Why the Dallas Observer Was Sold
The classified sex ads caused a national boycott. So its parent company cut ties with the paper. Or did it?
In late September, Joe Tone, the young editor of the Dallas Observer, broke the news to his staff that they would soon be moving offices. But they wouldn’t be going far, just four floors down in their building on the corner of Oak Lawn and Maple. In his pleasant, Midwestern way, he explained that the paper was moving to distance itself from Backpage.com, the classified ad site owned by the Observer’s parent company. That company, Village Voice Media, was based in Phoenix, but Backpage.com, which has been associated with prostitution and underage sex trafficking, was based right here in Dallas, where it ran operations just down the hall from Tone’s office.
In a blog post that went live at 12:14 am on Monday, September 24, he offered more details about the move: “The longtime owners of the Dallas Observer have sold the paper and its 12 Village Voice Media sister publications to a group of VVM executives, creating a new holding company and cutting ties with Backpage.com, the controversial classified advertising company. So: we have new owners, but the same old bosses.” The new company, based in Denver, is called Voice Media Group.
The “longtime owners” Tone referred to are Mike Lacey and his business partner Jim Larkin, who founded Phoenix New Times in 1970 and grew it into Village Voice Media, the nation’s largest chain of alternative weeklies. (Disclosure: I worked as a staff writer for VVM for three and a half years.) Lacey is a charismatic but prickly man, known for his colorful language, his love of Scotch, and his unwillingness to back down from a fight. He once went to jail as part of a long battle against Maricopa County Sheriff Joe Arpaio.
But it seemed the prostitution ads on Backpage.com, which have run in the Observer for years, had generated too much bad press and forced too many national advertisers to sever their ties with VVM. “Backpage.com has been a distraction, there’s no doubt about it,” Scott Tobias, head of the new Voice Media Group, told the Wall Street Journal. But the site was also too profitable to let go. The “adult” section of Backpage.com brings in an estimated $22 million a year. It appeared Lacey had decided to get out of the journalism business in favor of the sex business. He cast the move in different terms. In the few interviews he did after the separation announcement, he said his decision to sell the papers but keep Backpage.com was a “First Amendment issue.”
Backpage.com started in 2004. It’s the brainchild of a former Observer classified ad salesman named Carl Ferrer, a shadowy figure who cannot be seen or interviewed by reporters. (Liz McDougall, general counsel for Village Voice Media Holdings, LLC, would confirm nothing about the creator of Backpage.com, even his name, saying it’s for his own safety and “so he can focus on the business.”) The site is a person-to-person marketplace, similar to Craigslist. Backpage.com offers an adult section, with categories such as “escorts,” “body rubs,” “strippers & strip clubs,” and “adult jobs.” While plenty of the ads are placed by willing, adult women, the site has also been used by pimps to peddle women, some of them underage.
When Craigslist shut down its adult listings in 2010, after a serial killer used the site to lure victims, Backpage.com thrived, eventually accounting for a reported 70 percent of all prostitution ads in the country. There are now listings for every state in America and for countries on every continent except Antarctica.
The trouble for Backpage.com really began earlier this year, when New York Times columnist Nicholas Kristof wrote a series of articles excoriating the site. Kristof, who has won two Pulitzer Prizes for his reporting on human rights violations in China and genocide in Africa, documented the case of a girl who had been sold as a sex slave on the site when she was 16 years old. Then he pressured VVM’s financiers (including Goldman Sachs) and national advertisers (including Warner Bros., Disney, and Target) to cut ties with the company until Backpage.com agreed to remove the escort ads.
Representatives from VVM tried to make the case that removing the ads would drive the online escort business underground and offshore, making it even more dangerous for the women and children most at risk. But a national campaign sprang up with an online petition that collected 200,000 signatures from people demanding that the ads come down. A website called Village Voice Pimps began documenting dozens of sex trafficking cases nationwide that involved Backpage.com. Activists emailed media outlets across the country with lists of local advertisers that had agreed to stop placing ads in VVM papers.
The company felt the pinch, and by the end of the summer, VVM was laying off writers across its chain of papers.
When the sale of the papers was announced, something strange happened. The management buyout, readers were told, was backed by a private equity fund. But how much money was involved and, more important, who was involved—those details were kept private. If VVM was losing ad revenue because of its ownership of Backpage.com, then it stands to reason that part of the value of the fund’s investment in the weekly papers lies in recapturing that money. And the best way to do that would be to make it plain that the new owners are, in fact, new. Shrouding the private equity fund in secrecy only invites speculation. Andrea Powell, the executive director of FAIR Girls—an organization that helps at-risk girls, including some trafficked on Backpage.com—has called the sale “a smoke-and-mirrors effort” on national television. Too, it is rare for media outlets to not reveal their ownership simply because every hard-hitting story would be open to the criticism that it was written to further the interests of a secret, faceless owner.
Before the split, VVM tried to make its case to outside reporters. Now the entire organization—both sides of it—has become tight-lipped. Through their attorney, Lacey and Larkin have declined interviews. Tone said he couldn’t comment, instead deferring to a public relations woman in New York; she would only say that all the financials are “a private matter.” Tobias, who is in charge of the Observer’s new ownership group, would only answer questions over email. When asked why his company isn’t being transparent about its new sources of income, he replied with a canned statement that read, in part: “This was a business decision involving two companies who realized they have two separate missions—one in news and entertainment and one focused exclusively in digital classifieds—and both are better off focusing on those separate missions.”
Interestingly enough, hours after the split was announced, Village Voice Pimps posted some new information on its site. The group had found the trademark registration for the new Voice Media Group logo. It was registered in July—two months before the sale—to Village Voice Media Holdings, LLC. That means the logo of the new supposedly independent company is owned by Mike Lacey and Jim Larkin.
There’s also this: for all the things Lacey is known for—the drinking, the rabble-rousing—the 64-year-old multimillionaire is also known for the ink on his hands. Across his knuckles are tattooed the words “HOLD FAST.”
WRITE TO MICHAEL MOONEY AT MICHAEL.MOONEY@DMAGAZINE.COM.