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The high price of creating good journalism 

How Sun-Times Media left the Chicago News Cooperative behind

When a new group of Chicago investors took Sun-Times Media off the hands of the old group last December for $20 million, one of the new owners drew me an exciting picture of the journalism Chicago could be in store for. The picture hinted at a communion between old media and new—to be specific, the legacy print daily and a young digital start-up with big aspirations and an impressive pedigree. "There's no deal between the Chicago News Coop and the Sun-Times at the moment," said Bruce Sagan, who sits on the board of the group that runs Sun-Times Media—and sat on the board of the recently shuttered CNC. "They are indeed organizations with their own goals. But the goals are not far apart. It's a question if they can make it work. The Sun-Times needs personality, viewpoint. That can't come from somebody else. But is there a lot of news out there that can be shared? My god!"

"They're gonna talk," Sagan predicted, and, indeed, how could CNC and the Sun-Times not talk? They were, to an extent, the same people. In addition to Sagan's dual role, John Canning Jr., chairman of CNC, is on the board of Wrapports LLC, which is what the new owners of Sun-Times Media are legally calling themselves. And CNC board member Michael Ferro is now chairman of Wrapports.

What I didn't understand in December was the role James O'Shea, founder and general manager of CNC, had just played in making the sale of Sun-Times Media happen. O'Shea, a former managing editor of the Tribune, launched CNC in the fall of 2009 with seed money from the MacArthur Foundation and one significant contract—to provide four pages a week of Chicago news to the New York Times. O'Shea had plans, a first-rate staff, and a website—but two years on, CNC was spinning its wheels. O'Shea wanted to build out the website with deep, focused content he could offer for money—education was first on his list. But he didn't have the money to do it.

About the same time that O'Shea was getting CNC up and running, the collection of daily and weekly papers that constitute Sun-Times Media had been bought out of bankruptcy by an investment group led by James Tyree, chairman and CEO of Mesirow Financial. The other day Canning called Tyree a "visionary," in the sense that if buying Sun-Times Media made sense to Tyree it made much less sense to anyone else. "I had no idea why Tyree did it," Canning told me. "I knew Jim. He was a very Chicago-centric guy. And maybe it was 'I'm not going to let this iconic Chicago paper die.'"

At any rate, Tyree centralized and centralized some more, slashed his staffs, outsourced printing to the Tribune, sold off real estate, and nudged the operation into black ink. But last March Tyree, never in good health, suddenly died. A month later, O'Shea made a bold proposal to the CNC board.

We're not going to get a lot more money from philanthropy, he reasoned. And it takes money we don't have to build up the business to make it pay for itself. But if we can't create a revenue stream, maybe we can buy one. If Sun-Times Media throws off just $2 million a year, or even one million, that's a lot of money to CNC. Pay us to write stories for the Sun-Times and do small-scale R & D, and anything that works for us we'll export to the company.

Canning was intrigued. "I doubt that I would have on my own looked at the Sun-Times if I hadn't already been involved with the Chicago News Cooperative, but it was a logical thing to do," Canning tells me. "I called up the Mesirow people and said, 'Are you interested?' It wasn't for sale but they were glad to talk. Sagan, myself, and O'Shea went over and met with the Mesirow principals."

"The relationship with the New York Times provided seed money, but it was for a product that cost a hell of a lot more to produce." —John Canning Jr., chairman of CNC

Like O'Shea, Canning wanted to get CNC off life support. CNC had been operating about a year when Canning came on board, invited by his friend Jim Kirk, CNC's managing editor and a former business editor of the Tribune. "As a favor to Kirk, I put in $100,000, and I sure as hell wasn't thinking of this at the top of my charitable giving," says Canning. "Ferro put in $100,000. It was a worthwhile cause, with guys trying hard to put out a quality product. But I made no bones that this has got to get to revenue growth in some reasonable time."

Maybe Sun-Times Media was the way to make this happen. Because the Sun-Times and other dailies had slashed so much coverage they could no longer afford, O'Shea saw lots of opportunities for CNC to leverage the relationship. For instance, "I thought it was a good idea to beef up Springfield coverage," says O'Shea, "and take that coverage and see if we could use it to raise revenue from other papers that have closed their Springfield bureaus." Another opportunity was the arts. "The Times wanted some cultural coverage. I was looking into, can I get Sun-Times cultural coverage and use it in the New York Times? I could save money by putting Sun-Times copy in the New York Times. There's not a lot of cross-readership."

Was the Times OK with that? I wonder.

"We didn't get that far," says O'Shea. "But they were more than willing to make this work."

Mesirow was happy to discuss getting out from under Tyree's labor of love. "I said, 'I'm not going to be Jim Tyree here. The only way this gets done is if you find a Tyree,'" Canning tells me. "And I only knew of one person who might fill his shoes—Michael Ferro."

Says O'Shea: "He called Ferro and Ferro was actually pretty excited about the idea. Michael's a very creative guy. He's got a thousand ideas."

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