Sale for $1 billion in the trajectory of an unlikely American media tycoon – 05/09/2021 – World

I was sitting in a bar next to John Harris, a former editor of the national section of The Washington Post. It was late 2006, and he was recruiting me for a new project, a superblog called The Politico. I found it interesting, but I had a few questions about the owner.

I had never heard of Robert Allbritton and wondered if he was the kind of billionaire publisher who wants to have his own column on the front page or the other kind of wealthy owner, an amateur who quickly gets sick of his new toy. Harris answered me in cryptic Washington language: “He studied at Wesleyan.” And it seemed to me that this mention of the unorthodox liberal arts college in Connecticut meant something like “he’s generally harmless.”

In the end, Allbritton was a little more than that. The Washington heir, whose existence and moderate influence in Georgetown put him at considerable distance from the memorable characters in the digital media nerve center, has landed the kind of deal his counterparts in New York and Los Angeles only dream of: a $sale 1 billion.

In August, he reached an agreement to sell Politico (“The” was dropped early on) for $1 billion in cash to German media company Axel Springer, meaning he probably landed the most successful exit. of the new media of his generation, in purely economic terms. Allbritton, which had buried more than $50 million of the family’s fortune in Politico by 2018, is now among the century’s most successful media investors — although Politico, which never entered the noisy dispute for venture capital, rarely was cited among the hottest media startups.

“We hurt ourselves a little bit by not taking money from venture capitalists because we just didn’t participate in the conversation,” Allbritton said. Now, he added, he is pleased to hand over his company to Axel Springer, an imposing Berlin organization whose tower has long represented a gleaming middle finger raised to the Communist East. “In some ways, they are more American than most Americans today,” Allbritton said. “They represent freedom of the press, freedom of thought, they are openly in favor of the transatlantic alliance.”

Out there

Axel Springer publishes the controversial German tabloid Bild, and its president, Mathias Döpfner, told me that the deal with Politico cemented the company’s future in America. Allbritton commented that the Newsroom will not be subjected to a notable feature of the German company — a statement that employees are required to sign in support of the transatlantic alliance and Israel, among other favorite values.

I talked to Allbritton, 52, on the phone for 90 minutes. I had been promised the first interview since the sale was announced, and I admit I expected drama. His story has long intrigued me. When Politico began, Allbritton was known as the heir to a rising Washington dynasty that vied with the more aristocratic Graham family, owner of the Washington Post.

His father, Joe, was a Houston, Texas television mogul who bought the Washington Star in 1975, hoping to turn it into a more right-wing, combative competitor of the city’s leading newspaper.

As an editor, he really pushed to get his column on the front page because he belonged to “a different generation” and was a more “in command and control” type of guy, according to Allbritton Junior.

When federal regulators forced him to sell the Star in 1978, due to cross-ownership rules that prevented media companies from owning television channels and newspapers in the same city, he was devastated — and blamed it on a “mild conspiracy.” remembered his son.

The youngest Allbritton joined the family business after graduating from Wesleyan in 1992 with a degree in governance. In 2007, he took advantage of a loophole in cross-ownership regulations that allowed a company that owns TV channels to have a publication that didn’t come out regularly (Politico’s print edition follows the Congress calendar).

He bet on the vision of two former Post stars, Harris and Jim VandeHei, who brought in Mike Allen, a Time magazine columnist who was already known as a repository of Washington news and gossip, and he filled Politico’s Playbook newsletter with the kind of privileged material that supported White House advisers, Georgetown hosts, K Street lobbyists, and Capitol officials alike.

The old man was delighted. Before his death in 2012, he wore a Politico cap around town.
In 2013, Robert Allbritton, then president of Allbritton Communications, a privately held company, sold the family’s TV stations and dedicated himself to his own baby, Politico. Last week, the $1 billion sale gave him the kind of justification heirs don’t always get.

The drama between father and son was small compared to the explosion that rocked Politico in 2015. That year, Axel Springer —already a partner in Politico Europe— made an offer to buy the publication in a deal valued at around $250 millions, as confirmed by Allbritton.

VandeHei, then CEO of Politico, was already impatient to work at a family business — and wanted to move the business forward. Allbritton refused, just as he had turned down proposals from CNN and Reuters.

Old resentments between VandeHei, Harris, and Allbritton have come to a boil. VandeHei, Allen and treasurer Roy Schwartz left Politico and started Axios, an immediate success that became a serious competitor. The move brought an end to what many felt like a close friendship between Allbritton and VandeHei, though the former said he didn’t take it personally.

“A lot of other people have had much greater emotional reactions than me,” he said happily.

Allbritton also said he did not consider Axios a competitor, as its coverage was “broader” than Politico’s, and cited recent Axios articles on Apple News and the hurricane approaching New Orleans. “We would never do a story about meteorology,” he said.

But VandeHei’s departure didn’t sit well with his former editorial partner, Harris, and the site’s new editor, Carrie Budoff Brown. “Politico implodes,” boasted the Post. And when Axios took on the shine of the big hot news, the rivalry between the two publications soured. (At this point, assigning blame for the disruption is a bit like trying to arbitrate the Israeli-Palestinian conflict into a conversation.)

Harris spent the next year convincing Politico reporters and editors not to jump ship, while Budoff Brown restructured the Newsroom and worked to improve the workplace culture, which some employees described as grinding and sometimes sexist.

China, Middle Land

In May, Allbritton said he knew VandeHei was in talks to sell Axios to Axel Springer. Had he started negotiating with the Germans to disrupt the deal? I suppose maybe that was part of the interest. And in the Politico communiqué announcing the sale plan, a quote by Allbritton suggested this: “Particularly in recent years, we have emphasized doing rather than boasting.”

A spokesman denied that the phrase was aimed at his former colleagues, and Allbritton said that, after years of flirting with Axel Springer, he was ready to admit that his family business lacked the “power” it needed to keep growing. “We will be better off with a large global company,” he said.

On the day of the announcement, the New York Times reported that Axel Springer could still attempt a deal with Axios — perhaps VandeHei was CEO after the merger of the two publications? (I always imagined that one of these days he would run for political office in his native Wisconsin.) Politicians in Washington pressured the German company to add a firm denial of history, which it did.

Asked why he had chosen Politico over Axios, Döpfner told me in a telephone interview: “It’s an easy decision if you prefer number 1”. In a message to me, VandeHei called the sale “big news” for companies that produce quality journalism.

As I immersed myself in the deal, it caught my attention that the most dramatic part of the whole thing is perhaps the solidity of Politico’s business. The jump from a $250 million offer in 2015 to a $1 billion offer in 2021 can be attributed in part to a bubbling market and in part to the ambitious German company’s desire to burn the money it received when the private giant equity KKR made it private in 2020. But the valuation is mainly on Politico’s profit margins.

Allbritton Communications had been writing checks to cover Politico’s losses for a few years in 2017, when company CEO Patrick Steel said it needed about $8 million to close the next year’s budget gap — and Allbritton did. refused to write one more check.

“We’ve rarely been the ones who have made industry headlines in the last five years,” said Budoff Brown. “The strategy wasn’t particularly attractive, and we weren’t the ambitious newcomers anymore.”

Indeed, the company’s strength is not rooted in the kind of sensational political reporting, the “scoop,” that made Politico an actor. About half of its revenue comes from a project that VandeHei launched in 2014, the products called Politico Pro Plus and Politico Pro Premium.

These digital platforms can keep a person informed—for an annual subscription of a mere $10,000 or more—minute-by-minute on the inner workings of the Committee on Agriculture, or the Committee on Armed Forces, or anything of urgent interest to lobbyists and bankers of Washington. Clients sign contracts for two years, five to six digits, and it doesn’t take that many to build a media company of enviable profitability and stability.

Profit margins were above 20% last year and are expected to exceed 30% this year, on revenues of around US$ 200 million, according to the company. The cash inflow offset Allbritton’s initial losses. And a logical next step for the new owners, he said, would be to move forward in the business of providing Washington insiders with purer, more specialized data.

The business model has also allowed Politico — whether you like it or not — to stay largely out of discussions in recent years about whether journalists should be politically neutral in their public statements. “Culturally, what we do is becoming more and more alien to people,” Allbritton said. Many readers, he added, “either go hard left or hard right — it’s almost becoming a religious discussion. Otherwise, why aren’t people getting vaccinated?” “The beautiful thing is that our real audience is the federal district’s professional crowd,” he said.

Allbritton refused my attempts to reveal his personal feelings. He gives off a Boy Scout vibe and says that even if this text was critical it wouldn’t matter much to him. “If I get upset, it’s an hour and a half at the most,” he said.

There was one issue, however, that provoked some swear words. Allbritton’s company operates union and non-union locations, and Politico today faces an organizing campaign from NewsGuild, which represents workers from more than a dozen news outlets, including the Times.

“If you’re working in a warehouse, it makes sense,” he said. “But when you’re talking about smart people who use their minds for a very creative project, I don’t understand.”

At best, he added, the threat of a union would keep Axel Springer executives on standby. “They will try harder to maintain flexibility,” he said. What if the union campaign is successful? “That’s where the KKR guys are going to show up,” Allbritton said.