Las Vegas Sun versus Las Vegas Review-Journal: Two scorpions battle in a sinking bottle

Readers of the Las Vegas Review-Journal opened their paper a week ago on August 30 to see this prominent headline in the lead upper-right corner of the front page: “Why we want to stop printing the Sun.”

The daily RJ is owned by casino tycoon and conservative Republican mega-donor Sheldon Adelson. The Las Vegas Sun, distributed as a skinny one-section ad-free insert in the RJ, has been owned since its founding in 1950 by the more liberal Greenspun family. Its founding patriarch, Hank Greenspun, had been a publicist for a mob-run casino as well as a convicted gunrunner (later pardoned by President John F. Kennedy). Since 1989 the papers have been in a joint operation agreement, sanctioned by a federal law that allows immunity from antitrust laws so long as one paper was in danger of failing (here, the Sun) and editorial operations remain independent. The Las Vegas JOA is scheduled to run until 2040.

The editorial–that’s what it was labeled–asserted that what was called the Sun‘s failure to produce a “high-quality metropolitan print newspaper” breached the JOA agreement, entitling the RJ to end the agreement. “The Sun would be free to have someone else print, sell and distribute their newspaper, if they wish,” the editorial asserted. That’s a facetious contention in my judgment since dissolution of a JOA almost always results in the demise of the weaker product, which the Sun surely is. In the past 40 years, all but five of the 30 or so JOAs around the country have collapsed, leaving a single paper in each remaining. And generally those survivors today are in worse shape than ever before.

A JOA is best understood as a stay of execution for the ailing partner. Or, using in this situation a Darwinian example, in a battle between two scorpions in a bottle, only one will survive–assuming the bottle doesn’t sink in water and also kill the victor.

The Sun is a poor product mainly because it’s not getting much money anymore out of the JOA, under a formula tied to changes in agency cash flow. But as  I will explain, previous owners of the RJ made what is proving to be a very bad deal.

While the RJ gets all the ad and circulation revenue, it also has to bear all costs of production, printing and distribution. When times were better (i.e. more classified ads before Craigs List), the RJ paid the Sun $12 million in 2005, according to court filings, but kept significantly more than that for itself. Some of that money helped the Sun win the top Pulitzer Prize in 2009, an honor the RJ has never received despite its far greater resources.

According to the JOA, since 2005, when the Sun became an insert to the RJ, the payout to the Sun varies directly with the annual percentage change in agency cash flow. With far less advertising, the payout today is maybe no more than $2 million and perhaps a lot less. But is it proper, as the RJ seems to be doing in its filing, to blame the poor for being poor?

Meanwhile, the RJ is financially distressed itself, especially since Adelson paid $140 million–a whopping four times or so the then-going rate–for the paper in 2015 (and inheriting this cash-flow-sharing formula). From my reading of the JOA, which was helpfully attached to the RJ court filing, interest on any borrowed money isn’t part of the profit formula, so the RJ can’t stick the Sun with part of that cost, or payment of principal. Adelson is a major billionaire (Forbes pegs his net worth at $35.1 billion), and it’s possible he bought the paper partly as an insurance policy to prevent unflattering local coverage. But in my long experience writing for Forbes, billionaires don’t like to lose money on any venture.

As a journalist who has followed media issues for decades before becoming New To Las Vegas and occasionally has written about these kerfluffels, I tell you this: When a news organization suddenly writes out of nowhere about itself, the more prominent the play, the greater the chance important stuff contrary to its interest is being left out. I am reminded of Dashiell Hammett’s memorable line in his famous detective novel, The Maltese Falcon: “The gaudier the patter, the cheaper the crook.”

Moreover, by calling it an editorial, the carefully worded (and undoubtedly lawyered) front-page missive didn’t have to go through a journalistic fact-checking, relevance or include-all-the-facts review. Had this been done, readers might have learned the following:

–Contrary to the editorial assertion, the filing was not a “lawsuit we are seeking to file” but simply a proposed counterclaim to a long-running lawsuit between the two papers brought mainly over–what else?–money.

–Despite what the editorial implied, that lawsuit originally was brought not by the Review-Journal but by the Sun, which claimed it has been rooked for years by the RJ over the distribution of cash flow. (A Review-Journal news story three days later about the filing finally made the point that the lawsuit was started by the Sun, not the other way around.)

–The RJ is desperately trying to stop the Sun from getting the records of J. Ford Huffman, a newspaper consultant who worked on the redesign of the RJ (and, to some degree, the Sun) in 2016 and perhaps wrote down stuff highly averse to the RJ interest. The RJ is claiming Huffman helped aid the litigation against the Sun and so all his records should be shielded by attorney-client or work-product privilege. This week, District Judge Timothy C. Williams ordered that all of Huffman’s records be produced for his secret review.

–Much of the material cited in the RJ editorial is irrelevant to the core of issue of whether the RJ is playing fair with the money. The RJ claims it is being damaged by a lackluster Sun project. That it is largely lackluster is clearly true (the website lists only five news reporters). But the RJ has the huge institutional credibility problem of being owed by Adelson, the richest man in Las Vegas and a major Republican supporter in a state that is seriously trending Democratic. His paper publishes generally hard-Republican-right editorial and op-ed pages where, as it turns out, political endorsements have acted as the kiss of death for most candidates (including Donald Trump in 2016, who lost Nevada). Judge Williams is on the case because the RJ exercised its legal right to bounce the previous judge who had ruled against Adelson in a casino case and, as Adelson was secretly buying the paper, assigned reporters to shadow the judge. The RJ’s beefed-up team of investigative reporters sometimes target business rivals of Adelson.

–The editorial mentioned the joint operating agreement but didn’t mention that the main purpose of the federal law legalizing them, the Newspaper Preservation Act of 1970, was to preserve, as the law’s preamble says, newspapers “editorially and reportorially independent” of one another. In this context, “editorially” meant the editorial page. In my view, the stinging anti-Trump editorial cartoons by Mike Smith in the Sun, quite at variance to the rightest cartoons of Michael Ramierez in the RJ, are by themselves justification to continue the JOA.

For its part the Sun in its own editorial three days later got in some licks, under the headline, “The Sun refuses to kneel before Sheldon Adelson–and you should too.” While couching the RJ counterclaim lawsuit as a grab for power, the paper claimed that the RJ had just lost an arbitration decision to the Sun and paid over some money. Details in the editorial were scant. But I imagine this was a follow-up to a 2016 Nevada Supreme Court ruling holding that a private arbitrator, and not a judge, should decide the issue of whether the RJ could include its own editorial costs before determining the cash flow to be given the Sun. The Sun, which didn’t want arbitration, lost the court case but appears to have won the arbitration matter. (As you might imagine, the RJ made no mention of this in its editorial or news story.)

The Sun editorial also cited unspecified “catastrophic” circulation losses on Adelson’s watch. I suspect there could be something to this.

There was a time when the RJ, like all newspapers, touted its circulation. In 2007 the audited circulation was 172,366, possibly a Sunday-only number. In 2015 the claimed daily circulation of print and digital (although I don’t think there were all that many digital-only subscriptions) was 232,372. This was just before the Adelson team took over. Then things really started heading south.

In July 2017, my old Philadelphia Bulletin colleague Rem Rieder wrote a profile of the RJ for State magazine under the headline “Inside Sheldon Adelson’s journalistic gamble.” The circulation figures Rieder was given were 80,000 daily and 120,000 on Sunday. In an geographic area with a dramatically growing population, that by itself was a dramatically shrinking decline–about 50% in two years if you believe the earlier numbers.

And the decline doesn’t seem to have stopped.

Federal law requires publications with second-class mailing privileges to publish a statement prescribed by the U.S. Postal Service once a year prior to October 1 with its average paid circulation for the past year, and also the latest single issue. Under oath.

The RJ (and by implication the Sun) last did this nearly a year ago on September 23, 2018. The RJ buried the notice as a classified ad, running it in the middle of page G-11 in the Sunday paper next to an ad for a general ledger accounting clerk.

This may be why: The stated 12-month paid circulation average for daily and Sunday was only 77,826. The paid circulation for the latest single issue–a Sunday–was down to 82,627 (31% below Rieder’s figures of barely a year earlier). The number of claimed electronic-only subscriptions–a line on the Postal Service form–was zero. All told, a fraction of that claimed circulation in 2015.

The next published Postal Service statement is due by the end of this month. Watch out for those scorpion tails.

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