On this day in 2008, a smart, generous, but taciturn Christian man decided to make a deal with the devil. In one hand, he grasps a dusty old tome with gold-leaf lettering. The book contains his family legacy, which was built around hard work and pursuit of the truth. In the other hand, he holds a key to a safe filled with bars of gold.
The devil, looking exactly as you’d imagine devils do, stands in front of the safe with a paper shredder.
“Give me the book,” the devil demands. “Or you don’t get access to the safe.”
“What happens if I don’t access the safe?” The man asks.
“You forsake years of accumulated wealth. You throw away the fortune your great uncle and father bequeathed you. You go down in history as the man who squandered the family fortune.”
“What happens if I give you the book?” He asks.
“You stay in control of the family money. I put the tome in the paper shredder, destroying your great uncle’s visions and dreams.”
The man thinks about it. After some consideration, he hands the devil the book, and puts the key in his pocket.
You may have seen this story today in a less hyperbolic guise. Something like “NBC Buys Weather Channel,” with the following details:
NBC Universal, a division of General Electric, is buying the Weather Channel for $3.5 billion in cash. With about 37 million unique visitors a month, weather.com is one of the top 15 sites on the Web.
The Weather Channel makes $550 million in annual revenues. It appears to be an intuitive purchase for NBC, whose diversified portfolio runs the gamut from entertainment (Bravo, Oxygen) to drawn-out but necessary political coverage (MSNBC) to the Olympics, for which the media conglomerate has exclusive broadcasting rights.
Beneath the sale, however, lurks one man’s difficult decision. That man would be Frank Batten Jr., heir to the Landmark media company (which sold the Weather Channel), and the CEO who put his great uncle’s legacy into the paper shredder in order to keep Landmark private.
THE BACK STORY
Landmark is what’s described as a “venerable” family media company with newspaper, broadcast, telecommunications, and Internet marketing holdings. The company was founded around the turn of the 20th century by Samuel Stover, an entrepreneur and Virginia newspaper lover. According to the Landmark website, Stover found that “the (Virginia) Commonwealth had few newspapers of consequence and that most of these were at each other’s throats in a bumbling search for survival.”
He decided to revamp Virginia’s media to something more committed to journalistic integrity. After dogged effort, he gained controlling stakes in several Virginia newspapers as well as starting the Virginian-Pilot newspaper, a broadcast station, and a television station. His nephew, Frank Batten Sr., inherited the company after Stover’s reign ended.
According to Roanoke.com, Batten Sr. bought up dozens of small- to medium-sized newspapers during his reign at Landmark. “I don’t think you could find anybody in the industry who loved newspapers as much as Frank Batten Sr.,” says a source close to the family. Batten Sr. also founded the Weather Channel in 1982.
Then came his successor, his son. Frank Batten Jr. is known for his good leadership qualities, devotion to Christianity, and technological savvy. But he’s not like his forefathers. “Frank Batten Jr. likes newspapers, but he doesn’t have ink in his veins,” said the Roanoke Times’ source.
Batten Jr. prefers technology over news distribution. His best-known investment is in Red Hat, a Linux software company. (His father refused to get Landmark involved in the investment, which made Batten Jr. hundreds of millions of dollars.)
The newspaper business made up the Batten family heritage. However, instead of going public and keeping Landmark intact as a diversified media company, Batten Jr. is selling it off, piece by piece.
For the company, it was a sound business move:
Batten Jr. was following family protocol by keeping Landmark together. In an age of dying print, spinning off pieces of the company only makes sense. “Keeping the business intact may be the dumbest thing that anybody can do,” said Frank Daniels Jr., a retired publisher of The News & Observer in Raleigh, N.C., and former member of Landmark’s board.
“They’ve never even gone public. They certainly have the size and scope to go public and raise liquidity that way,” (media lawyer Murray) Schwartz (of Katten Muchin Rosenman) said. “I see a disconnect between that kind of discipline, staying private and not getting liquidity from the public markets, which creates a set of pressures that at the end of the day can have a negative affect on the core operations, and a wholesale sale of the company.” Schwartz noted that successive generations of family ownership often produces a large pool of stakeholders within the family who cannot cash out.
Selling businesses such as the Weather Channel gives stakeholders access to liquid assets. It also shifts the company’s focus from Stover’s vision to something different (if Landmark’s core business is no longer newspapers, what is it?).
Like a good leader, Batten is listening to his board of directors. Like a good businessman, he’s selling off unprofitable holdings. However, in keeping cash out of public investors’ hands, he’s throwing away Landmark’s original business model. A more idealistic man may have chosen to take the company public in order to boost a much-needed domestic supply of quality journalism.
It takes cool a mind to forsake the tradition that gives a family its good name. On the one hand, there’s no point in holding onto a dying newspaper business. According to Hampton Roads:
Lauren Rich Fine, a researcher at Kent State University’s College of Communication and Information in Kent, Ohio, said it was difficult to put a value on Landmark’s newspapers right now because there are fewer potential buyers than there were in the past. If Landmark, which had more than $2 billion in revenue in 2006, had put its papers on the market a decade ago, “probably every public newspaper company in the country would have taken a look,” she said.
On the other hand, selling valuable holdings like the Weather Channel instead of going public forsakes an opportunity for, well, the public. The common good. The quality of mainstream media. The Landmark case demonstrates the trade-off that occurs when private companies choose equity over large-scale vision. That is, vision that goes beyond self-preservation and into the realm of the common good.
Batten made a smart business decision–for himself and his family. However, I wouldn’t be surprised if Stover is turning in his grave.