Window of Opportunity
Rumors continue to fly about the sale of the New York Press, which was announced quietly two days before Christmas. Gossips say that former CEO Russ Smith is returning to Baltimore, deposed editor in chief John Strausbaugh is getting picked up by Vanity Fair (false, says V.F.), and former publisher Kim Granowitz is out the door (Granowitz confirmed that she has quit). Meanwhile, Chuck Coletti and Doug Meadow, the paper's new president and C.O.O., are giving bland interviews while the majority owner has lurked behind the scene.
But when the Voice contacted him, the wizard stepped out from behind the curtain. "We bought the Press because we want to make money," said David W. Unger, co-founder and managing partner of the New York-based Avalon Equity Partners. Avalon acquired a majority stake in the Window Media chain of gay alt-weeklies in 2001, at the time Window purchased the New York Blade News and the Washington Blade. Unger emphasized that New York Press L.L.C. and Window Media are separate entities, connected solely by a mutual investor.
Unger predicted the Press will be profitable "with just a little hands-on management." Asked why Avalon was not identified as the majority shareholder when the sale was announced, he asked, "Does the Voice go around saying that it's owned by Weiss, Peck & Greer?"
Sources describe Unger as "independently wealthy" and "bombastic." He founded Avalon Cable, which sold in 1999 for $845 million. That same year he launched the $63 million Avalon Equity Fund and began acquiring small cable systems to upgrade and sell. "I'm not bombastic," he said. "I'm passionate about what I do."
Unger would not disclose how much he paid for the Press, but said the Times' figure, $5 million, was "materially incorrect," while the $3 million reported here last week was "materially correct." Asked whether he will interfere with editorial content, he said no.
Up and down the East Coast, people are talking about Avalon's management of Window and what may happen to the Press. Said one observer, "The past is prologue."
Window was launched as a gay chain in 1997 by William Waybourn and Chris Crain, who brought together the Southern Voice in Atlanta, the Houston Voice, and the Southern magazine Eclipse. When Avalon acquired Window in 2001, some feared that association with a private equity fund with no gay mission would compromise the identity and stability of the gay press.
Window president Waybourn has no such qualms about Avalon. In an interview with the Voice, Waybourn called the company a lifesaver whose oversight has "helped us manage what we do so much better" and helped ensure that the gay press will be "able to survive and be stronger and more professional." He added, "We have a core mission of serving the gay community with our editorial and that hasn't changed."
But Window has had an array of financial problems, leaving some investors unhappy and observers skeptical.
Exhibit A from the critics: In 2000, when Window merged its existing papers, four Atlanta investors sued. They claimed they were not getting financial statements, which Window denied. According to plaintiff Michael Aycock, he and his partner were in it not to make moneythey wanted the Southern Voice to be sustainable and to reflect Atlanta's sophisticated gay demographic. Window countersued, accusing the plaintiffs of trying to block the merger. Both parties dropped their suits.
Exhibit B: In May 2001, Window bought the Washington Blade and New York Blade for about $1.9 million, backed in part by a $1 million dollar loan from Silicon Valley Bank. While Avalon assured investors that it would oversee the transition, critics recall that post-sale, Window had serious cash flow problems and jobs were eliminated at both Blade papers.
Kristina Campbell, former editor of the Washington Blade, says that after the Window buyout, "there was so much change that I wasn't really comfortable." (She quit in March 2002.) According to Campbell, she was asked to reprint copy from other Window papers and to rely more on freelancersbut freelancers weren't getting paid on time. Financially, she says, there was a sense of "bleakness on the horizon."
Exhibits C and D: In February 2002, Window defaulted on its $1 million bank loan. As if that weren't enough, in August 2002, two of the former Blade owners sued Window, claiming they were still owed money from the sale. The litigation is now in discovery. All this has left some people wondering, where did the money go?
Waybourn attributed Window's troubles to the economy. "Our financial future is quite good now," he said. "Yes, there were problems and we still face some challenges. But as long as Bush doesn't go to war, we're ready for anything." He said the bank has not called in the loan and that if the two former owners had not sued, they'd be getting paid now. In fact, he said, Window turned a slight profit in 2002.
After 9-11, he said, "we took some drastic measures," including restructuring, laying off staff, and closing the Window paper in New Orleans. In D.C., they hired a controller "who's very good at cash management." Last spring, the company cut the New York Blade to biweekly and shifted its ad focus from national to local. Now, Waybourn claims, 96 percent of the ads are local, and "the New York Blade is in the black, which is a major turnaround" from 2001. He said the paper is scheduled to resume weekly publication in the spring.
Finally, as to floated rumors about Window's future, Waybourn ruled out filing for bankruptcy. The notion published in this column last week that the Press and Window chain might be sold together for $10 million is preposterous, because that would be a "fire sale." Folding the Blade into the Press "has never been discussed." Moreover, he said, Avalon receives government funding as an SBIC (small business investment company), so the company is prohibited from selling off assets. (Avalon receives government-backed loans that match its investments, for as much as two to one.)
Synergies are already cropping up between the Press and New York Blade. For example, in recent months, new Press C.O.O. Doug Meadow has advised the Blade on ad sales and circulation. A proposal to move the Blade into the Press offices has some people worried that Window, which touts itself as gay-run, will be tainted by association with a straight paper.
"They need to get over it," Waybourn said. "The Press has a large gay readership, and if the opportunity presents itself, we'll work with them. There's nothing Machiavellian about it."
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