Run The Onion for a while, and the line separating funny and money becomes clear.
Or at least it did to brothers Dave and Jeff Haupt, who in May sold the satirical newspaper’s Colorado operations for roughly $400,000 to The Onion Inc., after working for a decade to build one of the paper’s most profitable editions. The paper is moving into a new Denver office at 1234 E. Colfax Ave.
In Colorado, the weekly tabloid – known for its irreverent shots at everyone and everything – has a circulation of 50,000 and generates more than $1 million in revenue a year. It is a model that is likely to steer The Onion’s expansion into more markets and give “America’s Finest News Source” – gasp! – greater corporate sensibilities.
The Haupts pulled it off by often being un-Onion. To win advertising dollars, they banned sex ads and scrapped stories with headlines such as “Christ Kills Two, Injures Seven In Abortion-Clinic Attack” and “Columbine Jocks Safely Resume Bullying.”
Sales reps in the paper’s Chicago office were known to smoke marijuana while watching Cubs games on television, Jeff Haupt said. But the Haupts and their partner, Dave Rogers, assembled a staff accustomed to power lunches. While other editions of The Onion ran pages of stories there weren’t enough ads to support, the Haupts cut content to avoid losses.
“The Denver office eventually became like Indiana, operating in its own time zone,” former Onion editor Rob Siegel said.
The Haupts, graduates of the University of Wisconsin at Madison, where The Onion debuted in 1988, were 20-somethings when they decided to follow their father’s lead and go into business for themselves. It was 1995, and tech stocks were flying. The brothers sold shares of Cisco Systems and approached Pete Haise, then-publisher of The Onion, with a deal laughable today: The rights to The Onion name for 10 years in exchange for a one-time $25,000 licensing fee. Haise also agreed to pay to place ads with the Colorado startup and to let the fledgling newspaper have The Onion’s content for between $200 and $500 a week.
“At the time, it was a very fair offer because no one outside of Wisconsin knew what The Onion was,” said Jeff Haupt, who recently agreed to oversee The Onion’s business operations in Madison, Minneapolis, Denver and San Francisco. “But I’m not going to pretend that we didn’t get a really good deal.”
It was a deal many at The Onion, including Haise, eventually regretted. There were blowups when the Haupts refused to run especially biting headlines or when they made changes to the paper’s layout to protect their financial interests. There was no question the company would buy them out when their license expired this year.
“We are absolutely paranoid about protecting our brand,” chief executive Stephen Hannah said.
When The Onion launched its website in 1996, millions flocked to it, and ad sales in the print and online editions took off. The Haupts turned a profit on valuable content they paid little for – which generated more resentment, said Chris Cranmer, a longtime Onion staffer and the paper’s current publisher.
“When that agreement was signed, no one knew what they were doing, and no one saw where The Onion was going to go,” she said.
The Haupt brothers aren’t apologizing for making a smart investment or running a tight ship.
“We put a lot on the line to take The Onion to Colorado,” said Dave Haupt, who worked with his brother to repay more than $100,000 in debt they incurred. “We might have been selling humor, but the business behind it was always very serious to us. The rest of The Onion was a complete disaster.”
Indeed, the tech bust of 2000 and terrorist attacks of Sept, 11, 2001, dried up ads and drove The Onion Inc. to the brink of bankruptcy. The paper had expanded into Chicago, Milwaukee and New York and couldn’t make ends meet. The Denver office also took a hit but had budgeted for a downturn, Dave Haupt said.
“They had watched their money like hawks, God bless them, while the rest of us had laughed our way to needing David Schafer,” Cranmer said.
Schafer, a who heads $850 million Schafer Cullen Capital Management in Manhattan, first invested in The Onion in 2001 after speaking with his son, Erik, then a University of Colorado student.
“Dad, if you invest in The Onion, you will be considered cool,” Schafer remembers Erik saying. “If you don’t, the possibility of you being any cooler than you are today is pretty remote.”
In 2003, Schafer bought Haise’s stake in The Onion to become majority owner.
With Jeff Haupt’s help, The Onion is taking business cues in the area of print operations, Hannah said. Schafer hired Hannah to help push The Onion into new territory: The Onion is considering entering Atlanta; Austin, Texas; Boston; and Washington, D.C. And to win more readers, it recently started updating its website daily, and added a sports section and complete archives. In coming weeks, Hannah promised the paper would beef up its Denver arts and entertainment coverage.
“So, for all of their complaining about how we did things, The Onion gets a big investor whose son saw our paper and liked it. And now they’ve got Jeff working for them,” said Rogers. “I think they owe us a thank you.”
Staff writer Christine Tatum can be reached at 303-820-1015 or ctatum@denverpost.com.
