Riordan delays tabloid
In moves likely to increase skepticism over his plans to start a new weekly newspaper, former Los Angeles Mayor Richard Riordan has delayed the L.A. Examiner’s launch until September and has retained an investment bank to enlist additional investors in the project.
The proposed weekly’s handsome color prototype began circulating among potential advertisers and investors in late January. As recently as mid-March, people associated with the paper told interviewers that the Examiner would begin publishing June 5 as an 80-page tabloid with an initial press run of 150,000 copies, and that it would be targeted primarily at affluent Westside readers, 80% of whom would receive their copies free and 20% of whom would be paid subscribers. Several of those who worked on the prototype told The Times and others that they expected Riordan to cover the paper’s projected $5-million start-up cost out of his own pocket.
The project, announced in the aftermath of his failed bid for the Republican gubernatorial nomination, already has brought Riordan a year’s worth of additional free media attention. This week’s developments -- first reported in the L.A. Business Journal -- are bound to raise new questions about the peripatetic ex-mayor’s commitment to the project.
Riordan, who could not be reached for comment, now plans to spend only $1 million of his own on the tabloid, according to the journal. Other investors will be asked to put up somewhere between $7 million and $10 million. That, sources say, should be enough to keep the weekly going for three years, its projected break-even point.
Rather than signaling a diminution of Riordan’s interest, Tim DeRoche, the Examiner’s president, and David Voyticky, vice president of the Century City-based investment banking firm of Houlihan Lokey Howard & Zukin, said the additional time and financing are designed to give the tabloid a greater chance for success.
“In investors’ minds, it’s not a question of when you launch, but of whether you’ve made sure everything has been done to ensure a successful enterprise,” said Voyticky, who is working on a prospectus that he said will begin circulating later this month.
“From the beginning Mayor Riordan knew he was going to have to have investing partners in this,” DeRoche said. “He never had any intention of funding this himself.”
Which raises a question: Where will the Examiner’s other investors be found?
“We’re going to approach some folks who already own newspapers in California and around the country,” DeRoche said, “as well as people with an interest in the civic life of Los Angeles. We’re trying to build a local cultural institution and a business, so the majority of our investors probably will be L.A.-oriented business folks.”
In those circles, Houlihan Lokey is regarded as a somewhat unusual choice for a project like the Examiner. A diversified international investment and, increasingly, merchant banking firm, it is know primarily for middle-market financial deals, particularly corporate restructuring.
According to Voyticky, who recently joined the firm, Riordan first approached “my old boss at Goldman Sachs, and they referred it on to people they knew they could trust, since [the deal] was too small for them. Typically, this would be too small for us too, but it is very interesting. It looked like it was going to be a lot of fun and a unique opportunity for us to contribute to the city of Los Angeles.
“I’m a New Yorker, and that city is very well covered by the print media. If you start counting dailies, you have a dozen or so that cover the city.... While the Los Angeles Times is an excellent newspaper, it doesn’t really cover the city of Los Angeles in that way.”
That -- in Riordan and Voyticky’s view -- creates a business opportunity. “Typically, newspapers are a medium- to high-risk investment and are not for everybody,” the banker said. “We’ll be looking for anybody who already owns locally focused papers. There are both media funds and individual media investors who have made this their niche and have done very well.”
According to Voyticky, such investors may be inclined to see the Examiner as “less risky than other start-ups because there already is a proven demand for a second weekly here. New Times Los Angeles paved the way here, and part of the business plan is to capitalize on their experience, but to bring forward a more mature paper.”
After five years of losing money, the New Times chain closed its Los Angeles paper last year in return for a payment from Village Voice Media, which owns the LA Weekly.
“Our ideal investor is a wealthy individual, who lives in Los Angeles and takes a serious interest in its welfare,” Voyticky said.
However, one politically well-connected local investment banker and investor, who asked not to be identified, said some potential investors may be wary of Riordan’s habitual criticisms of what he deems The Times’ deficiencies. “I think Dick may find it hard to find too many people with that kind of money who see any benefit in being identified with his unrelenting antagonism toward The Times,” the banker said.
One of the Examiner’s potential competitors, Beth Sestanovich, publisher of Voice Media’s LA Weekly, also was skeptical. “It’s a really tough economy in which to start any newspaper -- period,” she said. Although she agreed that the Westside readership is an attractive one, Sestanovich argued that advertisers of interest to consumers there already have an array of choices. “They’re going to need national advertising dollars to maintain an 80-page weekly,” she said. “That means they’ll be competing with The Times and every glossy magazine right from day one.
“I’m not sure it’s an investment I’d put my own money into if I were asked,” she said.
John Morton, an independent newspaper analyst based in Silver Spring, Md., also was dubious about the Examiner’s prospects. “I don’t think any newspaper company would be interested in this,” he said. “Experience long ago taught them that it doesn’t make any sense to start a newspaper in a market already well served by other newspapers. They might find an individual like Conrad Black, who did put a bit of his personal -- though not his company’s -- money into the New York Sun. But I think the chances are pretty slim in this case.”
Tim Rutten can be reached at email@example.com.