A newspaper deal threatens Utah’s main non-Mormon-owned daily, critics say

And the Justice Department is looking into it

A deal reached last fall between Salt Lake City’s two main newspapers is unraveling into an angry controversy as the Justice Department looks into allegations that the Salt Lake Tribune, in return for a lump-sum cash payment, is quietly ceding the market to the Mormon Church-owned Deseret News.

The deal, an amendment struck last fall to a longstanding Joint Operating Agreement, would give the News 70 percent of the print revenues generated by the two papers, in return for the payment, the amount of which is undisclosed. The onetime payment, critics claim, would benefit the New York parent, Digital First Media, owned by the hedge fund Alden Global Capital, while choking off revenue needed to sustain the Tribune’s newsroom.

“The hedge fund guys get what they want, which is a big pile of cash,” says Jim Dabakis, a Utah state senator who this week started an online petition asking the Justice Department to reverse the deal. “And the Deseret News gets what it wants, its generations-long dream [fulfilled] to extinguish the other voice in the community. And they get a monopoly from now on.”

Joan O’Brien, an ex-Tribune reporter who now teaches has taught media law and runs a local group opposed to the amended JOA, wrote a detailed letter to the Justice Department saying the pact will cripple the Tribune, “drastically intensifying the media monopoly power of The Church of Jesus Christ of Latter-day Saints in Northern Utah.”

Earlier this month, the Tribune reported that the Justice Department has begun reviewing the deal. Dabakis and O’Brien both say they’ve been contacted about the deal by DOJ lawyers. A department spokesman declined to comment.

The chiefs of both Digital First and the Deseret News reject the idea that the JOA will undermine the Tribune and said the opposite was the case.

In an email, Digital First’s chief executive, John Paton, declined to comment, but referred to recent remarks he made to the Tribune:

We continue to believe the recent revisions to the joint-operating agreement are important to The Salt Lake Tribune’s continued success and are consistent with our strategy of controlling our digital future while limiting our exposure to legacy costs and practices. We are also confident that under the restructured JOA, The Tribune will continue to be a strong independent voice, which has been and remains the goal of both parties to the JOA.

Clark Gilbert, chief executive of the Deseret News’ parent, sent a statement saying that the deal was reviewed by the Justice Department last fall and includes substantial benefits for the Tribune, including the fact that the paper pays no rent for the use of the plant and presses bought by the Deseret News as part of the deal.

“The Deseret News is committed to the market’s demand for multiple editorial voices and the amended JOA upholds that commitment,” the statement said.

The fierce struggle over the deal has deep roots in the history of the two newspapers, a rivalry that dates to 1873 when three Kansans bought the Tribune and promptly launched a campaign of anti-Mormon vitriol. While the language has tempered over the years, the Tribune has remained a formidable rival to the Deseret News and an important independent check on its owner, the powerful Mormon Church. In the 1950s, the papers, which had been fierce commercial as well as journalistic competitors, struck a deal under which they would share distribution and other business costs, an agreement later made into a formal Joint Operating Agreement and sanctioned under the Newspaper Preservation Act of 1970. Traditionally, the Tribune has been the larger paper (and remains so today with 2012 circulation of about 107,000 to 76,000 for the Deseret News). As a result, the Tribune received the larger share of revenues, 58 percent, under the original JOA.

Despite the JOA, the editorial rivalry remained fierce. And for non-Mormons, the Tribune is a potent symbol of independence in a state where the media is dominated by church-owned outlets. A Church spokeswoman declined to comment on the dispute.

The larger backdrop behind the JOA amendment is the shifting landscape of the newspaper industry, which, after its dramatic plunge in the last decade, is gearing up for what insiders predict will be a year of consolidation as financial players who entered the business during the crash now seek to exit. Earlier this month, for instance, media analyst Ken Doctor reported that Digital First Media’s parent, Alden Global, was planning to put its newspaper holdings on the auction block. Representatives of Alden Global didn’t return a phone call seeking comment.

The amendment to the longstanding JOA was quietly reached last October when, according to the Deseret News’ statement, Digital First approached the paper to renegotiate the deal. The new agreement was sent, as is required under the Newspaper Preservation Ac, to the Justice Department for review.

Terry Orme, a longtime Tribune reporter and editor who was named editor and publisher around the time the deal was struck, says Paton, Digital First’s CEO, told him about the deal in general terms but wouldn’t discuss details of the new arrangement. “John Paton was pretty clear he wasn’t going to get into specifics,” Orme said in a telephone interview.

After receiving a tip about the deal, Tribune reporters asked the Justice Department for the JOA, a public record, and reported the details shortly afterwards.

Orme says he expressed his concerns to Paton at the time. “When you get your revenue cut in half, that’s concerning,” he says. “How can you not be concerned about that?” The new deal gives the Tribune the operation’s digital revenues, but that’s a much smaller number. Orme also says the lump sum, which he didn’t disclose, was used to pay down Digital First debt, but “to my knowledge, none of that debt was our debt. That grates as well.”

Orme says, though, that Paton has been very explicit about his strategy of moving away from print and toward digital revenue, and that the strategy should be given a try. He added that, “we’re going to know soon, no later than June, what the impact is going to be.”

In an email, Paton declined to comment on Orme’s remarks.

Opposition has built steadily lately. O’Brien, who is married to Tribune reporter Tom Harvey and is the daughter of the late Jerry O’Brien, a longtime publisher of the paper until his death in 1994, formed a group calling itself the Utah Newspaper Project, now numbering about 50 and including several ex-Tribune staffers. In February, O’Brien wrote a 14-page letter of complaint to the antitrust division’s litigation chief, alleging that the deal violates both antitrust law and the Newspaper Preservation Act and “threaten(s) an indispensable journalistic voice.” The new 70-30 split represents a dramatic reversal of the previous arrangement that, the opposition group says, “denies the Tribune revenues sufficient to finance its essential editorial and newsgathering functions.” The group says the new JOA amounts to an “acquisition scheme” by which the Deseret News can achieve what the group says is a longstanding goal: the elimination of the Tribune.

The controversy gained steam this week when a local radio station, KUER, broadcast a discussion of the deal that included Orme. In a segment quoted in a Tribune story on the discussion, Orme publicly expressed misgivings about the deal and said the smaller cut from print operations had made the paper’s financial future less certain:

“It doesn’t make it any better, let’s put it that way,” Orme said. Print revenues continue to be “the biggest single source of income.”

“We’ve been relying on this stream of income for 60 years and to all of a sudden change it isn’t a small thing; it’s a big thing,” Orme said. “You better know where you’re going and you better have a high level of confidence in where you’re going before you do that.”

O’Brien says she pleased the Justice Department has begun what appears to be an extensive review. “I am a reluctant activist,” she says. “But few people in Mormon-dominated Utah are in a position to challenge this publicly. I sort of have to.”

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.