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Tuesday, February 19, 2008

On Common Sense

Posted By on Tue, Feb 19, 2008 at 10:07 AM

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And now a few words in defense of sanity

By Andy Van De Voorde

Executive Associate Editor, Village Voice Media

With the trial on hiatus yesterday, The Snitch found time to reflect on events of the past week — in particular, a peculiar blog post from the Guardian’s Tim Redmond that appeared last Friday.

In that post, Redmond — at least The Snitch assumes it was Redmond, and not “Brugmond,” the journalistic entity that comes to life when Redmond puts his byline on trial stories actually reported by his boss, Bruce Brugmann — lashed out at Dr. Joseph P. Kalt, a Harvard economist and expert on pricing in markets who was in town to testify on behalf of the Weekly.

Redmond’s chief complaint? (Click 'More' To Continue Reading SENSE)

That Harvard economists are eggheads who don’t live in the real world, and that, therefore, when they offer expert testimony about a case that just happens to involve their specific area of expertise, it is best to ignore them.

“I can say without hesitation that most academic economists live in a world devoid of reality,” wrote Redmond, apparently an expert on the uselessness of economic theory given that he chose to major in it at Wesleyan University.

(Why is The Snitch reminded of all those people who get law degrees and then scoff at the very notion of becoming an attorney?)

Because economists live in a fantasy land, Redmond continued, “they assume that all the participants in a market have the necessary knowledge and information to make the proper decisions. They assume that random factors like politics, love, passion, pride, anger, envy or simple nastiness are never part of the economic equation. They assume that everyone in a marketplace acts ‘rationally.’”

“Simple nastiness?” Who could he have had in mind?

But your faithful courthouse correspondent digresses.

The point, according to Redmond, was that logic and reason cannot and should not apply to a case involving alternative weekly newspapers.

To assume rational behavior, the Guardian editor went on, “is an irrational assumption, particularly when it comes to small businesses (and even more so when it comes to the alternative press).

“If all of us in this business had acted rationally, there would be no Bay Guardian. There would be no SF Weekly, New Times, or Village Voice Media. The entire alternative press exists because some utterly irrational people with little background in business and no rational hope for success decided to start little newspapers. They were – and many still are – motivated by politics, community service, excitement and a lot of other things, but rational business motives were never really high on the list.”

There it is again: The Guardian’s notion that alternative Weekly papers exist in an alternate reality far apart from the normal discourse of American business.

The Snitch finds it quaint that Redmond still holds such a fanciful view of his chosen profession, especially given that it has now progressed to the point where some of its practitioners spend hundreds of thousands of dollars suing competitors over alleged lost profits and bemoan their inability to raise the prices charged to local advertisers.

This blogger also wonders why, given the utter “irrationality” of alternative weeklies, the field has produced so many millions of dollars in real-world profits for so many people, including a good number of crazies (by Redmond’s standards) who cashed in by selling their papers to New Times.

Additionally, your correspondent finds it interesting that a man whose paper billed more than $11 million at its peak in the year 2000 and which has crowed in court about the financial acumen Brugmann displayed when he purchased a $5 million office building several years back by forming a limited liability corporation (think of the tax savings!) still finds it useful to wrap itself in the cloak of political passion and perceived poverty.

(Of course, in Brugmann’s case, there never was poverty — he is the son of prosperous Midwest merchants and the recipient of a master’s degree from an Ivy League school who made his first big killing in the newspaper business not by putting out a good paper but by suing the San Francisco dailies for allegedly trying to monopolize local advertising. Brugmann took a reported $500,000 settlement before the case was adjudicated — lucky for him, because the court found against the other plaintiffs.)

Those who have been following the Guardian’s latest attempt to cash in at the courthouse already have some sense of Redmond’s economic views. They were perhaps best summed up by a story he wrote about the online classified site Craigslist—and which was shown to the jury — which referred to the “warped rules of American capitalism.”

Redmond’s anticapitalist beliefs also appear to inform other aspects of the Guardian’s case, such as the repeated observation by the newspaper’s attorneys that all the Weekly had to do to make money in San Francisco was just raise its prices.

Hey, just tell your customers they have to pay more, and if they don’t like it, that’s tough.

If only we had known.

Either way, there was actually a logical purpose behind Redmond’s “end of logic” blog. It was intended to counter Kalt’s argument that, from an economic standpoint, it simply made no sense for the Weekly to do what the Guardian is accusing it of. It wouldn’t work, Kalt noted, in a media market as competitive as San Francisco, and it would be prohibitively expensive.

Dispensing with rational thought and giving into anti-big-media emotion is a prerequisite to buying into the Guardian’s case.

A few examples:

* To believe the Guardian, you must believe that New Times intentionally lost $25 million — and continued to do so after bringing in new partners with the 2006 merger with Village Voice Media — just to make Bruce Brugmann’s life miserable.

* To believe the Guardian, you must believe that New Times knew how to be profitable, but chose not to be because watching Bruce squirm was more important.

* To believe the Guardian, you must believe that, as part of its predatory pricing scheme, New Times artfully manipulated its financial results so that they precisely mirrored trends in the overall print media economy: Up with the dot-com boom, down with 9/11, and so forth. Such a coincidence.

This is when it becomes useful to adopt Redmond’s theory that New Times was in all likelihood driven by blind rage.

And it should be noted that Kalt didn’t just talk about theory during his testimony. He also noted that he had evaluated reams of real-world data such as revenues, circulation and pricing at both the Guardian and the Weekly.

None of it, said the professor, supported the Guardian’s claim that the Weekly intentionally lost money just to force the Guardian to lower its prices. If the Weekly really was engaging in predatory pricing to get fat at the expense of the Guardian, it would have been getting fat, not thin, noted Kalt.

Instead, both newspapers finances followed the same general curve; up during the dot-com boom, then down, especially after the events of September 11, 2001. The Weekly’s circulation and revenue went down and its prices went up, observed Kalt—the exact opposite of what one would expect to see if a paper was trying to bleed its competitor with bargain basement prices.

The only one of those three areas Redmond saw fit to mention was circulation. He suggested that Kalt overlooked the fact that New Times bought the East Bay Express in 2001, thus acquiring greater overall circulation than the Guardian.

There it was again: the Guardian’s unstoppable hubris. If New Times bought a paper in the East Bay, it must have been so it could indirectly squeeze the Guardian by offering advertisers “combo buys.”

Never mind the possibility that the company believed — before the events of 9/11, remember — that it could make profits by serving readers in Oakland and Berkeley.

Even more remarkable was what Redmond didn’t tell his readers, but which has come out at trial: That the Guardian itself tried starting up an East Bay paper back in the early 1990s.

Yes, the great enemy of “chains” attempted to create its own regional dynasty, and by doing so, increase its circulation.

And if it’s a stretch to buy the argument that New Times bought the Express just to go after the Guardian, it’s not a stretch at all to note that the Guardian’s East Bay gambit was designed to take business from a competitor — after all, it competed directly against the pre-New Times Express.

Did the old Express sue the Guardian and claim it was trying to put them out of business by undercutting them on prices?

Your humble blogger believes you already know the answer to that.

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David Downs

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