Knoxville Businessman Looks to Buy Paper Empire

Former Metro Pulse owner Brian Conley puts down an offer on a risky Creative Loafing alt-weekly chain

For sale? Knoxville's Brian Conley has offered to purchase Creative Loafing, Inc., for $13.3 million.

For sale? Knoxville's Brian Conley has offered to purchase Creative Loafing, Inc., for $13.3 million.

For sale? Knoxville's Brian Conley has offered to purchase Creative Loafing, Inc., for $13.3 million.

For sale? Knoxville's Brian Conley has offered to purchase Creative Loafing, Inc., for $13.3 million.

Earlier this month, Atlanta Magazine blog writer Steve Fennessy broke the news that there was an offer to purchase Creative Loafing, Inc., which owns six of the country’s largest alt-newsweeklies. The proposed buyer? Knoxville real estate mogul Brian Conley, also former publisher of the Metro Pulse from 2003-2007 before selling it to E.W. Scripps.

Conley, who’s already a majority shareholder in Atlanta’s other, more tabloidy weekly the Sunday Paper, has put in a $13.3 million offer to purchase bankrupt Creative Loafing, Inc. The company owns the four CL alt-weeklies in Tampa, Fla., Sarasota, Fla., Atlanta, and Charlotte, N.C., as well as the venerable Chicago Reader and Washington City Paper—making it, with a circulation of 425,000, a readership of more than 3 million, and a staff of 275, the second-largest alt-weekly chain in the country behind Village Voice Media.

The issue for CL right now — whether or not Conley will be able to purchase the chain at all — is up in the air. Indeed, even whether Conley would be purchasing it from CL CEO Ben Eason or from one of its debt-holders isn’t known for sure right now. Since the company is bankrupt, a lot of these decisions will be made in the U.S. Bankruptcy Court in Tampa. As reported by Wayne Garcia in Tampa CL’s blog “The Political Whore,” Eason has twice — in December and January — had to go to court to stop the company from being handed over to its largest debt-holder, Atalaya Funding, which financed the 2007 sale of the Reader and the City Paper. The next court date is March 11.

The $13.3 million offer is based on $4.4 million in projected Yearly Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA — basically, cash flow) that Conley says CL put into its initial October court filing. But, Conley says, that offer could go down. The latest numbers project 2009 cash flow at $1.7 million, with $25 million in revenue for the year. “I have inquired as to why there is a discrepancy between the October numbers and the latest numbers,” Conley says. “I have not been able to ascertain an answer regarding that.”

Eason says it’s because there was no $4.4 million projection.

“That offer was apparently based on an EBITDA that was supposedly filed in our October statement,” says Eason. “But frankly, none of us has any idea what he’s referring to.”

The company’s October statement does, in fact, contain information as to its total fiscal year 2008 revenues, as well as the first quarter of fiscal year 2009, but no mention of cash flow.

Another point of contention between Eason and Conley is regarding criticism Conley indirectly leveled against Eason in the Atlanta Magazine story.

The article cites a prior interview with Eason in which he is quoted as saying that 10 percent of company revenues go to its editorial department.

“That’s out of line with industry standards,” Conley is quoted as saying, adding that he would put 15 percent of revenues into editorial.

Eason has been criticized for firing Atlanta Creative Loafing editor Ken Edelstein in November, reportedly as a result of a difference of opinion regarding proposed editorial cuts. But in the 2009 projections, filed in court in December, Creative Loafing lists the chain’s editorial budget at $4.4 million, just over 15 percent of its projected total revenues of $29 million.

“It sounds like he does not have a good enough handle of our plan to be making some of the comments he’s been making,” says Eason, who has not spoken with Conley personally.

To the rest of the country — especially in the cities served by CL — this became a new-economy-meets-new-media story. In this economic climate, why would anyone want to buy the second biggest chain of old-fangled alternative newsweeklies in the country, one that went Chapter 11 last fall, crushed by a $40 million debt it can’t pay off?

To many in Knoxville, though, it was a Brian Conley story. During his four-and-a-half years as owner and publisher of Metro Pulse, Conley may have put the paper in the black for its first time ever. [“I took a paper that was losing $300,000 a year and by the end it was making $300,000 a year,” he says.] But he also earned a reputation among many longtime readers as a publisher who didn’t show much concern about editorial quality and whose actions sometimes damaged the newspaper’s integrity.

For his part, Conley says that if the CL purchase goes through, he will be a relatively hands-off publisher as far as editorial content is concerned. He says he would evaluate and perhaps replace some of the high-level editorial staff, but he would leave them to their own devices. He cites his involvement in the Sunday Paper as proof.

“I’ve been very proud of our editorial content so far. We are very politically involved at the local level,” he says, pointing to a recent article in the paper called “City Hall, Are You Listening?” which is critical of the Atlanta Police’s lax response to high crime rates in certain neighborhoods. “That was not something I suggested or had anything to do with from the editorial end.”

He says that his reason for buying the papers has largely to do with enhancing their editorial quality, saying “that is your product. That is why people are reading and advertising.

“Whether you’re talking about corporate ownership — like Scripps buying Metro Pulse — or whether you’re talking about Mr. Eason — who has taken on a $40 million debt without being able to service it — I think our goal as publishers here is to enhance editorial content,” he says, adding that he is “very proud of what we accomplished editorially.”

Not everyone thinks he should be, though. Among some circles in town, Conley is infamous for his antics at Metro Pulse.

The most widely reported incident occurred when KnoxViews’ Randy Neal, then writing anonymously as “South Knox Bubba,” criticized a June 2005 Metro Pulse Gamut feature, “Two Knoxville Party Girls Peer into Nashville’s Night Life,” saying it glorified drunk driving. Conley sent Neal an e-mail threatening to expose his identity as well as any dirt he could find about him by publishing it in the paper. Neal preempted him, exposing his own identity and then taking down his blog. Conley now says he was “defending two writers from personal attack.”

“He might have had too thin a skin toward the beginning there,” says then-editor Barry Henderson.

Conley also disputes claims that he micromanaged the editorial staff.

“I attended a few editorial meetings just to pitch ideas,” Conley says. “I wrote maybe about one in 10 of those unsigned editorials.”

It’s those unsigned editorials that occasionally caused accusations of conflict of interest.

In July 2005, for example, Metro Pulse published an editorial called “Eminent Domain Isn’t All Pernicious,” in response to a letter to the editor that criticized the paper for its support of the city’s proposed South Waterfront project. The editorial was unsigned and many thought Conley — a real estate developer — was behind it.

“Or then again, maybe the article was ordered, written, or influenced by Metro Pulse publisher and real estate developer Brian Conley,” wrote conservative blogger Terry Frank. “Does Conley have an interest in any possible eminent domain seizures? I’m looking. Any way you slice it, the Metro Pulse is not an independent voice.”

Conley, Henderson, and current associate editor Jack Neely have no memory of who wrote it, but Conley defends himself.

“I have never benefitted from eminent domain,” he says.

Eason says he has “no clue” about Conley’s reputation, but that “coziness, even the appearance of coziness, between real estate and development interests and editorial content can cause major, major problems.”

Neely says that the criticism that Conley’s interests as a businessman was at odds with the paper’s editorial independence came up a lot back when Conley was publisher, even though, he says, it usually wasn’t true. “He’s a businessman. He never made any promises about avoiding conflicts of interest," Neely says. "He was rarely present in the office, usually wasn't involved in editorial decisions, and only rarely tried to push reporters in a certain direction. I remember only once that he pushed a story that might be seen to serve his business interests, and in that case the editors didn't agree to do the story, because of the appearance of conflict of interest.”

Many of CL’s employees are just eager to see the bankruptcy situation resolved. Washington City Paper editor Erik Wemple says he, like Eason, doesn’t know much about Conley, but he’s trying to concentrate on his own product for now.

“We’ve been in this bankruptcy situation for several months now, and I think we’ve learned to be concerned only about the things that we can control,” writes Wemple in an e-mail. “For me and my colleagues in the editorial department at Washington City Paper, that means just doing our journalism.”

© 2009 MetroPulse. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Comments » 6

brianconley writes:

Dear Editor,

I want to thank Metro Pulse for publishing the Dickens-esque saga Businessman Looks to Buy Newspaper Empire by Charles Maldonado in its February 19th issue. In particular, I want to commend the author for exposing the nefarious ruse behind Brian Conley’s stated intention to not unduly influence the daily operations of the editorial departments in question.

Citing such empirical sources as “To many in Knoxville,” “Among many longtime readers,” and “Among some circles in town”, Mr. Maldonado slyly, and courageously, contrasts the recently liberated editorial regime with Conley’s despotic insistence that writers properly source their material, not libel anyone, and especially (capitalist pig that he is), not the paper’s largest advertiser.

From start to finish, Mr. Maldonado sheds light on Conley’s evil plan to purchase newspapers (gasp!), revealing that the one he currently holds a major interest in is a vulgar tabloid compared to the wholesome, life affirming alt-weeklies he so greedily covets.

And thank you, Mr. Maldonado, for not allowing Conley’s legendary “antics” as publisher - that so diminished the reputation of Metro Pulse – to go unpunished.

Sure, Conley, no doubt with the help of various lackeys, toadies and henchmen, may have made the paper profitable, securing its viability as an on-going concern and raising everyone’s salaries in the process. He may have nearly doubled its circulation and readership. And he may have even substantially increased the editorial budget, introducing articles and columns from such talented journalists and writers as Frank Cagle, Leslie Wylie, Chloe White, Molly Kincaid, Gay Lyons, Rikki Hall, and Steve Dupree along the way. But that’s just spin. The real story is the time he sent a mean e-mail to an anonymous blogger. And, of course, how lame Metro Pulse was before Charles Maldonado graced its door.

Ba-Humbug!

Brian Conley

brianconley writes:

Regarding Mr. Eason's assertion that neither he nor anyone he works with
knows where I came up with the $4.4 million projected annual EBITDA, I was
very clear in my initial letter of interest to him that I had derived that number
from the document entitled Creative Loafing, Inc. and Affiliated Entities
October Weekly Cash Flow report filed October 15, 2008 with the United
States Bankruptcy Court in Tampa, Florida. That report placed weekly EBITDA
for the Creative Loafing chain at $85,256. Multiplying that by 52 weeks
equates to just north of $4.4 million. Again, all of that was stated plainly in
my initial letter of interest to Mr. Eason.

As a prospective purchaser, I have, for several weeks, attempted to reconcile
that weekly cash flow report with Creative Loafing's 2009 projected EBITDA of
only $1.7 million (roughly $32,000 per week, 38% of the October weekly
EBITDA ) filed with the court in January. But the only response I seem to get
from Mr. Eason's team is that I have offered far too much money for the
papers.

I find that odd.

I also find it odd that Mr. Maldonado reported unequivocally that no cash flow
report was filed with the court in October, when he readily admitted to me in
our interview that he did not have access to all the court documents. I would
have been more than happy to have supplied it to him, but he didn't seem to
be too interested in the facts or objective reporting, choosing instead to
focus on unsubstantiated rumor and anonymous innuendo.

Maldonado writes:

I have a copy of the document filed in October. I couldn't find the numbers Mr. Conley is talking about and, apparently, neither could Mr. Eason. If Mr. Conley would like to share his copy of the document in question, I would be more than happy to run a correction.

--Charles Maldonado

Maldonado writes:

Mr. Conley has just sent me the aforementioned document, and, indeed, the $85,000 EBITDA is listed in there. Metro Pulse will run a correction.
--Charles Maldonado

brianconley writes:

Yet another inaccuracy in the story is the portrait drawn of the now infamous
feud I had with South Knox Bubba.

For the record, I don't recall Mr. Neal ever saying anything about the story in
question personally - and certainly not that it glorified drunk driving.

The issue I had was with anonymous posters on his blog making what I
thought were pretty crude personal attacks on these two writers.
My point then was that no one had the right to hide behind anonymity while
lobbing personal insults and accusations at real people. Mr. Neal and I had a
disagreement about that and, while I agree with Barry that I was too thin
skinned at times, I still feel the same way. Irrespective, Mr. Neal and his blog
seem to be doing better than ever these days and I think its due, in no small
part, to the fact that he's worked hard to make it a place where people can
have civil discourse.

johnsugg writes:

Maldonado wrote:

But in the 2009 projections, filed in court in December, Creative Loafing lists the chain’s editorial budget at $4.4 million, just over 15 percent of its projected total revenues of $29 million.

“It sounds like he does not have a good enough handle of our plan to be making some of the comments he’s been making,” says Eason, who has not spoken with Conley personally.

--------

This implies that Eason is responding to the issue of whether he has mandated 10 percent editorial budgets, and Maldonado is slyly trying to gig Conley for not knowing Eason's business by asserting that Eason's papers spend 15 percent on editorial.

Maldonado is wrong. A little thought would have produced the answer. Eason's revenues are declining so fast, he can't slash employees with sufficient speed to maintain the percentages. He most definitely has tried to lock his newspapers into 10 percent editorial budgets, and he has done that without regard to what it did to content and, ultimately, readership. He also flatly refused to recognize very clear financial evidence from a 2001 survey by the Association of Alternative Newspapers that papers that spent in the 13-14 percent range on editorial had higher profit margins than those that spent in the 10 percent range.

The result is clear. The content at Eason's papers is a shadow of what it was a few years ago. Media Audits, which surveys readership, reported recently that for the first time Sunday Paper in Atlanta has surpassed Creative Loafing in people who have "read last issue." (Eason's managers dispute that finding.) And, currently on the stands this week, Sunday Paper is 80 pages and profitable, while Creative Loafing is 56 pages and losing money.

(For the record, I am the former senior editor of the Creative Loafing group, and a shareholder. I do not support Eason's bankruptcy strategy.)

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