If New-Jersey based hedge fund Chatham Capital Management isn’t interested in selling The Charlotte Observer to a local owner, we should build it (and recruit current Observer talent — whom I admire and respect, but are saddled with ownership that’s misaligned with the community).
It’s not a wild idea. In 2021, when hedge fund Alden Capital refused to sell The Baltimore Sun to my 78-year-old buddy Stewart, he pledged $50M and started The Baltimore Banner. It’s now got 44,000 paying subscribers and a staff of 125.
The difference between me and Stewart is fairly obvious, I’m not that old (I’m 40) and I’m not that rich. I know how to run this, but I’m not wealthy enough to start it.
Catch up: I knew my public offer to buy The Charlotte Observer would get a reaction from media nerds, but I had no idea that it would lead to 500,000 views and 1,000 supportive messages (along with Wall Street Journal coverage).
Build vs. Buy
Starting a local media brand from scratch is hard. I know because I’ve done it.
Setting it up as a self-funded, for-profit is great for a lifestyle publication (ex, Charlotte Agenda and Tiny Money) — but it’s not the right setup for this project.
I’d create a non-profit. Why? It’s simple — you can generate a lot more revenue a lot quicker with philanthropic dollars. And it aligns the organization’s mission with the community.
What’s the cost of a minimum viable product here? You can’t be too small, but you don’t need to be too big. I believe the right staff size is around 40.
- Management team – 3 at an average of $300K/yr, so $900K
- Sales and fulfillment – 5 at an average of $150K/yr, so $750K
- Operations – 5 at an average of $100K/yr, so $500K
- Newsroom – 30 at an average of $125K/yr, so $3.75M
Total payroll of $5.9M. Let’s add another $1.6M for space, event production, technology, etc.
That’s a grand total of $7.5M in annual expenses.
On the revenue side, here’s what I believe we can do.
- Year 1: $1.5M — $500K philanthropy, $600K subscriptions (5,000 subs at $10/mo), $400K ads
- Year 2: $2.2M — $500K philanthropy, $1.2M subscription (10,000 subs at $10/mo), $500K ads
- Year 3: $2.5M — $700K philanthropy, $1.8M subscription (15,000 subs at $10/mo), $1M ads
- Year 4: $5.4M — $1M philanthropy, $2.4M subscription (20,000 in subs at $10/mo), $2M ads
- Year 5: $7.5M — $1M philanthropy, $3.6M in subscription (30,000 subs at $10/mo), $2.9M ads
We’ll break even in Year 5. From there, we’ll grow responsibly as revenue grows.
So, if we total all expenses for the first 5 years and offset them with revenue — it’s a grand total of $18.4M in philanthropic investment we’ll need to get to break-even (I know this is an oversimplification, but you get it).
There’s around 5-10 billionaires with connections to the Charlotte area.
So now, the question is — will a civic-minded, wealthy family provide this $18.4M philanthropic investment? My email is ted(at)tinymoney.com
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