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Denver's JOA makes for muddy reading

The 2001 joint operating agreement between the Rocky Mountain News and the Denver Post adds an element of mystery to the probable disappearance of the Rocky early next year. It's an extraordinarily complex collection of legalese that neither MediaNews Group head and Post publisher Dean Singleton nor Rocky editor/publisher/president John Temple is willing to discuss in the present context.

And while E.W. Scripps president and CEO Rich Boehne isn't quite so shy, he says the answers to questions about how the JOA might impact a closure "aren't very clear. The partnership and the operating agreement and most other agreements related to Denver's newspapers never contemplated an economic situation like this one. Everything was put together thinking about what would happen if you would seek some sort of restructuring in an economy that's growing and both partners are making money. None of the wording in any of the documents contemplates economic times like these."

That's debatable. True, the phrase "Great Depression II" doesn't appear in the JOA — but the mere existence of the Newspaper Preservation Act of 1970, the legislation that authorized such covenants, serves as a reminder that dailies have been fading from the scene for generations. The bill was passed and signed into law by President Richard Nixon in an attempt to preserve multiple print-journalism voices in a community — a goal deemed so important that papers given approval to sign such a pact are allowed to interact in ways that would otherwise violate anti-trust regulations. In exchange, however, these partners must be vetted by the U.S. Justice Department in advance, and any attempt to break the bargain must be approved by the federal government.

Sounds onerous, but somehow, 16 of the 27 newspaper JOAs have evaporated since the NPA's enactment — and the LLC operating agreement linking the Rocky and the Post offers a variety of remedies if the parties choose divorce. Article IX of the document, which deals with the "transfer of company issues" and "additional and substitute members," includes a lengthy section about how to move forward in the event of a bankruptcy or other "involuntary transfer" involving a JOA member. And Article X, titled "Dissolution and Liquidation," makes the so-called "closing of affairs" seem relatively straightforward by contractual standards. "Upon the occurrence of a Dissolution Event, the Members will meet and use their best efforts to develop a just and equitable plan for discontinuing and dissolving the Company and distributing its assets in kind between the Members," the document reads.

Like this last passage, most of the text is generalized in tone, but there are a few exceptions — most notably, what to do about the DNA's share of the Colorado Rockies. Scripps owned $5 million in limited partnership stock at the time of the JOA that was then split evenly between the Rocky and the Post once the agreement was inked. Upon shutdown, the LLC states, "Denver Publishing shall receive the first $5,000,000 of any proceeds from the sale of any interest in the Colorado Rockies baseball team owned by the Company and the balance of the proceeds, if any, shall be distributed in proportion to the Members' Percentage Interests."

This piece of the Rockies would undoubtedly become a bargaining chip when it came to divvying up the assets of the Denver Newspaper Agency, including the new DNA building and state-of-the-art printing facilities. The various parties have a great deal of latitude when it comes to determining who gets what — including allowing Scripps to receive 50 percent of the proceeds from the agreement until its expiration 42 years from now. Something similar happened when Scripps closed the Albuquerque Tribune earlier this year, thereby bringing to an end the nation's oldest newspaper JOA; it was founded in 1933. But the differences between the Albuquerque JOA and the one in Denver are substantial. Scripps's stake is smaller (40 percent vs. 50 percent), the JOA ends sooner (2022 vs. 2050), and the surviving Albuquerque Journal's circulation isn't nearly as large as the Post's (145,000 vs. 545,000 on Sundays). Under the circumstances that exist in Denver, it's hard to imagine Singleton promising to hand over 50 percent of his revenues for the next four decades-plus in exchange for Scripps's desertion of the market unless he believes the print-journalism industry as a whole will be little more than a memory a lot sooner than mid-century.

Which might very well be the case. But until that day comes, former Rocky and Post business editor Don Knox thinks the Rocky still has some value, especially if it can be picked up at a fire-sale price. "If you were able to get the equivalent of $175 million in revenue for $10 million, that's a great deal," he argues. "But it definitely means that if you were going to operate it, some hard and gutsy decisions would have to be made. For one thing, you couldn't keep nearly as large a staff on."

It's a measure of how bad the situation is that even the rosiest imaginable scenario presumes that a whole lot of talented journalists will lose their jobs. And there's nothing the Newspaper Preservation Act can do to stop it.

 
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