The mogul empire

Earlier this month, the news sites DNAinfo and Gothamist were abruptly closed by their owner, the billionaire Joe Ricketts, after their staff voted to join the Writers Guild of America East. Ricketts, who founded Ameritrade and controls the Chicago Cubs, took down the home pages of both publications—including, temporarily, their archives, which made it hard for their suddenly jobless reporters to even access their own clips—and replaced them with a letter stating that the sites hadn’t been successful enough “to support the tremendous effort and expense needed to produce the type of journalism on which the company was founded.” Back in September, however, Ricketts wrote a blog post, “Why I’m Against Unions At Businesses I Create,” that cast his decision in a somewhat different light:

In my opinion, the essential esprit de corps that every successful company needs can’t exist when employees and ownership see themselves as being on opposite ends of a seesaw.  Everyone at a company—owners and employees alike—need to be sitting on the same end of the seesaw because the world is sitting on the other end. I believe unions promote a corrosive us-against-them dynamic that destroys the esprit de corps businesses need to succeed.  And that corrosive dynamic makes no sense in my mind where an entrepreneur is staking his capital on a business that is providing jobs and promoting innovation.

Of course, his response to his newly unionized employees, who hadn’t even made any demands yet, wasn’t exactly conducive to esprit de corps, either. As a headline in the opinion section of the New York Times put it, Ricketts, who supported Donald Trump after spending millions of dollars in an unsuccessful bid to derail his candidacy, seems to have closed his own businesses entirely out of spite.

And this isn’t just a story about unionization, but the unpleasant flip side of a daydream to which many of us secretly cling about journalism—the notion that in the face of falling circulation and a shaky business model, its salvation lies with philanthropic or ambitious billionaires. We’ve seen this work fairly well with Jeff Bezos and the Washington Post, but other recent examples don’t exactly inspire confidence. In 2012, The New Republic was acquired by Chris Hughes of Facebook, who cut its annual number of print issues in half and revamped it as a “vertically integrated digital-media company,” leading to the resignations of editors Franklin Foer and Leon Wieseltier. (Foer rebounded with a book pointedly titled World Without Mind: The Existential Threat of Big Tech, while Wieseltier has suffered from unrelated troubles of his own.) Go a little further back, and you have the acquisition of the New York Observer by none other than Jared Kushner, which went about as well as you would expect. As Rich Cohen writes in Vanity Fair:

The Observer was a hybrid—tabloid heart, broadsheet brain. A funny man in a serious mood, a serious man with a sense of humor…Kushner either did not get this or did not care. Millennials have a thing about broadsheets. They’ve grown up reading on phones, that smooth path of entry. They can’t stand unwieldiness—following a piece from front page to jump, and all that folding, and the ink stains your fingers.

Kushner took the Observer to tabloid size, discontinued its print edition, and even fired Rex Reed, turning the paper into a ghost town. He and Hughes are at opposite ends of the political spectrum, but they both seized a vulnerable publication, tried to turn it into something that it wasn’t, and all but destroyed it. Ricketts, who shut down Gothamist a mere eight months after buying it, simply took that process to its logical conclusion. And these cases all point to the risk involved when the future of a media enterprise lies in the hands of an outside benefactor who sees no reason not to dismantle it as impulsively as he bought it in the first place.

Obviously, there are countless examples of media companies that fared poorly after an acquisition, but I’ve been thinking recently about one particular case, in which The New Republic also figures prominently. The American News Company was the distribution firm and wholesaler on which many magazines once depended to get on newsstands, and its collapse in 1957 is widely seen as an “extinction event” that caused a meltdown of the market for short science fiction. (For additional details, see this post, particularly the comments.) Here’s how Frederik Pohl describes it in The Way the Future Was:

ANC was big, mighty, and old. It had been around so long that over the years it had acquired all sorts of valuable property. Land. Buildings. Restaurants. Franchises. Items of considerable cash value, acquired when time was young and everything was cheap, and still carried on their books at the pitiful acquisition costs of 1890 or 1910. A stock operator took note of all this and observed that if you bought up all the outstanding stock in ANC (a publicly held corporation) at prevailing prices, you would have acquired an awful lot of valuable real estate at, really, only a few cents on the dollar. It was as profitable as buying dollar bills for fifty cents each…So he did. He bought a controlling interest and liquidated the company.

The truth is slightly more complicated. The American News Company had been on the decline for years, with the departure of such major clients as Time, Look, and Newsweek, and its acquirer wasn’t a “stock operator,” but Henry Garfinkle, the wealthy owner of a newsstand chain called the Union News Corporation. There were obvious possibilities for vertical integration, and for the first year or so, he seems to have made a real effort to run the combined company.

Unfortunately, in the face of falling sales for the industry as a whole, his efforts took the form of a crackdown on small niche magazines that were having trouble sustaining large audiences, in a cycle that seems awfully familiar. (As one contemporary account stated: “The American News Company found that the newsstand demand for some of the more intellectual magazines like The New Republic, Commonweal, Wisdom, and Faith was so small that it was profitless to carry them.”) His brutal tactics alienated publishers, including Dell, its largest client, which filed a lawsuit for restraint of trade. More magazines left, including The New Yorker and Vogue, which, combined with an ongoing antitrust investigation, was what finally led Garfinkle to cut his losses and liquidate. Yet there isn’t much doubt that Garfinkle’s approach played a role in driving his clients away, and he had plenty of help on that front. He had started his empire with a single newsstand that he bought in his teens with a loan from a generous patron, and when he took control of the American News Company, the transaction was masterminded by his general counsel, who had joined the firm the year before. As one author describes this attorney’s “hardball legal tactics”:

[He] later claimed to have engineered Garfinkle’s successful coup. At the publicly held company’s annual meeting in March 1955, Garfinkle headed a dissident group that eventually forced the management to resign. This bold move allowed Garfinkle to gain control of the ninety-one-year-old company, which called itself the world’s oldest magazine wholesaler. Garfinkel revamped the ailing company, renamed it Ancorp National Services, Inc., and gained a near stranglehold on the distribution of newspapers and magazines in the Northeast.

This passage appears in Thomas Maier’s biography Newhouse. The benefactor who gave Garfinkle his start was Sam Newhouse, Sr., and the general counsel who oversaw the takeover—and remained at the company throughout all that followed—was none other than Roy Cohn. I’m not saying that Cohn, on top of everything else, also killed the science fiction market. But if history has taught us one thing, it’s that publications should watch out when a buyer like this comes calling.