Meet the new boss
Eason family loses ownership of Creative Loafing to its largest creditor
On Aug. 27, the staff of Creative Loafing Atlanta was delivered what could be described as refreshing news from a trio of strangers: After nearly a year of staff cuts, job insecurity and legal wrangling, the paper’s parent company Creative Loafing Inc. had successfully emerged from bankruptcy.??Standing before staff packed into CL’s conference room were the new board members and advisers who’d been handpicked to lead the six-newspaper chain by its incoming owners, New York-based hedge fund Atalaya Capital Management.??“I want your ideas,” said Jim O’Shea, a newspaper veteran who was let go from the Los Angeles Times after refusing to cut his editorial staff. “I want to hear from you. And I’ll do everything in my power to make sure we’re sitting here two, five, 10 years from now with more resources, more people, better salaries and more of a future.”
??Seated underneath framed covers from CL’s 37-year history, the staff applauded the sentiments. After the meeting, one staffer likened the mood in the room to the elation with which liberals greeted the inauguration of President Barack Obama after eight years of George W. Bush. ?? Richard Gilbert, the former president of the Des Moines Register, will be the company’s interim CEO, while O’Shea will advise on editorial strategy. Also on the board is Michele Laven, a Los Angeles-based Clear Channel executive and former chief operating officer of New Times (the alt-weekly chain that later merged with Village Voice Media), and Michael Bogdan, partner and managing director of Atalaya. Elaine Clishman, a former Village Voice and New York Post sales director with 30 years experience, has been retained by Atalaya from the nonprofit American Press Institute and will assist sales and marketing with revenue-generation ideas — some of which, she said, are untested.??Two days earlier, a Tampa bankruptcy judge wrested control of the company from Ben Eason, ending his family’s stake in the six-newspaper chain that started as a pamphlet printed in a Morningside basement in 1972 — only to grow into the country’s second-largest alt-weekly group.
??Since 2000, Eason shepherded the company through a series of management decisions that his critics, including former staffers, have publicly complained about: a revolving door of publishers (seven in eight years), a series of high-priced consultants who constantly shifted editorial focus, and a push to transform the company into a daily Web news operation with limited resources. ??But Eason stresses that it was debt and the hardships facing all of print media — not any mismanagement — that did him in. He stands by his management style and business decisions, including his acquisition of two pricey papers. ??In September 2007, just before the economy began nosediving, Eason borrowed $30 million from Atalaya to purchase the Chicago Reader and Washington City Paper. Creative Loafing’s board resigned in protest of the deal.
??What the board viewed as an act of overleveraging, Eason saw as an opportunity: Pick up two of the country’s best alt-weeklies, lure national advertisers, and roll out a Web-first business and editorial model. But Eason couldn’t keep up with debt payments and began ordering companywide cost cuts, which included the loss of well-known journalists. In Atlanta, the editorial staff has dwindled from 21 positions to 13 in 18 months. Freelance budgets were cut. Space for editorial content shrank. ??In September 2008, Creative Loafing Inc. filed for Chapter 11 bankruptcy protection in Tampa, where CL Inc. is headquartered.??Eason says he believed he had a 50-50 chance of keeping the company he’d purchased from his mother, Deborah, nearly eight years earlier. But on Aug. 25, when a crowd gathered in a Tampa courtroom for the last chapter of CL’s bankruptcy, Eason’s odds quickly plummeted. Judge Caryl Delano called for opening bids in an “equity auction” to determine who’d walk away with the organization, Eason or his largest creditor. And it quickly became clear that Eason didn’t have enough cash to play ball with the hedge fund.
?? After Eason submitted an opening bid of $2.3 million — roughly a third of which was cash — Atalaya’s lawyers doubled down with a $5 million cash bid that sucked the air out of the courtroom packed with reporters, CL managers, and Eason family members.
??Eason had planned to argue that even though he had less cash than Atalaya, he would be better equipped to operate the papers because he cared and knew more about the company than a hedge fund interested only in the bottom line. The judge, however, wouldn’t allow the argument. She granted control of the organization to the hedge fund. ??With Atalaya at its helm, the alt-weekly chain no longer carries the burden of a $30 million loan — or even the reduced $12 million debt that Eason would have still owed Atalaya, had he won. Of course, the papers must remain profitable for Atalaya to see a return on its hefty investment.
??On Aug. 27, interim CEO Gilbert told the staff how the company will be run under Atalaya. He said the chain would not be broken up and sold off. Atalaya, he said, has promised to judiciously invest in CL by hiring more staffers and writers, implementing new business strategies, and beefing up the papers so that they will become more valuable in the future. Each paper will continue to focus on local issues, reported and written by local staff. It was time to rebuild, he said.
??The renewed emphasis on original editorial content, or at least what’s been proposed, reflects a shift in values. In the months leading up to the Aug. 25 hearing, Eason had championed an editorial model based on the Huffington Post, a news site composed predominantly of aggregated content compiled by a skeleton staff. O’Shea told the staff that the company needed to return to the “fundamental bedrock of this company and our industry” — journalism that resonates with and adds value to communities.
??“I would not be standing here if this company was going to be dismantling things,” O’Shea said to the staff last week. “The only way out of the mess journalism is in is to grow out of it — and invest in it. What are the stories you’ve wanted to do, but haven’t had the resources?” The very fact that he sits on the new board, O’Shea said, was “symbolic” of the improvements that Atalaya intends to deliver.??“No one’s gonna promise you a rose garden now that there’s been an ownership change,” interim CEO Gilbert said. “But we will do everything we can so you won’t get another crown of thorns.”
??Atalaya doesn’t intend to stay in the newspaper business. Their ownership is the result of an investment deal gone wrong. They intend to rebuild the company and, years down the line, sell it. ??Atalaya’s Bogdan acknowledges as much. He stresses, however, that Atalaya is prepared for the “long haul” and wants to see the organization flourish.
??The advisory board members claim CL has a rare opportunity — a committed owner with staying power who’s willing to invest in journalism and experiment at a time when newspapers are shedding staff just to keep the doors open. The business model has changed, they argue, but that doesn’t mean journalism can’t survive.
??“I’d be very disappointed if there wasn’t a healthy dose of skepticism,” Gilbert told the staff. “None of us can predict the future of this industry. But the opportunity we have at this special place and at this special time is enormous. The dailies are on their back. The industry is on its back. Everyone’s running around, including us, wondering what we can do about the changes. But we’re going to figure that out together.”