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SPECIAL REPORT / CROSSING THE LINE

Crossing the Line

A Los Angeles Times Profit-Sharing Arrangement With Staples Center Fuels a Firestorm of Protest in the Newsroom--and a Debate About Journalistic Ethics

December 20, 1999|DAVID SHAW | Times Staff Writer

Philip Anschutz, whose company owns Staples Center, also owns the Los Angeles Kings hockey team and most of a 25% interest in the Lakers basketball team, the two primary tenants of the new arena; through the Kings, the company already had a promotional arrangement with the Los Angeles Times. In exchange for cash payments from The Times and free advertising in the paper, The Times had been allowed to sponsor special family nights at Kings games and to have signage rights at the Forum, where the Kings played before Staples Center was built.

The arrangement was similar to arrangements The Times has with the Dodgers and Angels baseball teams--and similar to arrangements that many big-city papers have with their local professional sports teams. But for Staples Center, Leiweke wanted more. He wanted The Times as a founding partner.

Newspapers that enter into such arrangements inevitably expose themselves to at least "the possibility of conflict [of interest]," says Tom Goldstein, dean of the graduate school of journalism at Columbia University in New York. "It's much cleaner if your corporate parent has nothing to do with the subject you're covering."

Editors at many newspapers--the New York Times and Washington Post among them--agree. Such a relationship would be anathema to the Post, says the paper's executive editor, Leonard Downie.

For the Record
Los Angeles Times Monday December 27, 1999 Home Edition Part A Page 3 Metro Desk 2 inches; 39 words Type of Material: Correction
Investment conference--Participants in the Philadelphia Inquirer investment conference are selected by members of the paper's newsroom staff but, contrary to what was reported in The Times last Monday, they are invited by Morningstar, the co-sponsor of the conference.

But Los Angeles Times executives thought Staples Center could be a major contributor to the revitalization of downtown Los Angeles and they were eager to participate. "I didn't think it was worth what they were asking, though," says Jeffrey S. Klein, then-senior vice president of The Times, who supervised the early negotiations on the Staples deal. Leiweke understood.

"The Times was spending probably . . . as much as a half-million dollars in cash and in-kind with the Kings and the Forum," Leiweke says. "Our founding partners were going for . . . $2 million to $3 million" per year for five years. It was "very clear" to Leiweke that The Times wasn't going to put up that kind of money. "This was way out of their ballpark. . . . We knew that in order for us to ultimately make a deal work, we were going to have to come up with a much different concept on how to fund our package."

Previous Successes

Negotiations stalled for several months in 1998, then got on track, Leiweke says, "when we began to change from saying, 'Here is the number that our founding partners come in at,' and instead had conversations saying . . . 'We're willing, in your particular case, to take a portion of this in cash, a portion of this in trade [free advertising] and a portion of this on ideas that we would create that would generate revenue for us, and we'd take a risk on that and apply it toward your fee as if it was a guarantee."

Why was Leiweke so eager to have The Times as a founding partner?

"We'd had great success with them on [Kings] family nights," he says. "They'd been wildly successful, 3,500 people a night, dramatically expanding our base of fan support. . . . Because of the marketing and promotional support they could provide, there was value beyond the cash" that the paper would contribute.

Mark Sande, who negotiated the final agreement for The Times, saw Leiweke's proposal as "an adventurous and creative" approach, "a good entrepreneurial idea." Times profits were down in 1998, budgets were tight and he thought Leiweke's proposal was "a way for us to be able to make this deal during a time when cash was a problem."

Sande was then general manager of The Times Sports section--a new position on the business side of the paper, one of several created by Mark Willes to improve revenue and interdepartmental cooperation. Like the other section general managers, Sande was supposed to devise ways to get new readers and more advertising for his section and to promote awareness of the section in the community. Toward that end, the deal Sande negotiated with Staples provided that The Times would get exclusive signage rights at the arena, exclusive rights to sell The Times inside the arena, a Los Angeles Times news kiosk just inside one of the main entrances, and a 16-person suite for all Staples Center events--all for substantially less money than most of the other founding partners paid.

Although all the principals in the negotiations say that the precise terms of the Staples deal are confidential, information from a variety of sources shows that, in effect, The Times agreed to pay Staples Center about $1.6 million a year for five years--$800,000 of that in cash, $500,000 in free advertising and an estimated $300,000 in profits from what Leiweke had called "ideas that we would create that would generate revenue for us."

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