Aaron Kushner's Wrecking Ball

Aaron Kushner's Wrecking Ball
Illustration: Kevin McVeigh | Design: Dustin Ames

They glumly marched into the third-floor newsroom of The Orange County Register's Santa Ana headquarters on June 9: editors, reporters, bureau chiefs, sales reps, the copy desk, photographers—almost the entire staff, gathering to hear their fate. Nearly two years to the day, Boston businessman Aaron Kushner had bought the paper and its parent company, Freedom Communications, and quickly made national news with a bold strategy: hire reporters instead of laying them off. Increase page counts instead of cutting back. Focus on print instead of digital. Start new dailies and acquire others instead of shedding them. More than 350 new hires, including about 170 on the editorial side, signed onto his vision, invigorating the Register in a way that veterans say recalled the glory days of the 1990s, when Pulitzers were won and the Sunday edition was thick enough to crush a cat.

Kushner had long used the newsroom for town halls, instead of the in-house R.C. Hoiles Auditorium, as had previous publishers. It was a move to rally his troops, to show he was one of them. But June 9 would not be one of those days.

He arrived just before the meeting's 4 p.m. start, wearing his trademark uniform of a tucked-in button-down shirt, no tie, slacks and an air of assuredness. Just 10 days earlier, news had leaked in the Orange County Business Journal that Kushner was about to implement mandatory two-week furloughs by July to stave off massive financial losses, plus he would drastically scale back the Register's new sections, its community papers, and its Long Beach and Los Angeles editions. Shortly after the leak, Register editorial employees were summoned in groups to the office of editor Rob Curley. He told reporters they could apply for buyouts by the end of the week, and those approved had to leave by the following week; if not enough reporters took them, layoffs had to happen immediately.

Curley sat in the middle of the newsroom with his reporters as Kushner addressed the crowd. The CEO apologized for the measures he was about to execute. "Everyone says our strategy has failed," Kushner told his disbelieving writers. "Perhaps they should be saying that our strategy has not succeeded?"

And the town hall went downhill from there. There was open eye-rolling at Kushner's upbeat report on revenue and circulation, which offered no specifics. While insisting he and his partner, Freedom president Eric Spitz, were doing "everything we can" to keep the newspaper thriving, he quickly became defensive at anyone even slightly questioning his narrative. When asked whether circulation was growing for the Register, Kushner answered, "That's a very nuanced question" before finally admitting it was declining, that new subscribers had not materialized. When asked why he had expanded so aggressively if Register revenue hadn't reached sustainable levels, Kushner shot back, "You can't grow revenue by hoping for it, by wishing it. You have to actively invest in it, and that's what we plan to do." Asked if the furloughs and buyouts would stave off any future layoffs, Kushner replied, "There's things I can guarantee and things I cannot."

After most Register all-staff meetings, the newsroom erupts in chatter, as reporters catch up with colleagues they rarely get to see. This time, silence reigned—no applause for Kushner, no joviality, nothing. He left; people remained, stunned. "At this last town hall," said one reporter who attended, "it was a chance to say goodbye to some of the people who were leaving that we may not see again before their last day."

Soon after, dozens took buyouts, leaving a hollowed-out paper that was now roughly the same anemic size it was when Kushner bought it back in 2012. Even worse, Kushner had lost the trust of the newsroom for good—two years of audacious experimentation and optimism, gone in two weeks.

"The grand Orange County Register newspaper experiment has met the real world," wrote reporter Amy Wilson—lured back to the paper after years away—on her Facebook page, letting friends know she was moving back to Kentucky. "After almost two years, reality bites."

*     *     *

"When you listened to him, you wanted to be transported," said a former staffer, describing the first couple of months with Kushner at the helm of the Register. "Everything was big, and everything was going to be grand. He painted a very rosy picture, a picture that didn't seem to match what the newspaper industry was dealing with. We should've all known better."

In interview after interview with more than a dozen former and current Register employees (all of whom requested anonymity, fearing reprisal or the endangerment of their buyout, which included a nondisclosure clause), a picture emerges that's far different from the calm, cool, collected Kushner who became a media darling, appearing everywhere from NPR's All Things Considered to The New York Times proclaiming the wisdom of his unorthodox ways. The Kushner that emerged from interviews with his crew is someone who initially charmed and inspired everyone—until it became apparent his get-rich plans weren't succeeding and a different leader emerged.

 

"He doesn't want to hear 'No,'" said one former editor. "He wants his plan implemented, and he wants it done by his date. There's no talking to him about the realities of the situation. Basically, it's just about what he wants."

"If you ask a question he doesn't like, he'll double talk," said a veteran who's still at the paper. "If you ask too much, you don't have a job."

In retrospect, it seems obvious Kushner set himself up for failure, like a Jenga tower depending on every precariously placed block. He installed himself as publisher despite having no previous newspaper experience. A hard paywall—his most controversial move—was erected to force readers to buy the print edition in an era when online content is king. To justify that, Kushner plunged into a hiring binge that saw the Register sign up hundreds of employees even though it didn't have the revenue to pay them. To fund his vision, the sales department was tasked with selling all those points despite an industry-wide decline in print advertising during the past decade.

"We have a very strong team and some great financial backers, and when there are properties with what we want to do strategically, it's an easy process, from a financial perspective, [to pursue them]," Kushner said, when asked by the Weekly why he and his 2100 Trust were interested in the Register (see "The Pied Piper of Print," Dec. 13, 2012). "We knew as soon as we started digging into the [Orange County] community and the business itself, that it was a great fit for what we wanted to do."

Through the end of 2012, the Register inspired hope. This brash novice, unafraid to proclaim that print still mattered and openly talking about purchasing even more papers, mesmerized the local and national media. New sections debuted; the paper got significantly fatter. The sight of Kushner meeting with OC leaders and businesspeople, talking with reporters in the newsroom, and proclaiming his ambition during keynote speeches and panel discussions made Register reporters believe through the first heady months of his regime.

"The newsroom was electric," said a staffer, recalling the first half-year under Kushner. "I'm a vet, and I gave it a try. I mean everything he was saying and doing, it was almost hard not to buy into it simply for the fact it was opposite of the industry trend of slash and burn. Fresh-faced, lots of money, spending money on writers and editors."

Like Peace Corps newbies heeding President John F. Kennedy's call to service, staffers urged their acquaintances from rival newspapers to join them, taking to heart Kushner's August 2012 memo that stated, "If you have friends and colleagues who you believe can help us grow, please share the opportunity with them."

"I wouldn't say I got hoodwinked," the staffer continued, "but it's just another lesson of life: If it's too good to be true, it is."

The honeymoon began showing warts at the beginning of 2013, when Kushner eliminated matching contributions to reporters' 401(k) plans. A planned Sunday magazine never materialized. In March of that year, Kushner upset the newsroom when he announced during a staff meeting that he didn't believe in the old journalism adage of afflicting the comfortable, part of his philosophy of focusing on positive news and community building. The following month, Kushner debuted weekly sections devoted to covering Chapman University, UC Irvine and Cal State Fullerton that were funded wholly by the colleges and featured puff pieces penned by Register staff.

According to one reporter, "That's when a lot of us realized that we had been sold a pile of shit."

The first canaries in the coal mine in the Register's building were in the sales department, which doubted Kushner almost from the start. To publish more pages and sections, Kushner eliminated a successful zoned advertising program because the Register's ancient presses couldn't handle the extra work. He eliminated massage ads in May 2013 after claiming children read those ads; it cost the paper $1 million, per sources.

"Communication was horrible," said a former salesperson. "We'd be told of a new section or paper with only a month's notice to sell it. 'We're going to have a new section!' we'd hear. That's fabulous! Do you have the advertising dollars to support it? Of course, we didn't. But [Kushner] wanted things done rapid-fire; he wanted results immediately."

One example was the Golden Envelope program. The Register had debuted it to much fanfare in the fall of 2012: Subscribers could choose a charity, which would then get $50 in free advertising for every subscriber that recommended them. "One of the most powerful ways we've banded together in support of the community is through participation in the Golden Envelope program," Kushner wrote in a letter to subscribers. "We have since heard wonderful feedback from nonprofits who are seeing a significant boost in volunteers, awareness and funds for their missions because of your participation."

 

His motives were more crass: Ad reps were instructed to upsell nonprofits to buy ads in the paper and start a new revenue stream. It never materialized because most nonprofits couldn't afford them. "On one side," said a manager, "we had people saying this is our commitment to help out nonprofits. On the other side, you had people saying, 'Money, money, money.' A lot of nonprofits were offended—how is that building community?"

But nothing raised more ire than the paywall, instituted in April of 2013. "When they told us that, we couldn't believe it," said one reporter. "But they told us they know what they're doing. You don't cut people off cold. That was a stupid thing."

The sales department began hearing from angry advertisers and readers. "We told our managers what our clients were telling us," said a representative. "They wouldn't listen."

Instead, Kushner and Spitz frequently used the analogy of a Starbucks cup of coffee to justify the move. "If you went into Starbucks, and it was a smaller cup with a little less coffee in it, would you pay more or less?" Kushner explained on MSNBC last year. "You'd pay less. If instead . . . every week you come in, I give you a little bit more coffee in a little bigger cup, over time, you'll pay more for it. That's the simplicity of [my] model."

It was a mantra repeated by Register management, but one the newsroom openly mocked.

"What the fuck is this?" said a team leader. "What's this bumpkin mentality? He went to Stanford, and this is the shit he comes up with?"

Still, Kushner pushed forward through 2013, and people stood by him. The hiring of reporters continued. Community weeklies turned from tabloids to broadsheets, with the Irvine World News and the Reg's Costa Mesa/Newport community paper, The Current, turning into dailies. He announced a daily would debut in Long Beach, insisting advertising dollars and subscribers would eventually blossom and fund the push. Then-editor Ken Brusic had enough confidence to tell The Guardian in late July that year, near Kushner's one-year anniversary, "It really is extraordinary. We've been able to create a sense that there is a future, that there is possibility."

Within six months, Brusic was gone—and the Register was falling apart.

*     *     *

At the end of 2013, Kushner was seemingly on top of his empire-building game. Just a year and a half after acquiring Freedom Communications, he had pushed into Long Beach, had taken over the Riverside Press-Enterprise, and was getting ready to start the Los Angeles Register to take on the Los Angeles Times. The paper was big; reporters still believed.

More bumps had occurred, for sure. The P-E's previous owner, the A.H. Belo Corp., had threatened to not go through with the sale after Kushner couldn't meet certain financial thresholds, and Freedom's previous owners sued Kushner over allegations he owed them money; he responded by saying they grossly underplayed the pensions he'd have to pay out. But Kushner was still riding a wave of rah-rah national press for apparently doing the impossible: not only expanding a daily newspaper in a time of endless layoffs and budget cuts, but making it thrive, as well.

Privately, though, Kushner was fretting. He had bought Freedom for $50 million, paying off that debt by selling off most of the Register's sister papers and other corporate assets. To complete the P-E deal, he had to take out another high-interest loan; his company only had $6 million on hand after that. Advertising sales were nowhere near the level needed to sustain Kushner's experiment, an inconvenient truth he had already shared with his staff in August, when he revealed the Register hadn't met second-quarter expectations.

He needed money. So Kushner went around Southern California in December, pitching potential funders with a PowerPoint presentation on how he'd make them cash.

According to sources who spoke to the Weekly on the condition of anonymity, Kushner offered a $12 million investment in Freedom. It was needed, according to the confidential PowerPoint, to "complete the $30 million preferred equity financing that surrounded the acquisition of the Press-Enterprise and the recapitalization of" Freedom. Anyone who took the plunge was promised a robust 18 percent annual return, 12 percent equity ownership and "the opportunity to participate in future company transactions," as well as have an "advisory role in the growth of Freedom."

"Management believes that The Orange County Register has now built a reservoir of quality and goodwill rivaling any newspaper in the country," the presentation asserted. "The fixed investment in a major revamp of the Register is now complete with the upswing in revenue and major partnerships accumulating already with significant growth still to come."

 

Kushner's pitch mentioned little about journalism. Instead, his spiel focused on real estate: he planned to sell the Register's offices and land around it, with a slide showing it would bring in $81 million by the beginning of 2015 to pay down $47.1 million in debt and "preferred equity" to investors. He also proposed strategies that had already gotten him into hot water in the Register's newsroom for breaching the wall between advertising and editorial. One was using Freedom's imprimatur to sell naming rights and sponsorships for venues and events ranging from the Segerstrom Center Plaza to Formula One racing teams. Another proposal pitched a "transaction and content hub" in the model of LasVegas.com to promote OC tourism and travel. Yet another was the creation of a "service bureau for national newspaper partnerships using our system, reputation, sales force and business model to monetize remnant newspaper inventory across the country, both digitally and in print."

And, incredibly, Freedom also hinted at further national expansion plans as a way to ensure returns for investors. Noting that many newspapers were in "sell mode," the presentation proclaimed "huge potential . . . to deploy this growth strategy nationally."

Investors were unimpressed.

It's not clear whether Kushner was able to convince anyone to fork over $12 million, although the Columbia Journalism Review pointed out even junk bonds didn't promise such returns. But shortly after his presentation, Kushner's aura of invincibility crashed—and fast.

Simply put, his strategy never paid off. Costs piled up, while revenue fell so sharply that by August of 2013, the Register began offering absurd discounts—one deal, for instance, promised that if advertisers bought two full-page ads, they'd get three for free. The deals, while earning money in the short run, angered clients when the Register demanded they pay normal rates after the specials. "It's like you put them on heroin," a former sales rep who was laid off said, "and then you pull them off it."

Even that fire sale wasn't enough. A February 2014 executive summary obtained by the Weekly showed the Register had lost about $24 million in 2013 after writing off taxes and had stock, pension and loan liabilities totaling $94 million. Revenue kept plummeting: That same month, a month-to-date sales performance memo given to the Weekly revealed that reps were only able to make about $5,000 of their $40,000 goal for the paper's new Celebrations/Fashion sections; for Inside Retail, they were off by nearly $86,000. The memo was blunt: "Unfortunately, we have gone backward significantly in revenue."

Kushner, meanwhile, demanded results and wouldn't hear anyone who suggested that maybe his rapid push had set up the Register for failure. "Everything was always everyone else's fault," said someone in Kushner's inner circle. "He'd cut people down pretty fast [when they offered advice he didn't like]. He was pretty brutal and demanding, and his management style trickled down to others. People below us would ask, 'Does anyone tell him, "Hey, let's put the brakes down?"' Nope, can't do that with him."

So at the start of 2014, the dismantling began. The Register switched its health-care coverage from Anthem Blue to the cheaper Kaiser Permanente. He bought life-insurance policies on employees to fund the paper's pension plans, a move the Los Angeles Times called "ghoulish." On the sales side, departments were laid off; those who stayed now found they couldn't earn a commission unless they hit 100 percent of their goals (before, commissions began at 90 percent). And the goals were set so high, according to someone familiar with the issue, that "no one could hit them—not even close."

In mid-January, Kushner announced layoffs at the Register and P-E, with the latter paper suffering its second round in three months; it has lost at least 80 staffers since the takeover. He didn't bother to meet with those he let go in person, instead describing the layoffs in an internal memo (sent by Register communications manager Eric Morgan) as "a difficult but important restructuring of our OC Register content team that reflects our assessment of what our content team looks like to tackle the next phase of our growth in Orange County and LA County." Brusic resigned instead of implementing the cuts; in his stead, Kushner upset the newsroom by appointing deputy editor Rob Curley.

Curley had arrived at the paper in 2012 with a checkered past. Hailed as a whiz kid by media watchers, he landed multiple high-profile positions before joining the Las Vegas Sun in 2008 to head its digital operations. There, Curley angered long-timers by spending millions of dollars on a video effort that lasted four months and getting accused of practicing payola—he suggested that "product placement would be sold" on his broadcasts, according to a 2010 Las Vegas CityLife exposé. The CityLife story also claimed that Sun editors told reporters not to question Curley on anything. He eventually left in May 2012 and planned to take a job at a real-estate company. But a month later, Curley joined the Register—groomed to eventually take Brusic's spot and do Kushner's will, according to sources.

 

Increasingly, Kushner became desperate as everything bottomed out. The debut of the Los Angeles Register meant about 75 staffers left the newspaper's Santa Ana headquarters, leaving it short-handed. He okayed outlandish subscription specials that increased Sunday circulation—one allowed people to get the Register's Spanish-language weekly Unidos and the Sunday Register at the rate of two pennies a week for two years. The atmosphere in the newsroom became "toxic," said one observer, as Curley openly argued with reporters, most of whom gave him no respect. At the P-E, Kushner ordered editors to fudge the "Most Read Stories" email it sent out every morning to subscribers so that cheery stories with few hits made the list and replaced crime dispatches, which were actually more popular.

By April, Register editors agreed to run stories by nonprofit rival Voice of OC because their investigative staff was so thinned-out. The hard paywall eventually became so porous it's now harder to find a story that's not behind it. And about a month and a half ago, sales reps say, they began getting calls from collectors who were asking for the Register's accounts payable department, "screaming and frustrated and saying, 'I want to get paid.'"

By the time the furlough leak came out in the Orange County Business Journal, no one was surprised. The paper's staffers had had enough. "He's really violated the compact with us," according to a reporter. "For me, you say you want to do this all for us and the community, but are you really doing it all for us? That's been one of the most devastating things for people here. We believed Aaron when he said things would be better. Now, who knows what's going to happen?"

"When we walked into the newsroom" to hear Kushner deliver his June 9 speech, said someone present, "we knew it was going to be a fucking bloodbath."

*     *     *

On June 20, a subdued Rob Curley sat in the Register's lobby to talk with the Weekly. Three days earlier, the last of the Register's reporters who took buyouts said their goodbyes to the newsroom. Management thought only 20 would apply; the final tally was about 70. In fact, Kushner and Curley asked some people to not take buyouts, or to delay them because departments were eviscerated and the basic task of putting a paper together would literally be impossible. These were buyouts even less generous than the ones offered in January—paid out in two-week increments instead of in one lump sum, with no health coverage—yet Pulitzer Prize nominees, editors, nearly the entire graphics department, new hires and so many more tripped over themselves to leave, no longer waiting for Kushner's dream to pay off.

"It was a week of tears," said someone who stayed. Salt was rubbed in the wound on June 16, when Register brass gathered at the House of Blues in Anaheim to celebrate the debut of the Los Angeles Register along with advertisers. And upper management spiked a farewell column by popular Home and Gardens editor Cindy McNatt and forbade the publication of others, arguing they were redundant.

The buyouts "will not be easy and will impact all of us, but it is necessary to ensure a strong and healthy future for our newspapers," Kushner wrote in a companywide email. "Critics will try to say that we have failed. To the contrary, the failure would be if we did not try at all, or if in our measured success we did not adapt so that we could continue to invest in our growth."

"I want to be thoughtful to my smaller newsroom, but . . ." Curley says, when asked how he planned to motivate those remaining. His voice trails off. "I wish I had the wisdom of Solomon."

Curley spoke openly to the Weekly about his past and present, from the payola allegation at the Sun ("It would've been marked explicitly as advertorial," he said, and besides, the project never went through) to his popularity in the newsroom ("You can't make everyone happy, and you just try to do the best that you can and try to do what you think is right."). Curley claimed Brusic recruited him, not Kushner. Regarding the allegations that he clashed with reporters, Curley said he "knows it's not true" but adds "I expect people to treat each other with respect in the newsroom. When they don't, it's hard for me to respond with kittens and rainbows." He admitted that the buyouts "hurt our hearts," but vowed to be resilient alongside his staff.

 

"There's a moment in every journalist's life when they realize they want to be a journalist," he said. "We have to channel that calling right now, even if it's difficult. You have to lead when it's hard, not when it's easy."

Asked if he trusts his owners, Curley replied, "What others are doing, it isn't working. I don't know what's right or wrong, but you have to take a leap of faith."

But Kushner's problems continue. The Register's internal numbers from the beginning of this year estimated its net loss would be around $8 million for 2014. Sources claim the Los Angeles Times stopped delivery of the Register over millions of dollars owed, and that money is so tight the Register's ink-delivery man showed up one evening, telling the workers at the printing press he was instructed to not give them the barrels unless someone gave him a check on the spot. Kushner reputedly refuses to pay the Associated Press for running its stories in his Los Angeles and Long Beach papers, claiming they're merely editions of The Orange County Register instead of stand-alone mastheads. (An AP spokesperson didn't outright deny the claim, stating instead it valued Kushner's "membership in the Associated Press cooperative, and we look forward to continuing to provide vital AP news content to him as he pursues other publishing efforts in Southern California.")

Asked for comment, Kushner had an answer for everything. Owing the Times millions of dollars in distribution fees? The Times "has never stopped distributing" his paper. The delivery man with the barrel at the printing press? His "ink delivery [has never] stopped." The Associated Press imbroglio? "We operate under strict contract with the AP and pay the AP a lot of money to license their content in our contracted geographic zone, which in our case includes LA, Orange, Riverside and San Bernardino counties." Telling the P-E to add happy stories to its daily emails even if they weren't the most-read pieces? "We are always evaluating and evolving the content we provide digitally and in print, and our subscribers expect us to edit what we produce." And while newsroom sources point to Kushner as the person who blocked McNatt's farewell to readers, he insisted, "I don't spike columns."

During an email exchange last week, the Weekly accidentally sent Kushner a rough draft of this story. After receiving the document, Kushner, who had already responded to earlier questions, replied, taking issue with the Weekly's coverage of his recent travails and stating he "got the sense that you enjoy tearing things down much more than building things up." He described Curley as "a wonderful editor, leader and person." Kushner discounted our use of the Register's net income estimates to judge the health of his company, pointing out that operating income is on the rise and that "it's inconvenient for your narrative that we'll be generating steady cash from our operating business this year"; according to the executive summary obtained by the Weekly, the Register is predicting it will post a $17.6 million operating profit in 2014, with annual increases through 2018, when the figure is projected to reach about $65 million. And he disputes that The Orange County Register's newsroom is shrinking. "Our newsroom and our paper is 50 percent larger than when we started, plus we've added the Press-Enterprise and LA Register," Kushner argued.

On the Weekly's Navel Gazing blog, former sports copy editor Chris Long left a long comment summing up the Register during the Kushner era. He had started with the paper in 1996, got driven out, but returned the following year, "when a more competent sports editor took control." Long stayed "for an 18-year stint on the sports desk that conclude[d]" with the buyout.

"Two statements by Aaron Kushner stand out from early town-hall meetings," Long wrote. "After being asked how he can succeed when most other newspapers are failing, he said, '[He and co-owner Spitz] are smarter than they are.' The other statement was, 'You can't cut your way to success.' Now, he is doing what all the guys he's smarter than have done."

Nice Shirt; Smug Mug
Kevin Liu

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