Not easy on Eason
Creative Loafing Inc. CEO Ben Eason had a rough afternoon on the stand yesterday in U.S. Bankruptcy Court, according to an account published by one of his own reporters early this morning.
After testifying that he’s led a transformation over the last few months to a web-first-print-second company (as predicted here), Eason had to endure a “withering cross-examination” by Tyler Brown, attorney for CLI’s lead creditor, Atalaya Capital Management, which is trying to gain control of the alt-weekly newspaper publisher. According to CL/Tampa’s Wayne Garcia:
Brown meticulously walked Eason through his own financials, getting Eason to begrudgingly acknowledge that online revenues have dropped month-over-month since CL went into bankruptcy court on Sept. 29, 2008. (Eason countered that those drops are explained by differently sized months, some with four weeks and others with five weeks, as well as seasonality. On a month vs. previous year’s month basis, online advertising is significantly up, he testified. “I believe that the trends that we put out there are positive.”)
Brown asked Eason about the $3.5 million-$4 million in cuts made to the current year’s budget, which resulted in about 50 layoffs, 40 percent of which came in editorial news departments. Brown’s questions insinuated that the cuts actually hurt the chain and profits and forced Eason to admit that the chain’s “preeminent position” in its cities is actually sliding, or at least has slid in Atlanta, where the paper was founded. A Media Audit in November showed the rival Sunday Paper having a higher readership than the Atlanta flagship paper, a fact that it took 3-4 attempts by Brown to get Eason to agree.
The cross-exam was contentious, with Eason making a snide remark aimed at Brown at one point and disagreeing strongly with the dire portrayal of the company by Atalaya. His most common answers were “That’s not true” and that’s “not necessarily the case.” The cross went after 6:30 p.m., after which rebuttal testimony was expected.
As disclosed previously on this blog, I was fired by Eason last fall as CL/Atlanta’s editor after protesting the heavy tilt toward cutting editorial staff and other front-line departments. Ironically, I think Eason understands part of the long-term picture confronting the company quite well: Alt-weeklies are well positioned to thrive on the web, and they have no choice but to make a radical transition.
But transformations of this kind are all about timing and execution, both of which have gotten Eason into trouble in the past and again this time. For one thing, it now appears that he panicked last year by trying to change everything all at once without having the competency in place to make the necessary changes effectively. For another, he underestimated how important it is to continue to do the basics — for example, to provide the resources to produce great content, to pay attention to whether the paper is actually getting distributed, and to have leaders in place who understand the local market. In my experience, Ben was disturbingly dismissive of such fundamentals, preferring to keep his mind in the abstract world of long-term trends and grand ideas.
CL reality show: next week!
A friend (and former Loaf employee) writes:
I’m so confused…So we won’t know anything about what will happen to CL until next week? I’m starting to feel like I’m missing episodes of a reality show.
That’s right my secret admirer. CL/Tampa’s Wayne Garcia reported last night that Ben Eason was to testify in Bankruptcy Court today:
The hearing will then be continued until Tuesday of the following week to hear from the company’s CFO and a Tampa Bay business valuation expert, after which Judge Caryl E. Delano (at some point) will rule on Atalaya’s motion to gain control of the company. Atalaya is owed $31 million from its f[i]nancing of CL’s 2007 purchase of the Chicago Reader and Washington City Paper.
Those of us weren’t in the courtroom, don’t know what happened today yet. I’m hoping that Wayne will file somethng later about Ben’s day on the stand. Will link here if I see it.
NON-UPDATE: I haven’t gotten any reports of what happened in court today. Will try to find out tomorrow and if so will pass it on.
Atalaya: Keep CL alive
(See update to this this story here.)
The investment fund that is the main creditor of Creative Loafing Inc. would keep its six papers going and pump more resources into them than current management has been willing to spend, the fund’s media specialist testified today in U.S. Bankruptcy Court today. But only if CEO Ben Eason and the rest of the team that got Creative Loafing into its bankruptcy mess were forced out.
From CL/Tampa’s Wayne Garcia:
Atalaya partner Michael Bogdan testified that the firm has hired another investment banking firm with media experience, Bulkley Capital of Dallas, Texas (with an office in Atlanta, the home of CL’s largest newspaper) to advise it and provide “management assistance” in running the CL papers if it is successful in court today.
… Bogdan said his investment firm would be willing to spend more money to increase revenues at the newspaper chain, but only if it can displace the current management and ownership. He said Bulkley is familiar with alt-papers and advised the Chicago-DC paper owners in their 2007 sale to CL. Bogdan said Atalaya would seek to publish “a quality publication” in order to maximize its investment. He also said the lender is concered about the CL workers. “We’re concerned with the morale of the employees,” a fact Bogdan said he gleaned from “reading in blogs.” Federal Bankruptcy Judge Caryl E. Delano disallowed the blog-related testimony after an objection from CL’s attorney, David Jennis.
Bulkley sounds as if he’s set up to help manage and sell media companies rather than to shut them down. This undermines the public claims of CLI CEO Ben Eason that Atalaya would shutter the papers if it wrested control from him.
In case you didn’t know, Eason fired me in November for urging him to cut his administrative staff a wee bit before continuing to axe Sales and Editorial. So, consider my reporting on this with that in mind.
Still, facts are facts: Eason’s own Bankruptcy filings show that he’s cut both Sales and Edit, while he’s failed to cut the General & Administrative budget that includes his salary and those of the people closest to him. The result has been disastrous, particularly in Atlanta, where the print product is now regularly smaller than the upstart Sunday Paper. And now Eason’s claim that Atalaya would shut down the papers — rather than try to get its investment back by operating it or selling it — sounds even less credible.
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