5 million people. Digital First will likely cut newsroom staff as the company has done elsewhere to save on costs, though some job losses were also likely under Tribune, said Ken Doctor, a former newspaper editor and executive who now analyzes media.

"It is kind of a no-win process, but in the immediate question, I think Department of Justice's narrow interpretation — which clearly tilted the board toward DFM (Digital First Media) and away from Tribune — doesn't end up serving the public interest best," he said.

Freedom filed for bankruptcy protection in November following a series of layoffs and buyouts. Those came after the company aggressively expanded in print journalism by starting daily papers in Los Angeles and Long Beach and buying the Press-Enterprise for $27 million.

The sale needed to be approved before private financing that is keeping Freedom's newspapers afloat dries up on March 31.

William Lobel, an attorney for Freedom, said he was pleased the sale was approved, but he would have preferred more money. He questioned why the Justice Department waited until the last minute to raise antitrust concerns that now cannot be contested in court.

Assistant Attorney General Bill Baer of the Department's Antitrust Division said in a statement that many people still rely on local newspapers, even as more information is available online. "Preventing the Los Angeles Times from combining with the Register and the Press-Enterprise will ensure that citizens and advertisers in Southern California continue to benefit from competition and from a diversity of views in their local news coverage," he said.

Jeremy Rosenthal, an attorney for Tribune, told the bankruptcy judge the company would not object to the sale to Digital First, but he disagreed with the government's definition of the newspaper market, which now includes a myriad of ways people get news and view ads thanks to technology.

"The entire newspaper industry is under existential threat from electronic media," he said.

Tribune's bid would have netted an additional $2.6 million for creditors, said Robert Feinstein, an attorney for the committee of unsecured creditors in Freedom's bankruptcy case.

The Associated Press is among the creditors in Freedom's bankruptcy proceedings.

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This story has been corrected to show that the Press-Enterprise is located in Riverside, not Long Beach.