City Paper Sale: The Real Story
When the sale of the Washington City Paper was announced last month, it appeared that the former owners, the folks who controlled the Chicago Reader weekly, were simply falling victim to Craigslist and the resulting decline of paid print classified advertising.
Add the flurry of new free print papers in the Washington area, and it seemed logical enough that an owner might decide to get out of the print weekly business.
But now comes word from the Chicago Reader that there was more going on with this sale than first met the eye. Reader editor Michael Miner reports that "the owners who spoke for the Reader were being sued by a founder they'd stripped of operational authority some 20 years earlier." That founder, Tom Rehwaldt, accused his former partners of scheming to sell the Reader and City Paper, as well as the company's other holdings, in an inside, sweetheart deal rather than trying to get a better return from another party. And Rehwaldt had another party in mind--New Times, the country's largest owner of alternative weeklies.
The Reader story provides a little insight into the troubled state of alternative weeklies in the age of the Internet, and specifically into the City Paper's bottom line: "the Reader's net income, 'typically approximately 30% of revenues' in the late 80s, had declined to a small operating loss in 2006, while profits of the Washington Free Weekly, Inc., which published the Washington City Paper and was controlled by the same officers and investors, dropped from about 15 percent of revenues to 6.7 percent. (Because classified revenues were never as important to City Paper as they were to the Reader, the Washington paper was less affected by the free classifieds introduced by Craigslist.)"
The other owners of the Reader vehemently disagree with their ex-partner's version of reality and say that while they were talking to various companies about selling the papers, they would never have sought a deal that would bring in a smaller return and especially not simply to spite Rehwaldt, as his lawsuit contends.
As it turns out, the papers were sold to a Tampa company called Creative Loafing, which says it will trim expenses and maintain the current editorial leadership of City Paper. Rehwaldt, meanwhile, got his cut of the sale and went away.
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