When William Randolph Hearst began thinking in the early 1900s about building a headquarters in Manhattan for his newspapers and magazines, he envisioned a tower rising into the sky near Columbus Circle that would stand as a monument to his empire. But by the time a six-story base, with its art deco facade of cast limestone, was completed in 1928, plans for the tower were scrapped. Now, nearly eight decades later, the fusty low-rise building that has mirrored Hearst Corp.'s somewhat stodgy image has given way to a spectacular glass-tower headquarters.
Built atop the original structure in a design by architect Sir Norman Foster, the new 46-story Hearst building is about as modern as it gets, from its signature triangular-paned exterior to a thoroughly green approach.
No question, the $700 million-plus headquarters will help pump new energy into the private, closely held Hearst, putting under one roof for the first time nearly 1,800 employees. The building's morphing of art deco with the contemporary will also underscore Hearst's efforts to adapt its Old Media holdings for the Digital Age. "It's just great to complete the chief's vision of the future," says Hearst CEO Victor F. Ganzi in a rare interview. "We like to think we built a 21st century office for a 21st century company."
In these days when media executives are feeling more and more heat from investors over stagnant share prices, Ganzi, a lawyer, might just be the most envied mogul around. Hearst has no shareholders, so it faces none of the Wall Street pressures to deliver quarter after quarter. And Ganzi has a stable team of executives to help him expand aggressively just as other media outfits are retrenching, making fewer acquisitions in favor of investor-friendly stock buybacks. "It must be refreshing to have the long-term view that allows you to take more short-term risks," says media consultant Tom Wolzien. Adds Cathleen Black, president of Hearst Magazines and clearly in line to be Ganzi's No. 2 if he decides to fill the job he once held: "Vic is putting his own stamp on [Hearst] and is always willing to look at an acquisition. He has also made us a little bit more open."
The 119-year-old Hearst, controlled by a family trust, is certainly pushing beyond its traditional newspaper, magazine, and TV operations. In March the company agreed to pay nearly $600 million for a 20% stake in credit-ratings company Fitch Group. Hearst already sells business information through such services as Zynx Health Inc., which provide scientific research and best practice guidelines to hospitals. So Fitch, with its ratings and research arms, fits in, and its fee-based model helps diversify revenues. (Fitch competes with Standard & Poor's, a unit of BusinessWeek's parent, The McGraw-Hill Companies (MHP).)
Not that ad revenue is hurting at Hearst, despite a tough climate for media overall. The company is projecting revenues will be more than $7 billion this year, compared with $5.2 billion in 2002 when Ganzi took over. Net income was about $800 million last year, vs. $500 million in 2001, the company says. "My biggest surprise as CEO," says Ganzi, only Hearst's sixth chief executive, "is that it is a lot harder than I expected [to make profits]."
For the most part, Hearst has been shrewd about investments, taking stakes in ESPN (DIS) and Lifetime Networks, for example. Just as Hearst made those moves during cable's infancy, now it hopes to make similar forays in broadband. Its Interactive Media unit is scouring for the next big payoff. Using minority stakes, "we want to be active investors, sit on the boards, and learn," says Kenneth Bronfin, head of interactive media and a former NBC (GE) executive with several patents in TV technology.
One big bonanza: an investment of several million dollars 12 years ago in a tiny women's portal called Home Arts that eventually ended up as part of iVillage Inc., with Hearst holding a 25% stake. In May, Hearst got a $155 million payout after NBC Universal Inc. (GE) shelled out about $600 million for the Web site.
Hearst is even finding some new life in print. It has launched 57 international editions of its magazines since 1999, bringing the total to 176. Cosmopolitan, for example, has 56 editions -- and enough revenue to win it the prestige of being housed on the highest floors of the Foster tower. The appetite for U.S. titles and culture is extraordinary in countries where magazines were never prevalent before, says Hearst executive George Green. International sales helped generate a 21% gain in earnings for the magazines in 2005, he says.
Looking ahead, Ganzi is fully aware that any Hearst CEO is expected to ensure that the company is at its maximum value when the Hearst family trust expires and family members take ownership directly. That is due to happen sometime around midcentury, with the death of the last family member born before WRH died. That's a long way off. But Ganzi says he feels a sense of urgency every day. He may have a fancy new building, but he insists the game plan is unchanged. Except now there's a much better view.
By Tom Lowry