For many local businesses, 2007 was a year of growth and prosperity. Customers were plentiful, the economy was strong, and few anticipated a world financial meltdown and years of recession and stagnation.
The 80-page "Colorado Springs Gazette 2008 budget review" seemed to describe a healthy, thriving enterprise. The paper had total revenues of $64.5 million, expenses of $51.3 million, and EBITDA (earnings before interest, taxes, depreciation and amortization) of $13 million, or 20.2 percent.
Such margins would please any business owner. Even though the total revenue figure had declined by $2.5 million from the year before, managers had compensated by reducing expenses proportionately.
But the paper's apparent health was an illusion. Those earnings were diverted elsewhere, as they had been for years. Every day, Freedom Communications swept the Gazette's bank accounts, and transferred the funds upstream to the company's California headquarters.
In the years from 1980 to 2007, the paper earned more than $400 million. Most of it went to support a bloated head office, to prop up less profitable entities, and to pay dividends to the descendants of Freedom Communications founder Raymond Hoiles. A 2002 buyout had left the company with a byzantine corporate structure, hundreds of millions in additional debt, and no clear means of repaying it.
Seven years later, Freedom would file for bankruptcy.
MediaNews Group (the owners of the Denver Post), Tribune Company, the Journal Register Company and a dozen others also went broke. The bankrupt companies blamed the Internet, new media, the rejection of print by younger readers, the deepening recession, the exodus of traditional advertisers or the Hand of God.
But the chains weren't the victims; they were the perpetrators.
Empire-builders at dozens of corporate headquarters had thought they understood the future. Newspapers with local monopolies, like the Gazette, were bulletproof investments. You buy out sleepy local owners, use the cash flow to fund more acquisitions, and pretty soon you have a chain. Newspaper earnings would always increase, wouldn't they?
The holding companies were actually pyramid schemes, dependent upon ever-increasing cash flow to service mountains of debt. They had no reserves to tap in a downturn, and no ability to borrow.
As earnings began to stall in the 1990s, corporate bean-counters instilled discipline. Revenue goals had to be met, and if that meant trimming staff and degrading the product, too bad.
The Gazette's newsroom shed 21 employees from 2002 to 2007, and that was just the beginning. When the financial tsunami hit in 2008, managers were forced to destroy the paper in order to save it. What couldn't be outsourced was cut, and what couldn't be cut was gutted.
It happened at lots of chains. The American Society of Newspaper Editors says 16,200 newsroom jobs were lost between 2003 and 2012.
Some papers were able to weather the storm; the family-owned Pueblo Chieftain was one. Longtime publisher Bob Rawlings had listened politely to a dozen would-be buyers in the decades before the crash, and had turned down every one. In an interview several years ago, he explained why.
"This newspaper is important to this city and to this region," he said. "I didn't think it would be right for me to turn my back on Pueblo."
Post-bankruptcy, the Gazette appeared to be unsalvageable. Circulation had declined precipitously, and the ancient presses barely functioned. The new owners had gotten it as a throw-in when they acquired the Orange County Register from the wreckage of Freedom.
Enter a deus ex machina in the form of Phil Anschutz, the billionaire boss of the Broadmoor. He recapitalized the paper, moved it to spiffy new downtown headquarters, and has given it life. Similarly, Warren Buffett bought the Omaha World-Herald, and Amazon's Jeff Bezos bought the Washington Post. Rupert Murdoch still loves his newspapers.
If your town's daily is in trouble, you'd better have a billionaire sugar daddy standing in the wings. Otherwise the future may be bleak, like that of a lonely pit bull waiting for new owner at the Humane Society.