Why Gawker's bankruptcy spells the end of an empire

The unsophisticated view of bankruptcy is that it’s a bad thing: it means, quite literally, you’ve gone bust, and your business is worthless. If your business is worthless, then there’s no point in it continuing. So, it’s the end.

The sophisticated view of bankruptcy is that it’s no big deal: it’s basically just a change of ownership. Every company has a capital stack, with some combination of secured debt and unsecured debt and preferred shares and common shares and the like. Bankruptcy, in this view, is just a way of effectively doing a debt-for-equity swap, or otherwise shuffling money and value between various elements of the cap table in the event that a company’s liabilities get too big. Call it the Donald Trump view: Filing for Chapter 11 bankruptcy can sometimes be a perfectly sensible business decision, which doesn’t necessarily mean the end of anything at all.

In the case of Gawker Media, the truth is somewhere in the middle. The fact that Gawker Media has filed for bankruptcy certainly doesn’t mean it’s going out of business, but it is still a very big deal, especially for Gawker.com, its namesake flagship site.

Or, to put it another way: change of ownership matters – a lot – when you’re talking about certain media properties. In the case of Lifehacker, for instance, one of the blogs that is going to get auctioned off to the highest bidder as part of Gawker Media’s bankruptcy, there is a very good chance that nothing much will change. Lifehacker does uncontroversial service journalism, and will probably continue to do so no matter who buys it.

But in the case of Gawker.com, ownership matters a lot. Gawker was built precisely because its founder, Nick Denton, thought that most media owners were far too pusillanimous in terms of what they were willing to publish. The New Yorker’s 2010 profile of Denton talks about how Gawker started off as “a deliberately fly-by-night operation” which was staffed by “bloggers who considered themselves outsiders with nothing to lose,” and whose cash wages were “a convenient hedge against potential libel claims.” The site itself has said that “no major media company could buy Gawker and keep up the site’s outsider angle.”

By filing for bankruptcy and announcing a stalking-horse bid from Ziff-Davis, Gawker has started the clock on an auction of all of its assets, which will be overseen by a bankruptcy court looking to maximize proceeds. In other words, this isn’t like Don Graham selling the Washington Post to a friendly Jeff Bezos, or Chris Hughes selling The New Republic to a friendly Win McCormack. This is a raw capitalist sale to the highest bidder, whomever that bidder might be; the court will pay no regard to whether or not the bidders are aligned with Gawker’s existing editorial policy.

In the specific case of Gawker itself, that matters a lot. Gawker has had various incarnations over the years, but it has always had the same proprietor, and that proprietor – Denton – has always seen Gawker’s independence as being key to its ability to speak truth to power.

As Politico’s Tom McGeveran says, a non-independent Gawker is likely to be “utterly changed, if not annihilated”; if it were bought by Ziff-Davis, it “would surely become unrecognizable.” Almost by definition, Gawker is going to be sold to the bidder with the deepest pockets, and the richer you are, the more you have to lose. It’s easy to be fearless when you’re a scrappy young blog with no assets; it’s much harder when you’re a major corporation that wants to minimize the probability that a Florida court judgment could wipe $140 million off your balance sheet.

Denton, and the rest of Gawker’s management, will surely put on a brave face no matter who ends up buying the franchise. But Gawker simply won’t be the same if it becomes part of some big, rich media company. It won’t have lawyers who respond to nastygrams with public letters like this one; instead, it will be a subsidiary of a company with a board of directors who have a fiduciary obligation to minimize contingent liabilities.

My hope is that precisely because Gawker’s value lies in its independence, any bidders for Gawker Media are going to consider it more of a liability than an asset, and therefore leave it out of their bid. It’s still theoretically possible, in other words, that Gawker.com might remain independent, even if Gizmodo and the other cash cows of the Gawker Media organization get sold, or that Denton might manage to buy the flagship site back from its new owner.

But the tragedy of today’s filing is that Nick Denton has no real control over that outcome. He built Gawker Media, and has devoted the past 14 years of his life to it. Now, he’s probably going to see his company disappear into the hands of one of the media moguls that Gawker was created to skewer. That’s nothing to be sanguine about.