Can Billionaires and Newspapers Mix?
With declining circulations and dwindling advertising revenues, newspaper companies have been struggling for years. As their stock prices have come under pressure, shareholders have pressed for some companies to be broken up. In the crosshairs this year is Tribune Co. (TRB), owner of the Chicago Tribune, Los Angeles Times, and Newsday, as well as the Chicago Cubs baseball team (see BusinessWeek.com, 7/13/06, "The Real Story at Tribune").
The result is that, after 40 years of big, publicly traded companies such as Tribune and Gannett (GCI) leading consolidation in the industry by buying up small papers, the industry looks like it's headed toward a new era in ownership. A new breed of wealthy businessmen—including ex-General Electric (GE) CEO Jack Welch, billionaires Eli Broad and Ronald Burkle, and DreamWorks co-founder David Geffen—are looking over the books of struggling companies as they consider buying marquee newspapers, such as the Los Angeles Times and The Boston Globe. Most recently, Maurice Greenberg, the former chairman of insurer American International Group (AIG), has expressed an interest in Tribune Co. and even Dow Jones (DJ), according to a report in The New York Times (NYT).
Still a Business
The question is how well can billionaires and newspapers mix—and how would the new ownership structure change the industry. Many of the would-be acquirers are successful businessmen, with skills that could help the struggling enterprises. Some see themselves on a rescue mission—an attempt to bring papers away from the pressures of Wall Street and back into private hands. "If a mogul is coming in with a head of steam talking about a local treasure and restoring civic institutional worth, it could well be an improvement over chain ownership," says Peter Hart, an analyst for the media watchdog group FAIR (Fairness and Accuracy in Reporting).
Yet businessmen don't want to lose their shirts, either. Philadelphia businessman Brian Tierney took over The Philadelphia Inquirer earlier this year as part of the breakup of parent company Knight Ridder. With the continuing soft advertising market, he ended up cutting expenses and eliminating the publisher and editor. He's now looking to cut 150 jobs.
"There will always be a desire to get good profits out of the newspaper or chain," says Bob Steele, a professor of journalism ethics at The Poynter Institute, a journalism research and educational organization. "The question is, how much money will they want, and how fast."
But Not a "Widget Factory"
Many in journalism say that any chance at rescuing newspapers from the cost-cutting pressures of public investors is one worth taking. They blame Wall Street for the ferocity of job cuts in the industry, which amounted to 2,000 last year at midsize and large daily newspapers, according to Editor & Publisher.
"Wall Street's values are almost directly opposed to journalistic values," says Hart. "Good journalism calls for intensive, on-the-ground reporting, while the financial pressure is there to do the work with half the staff. But if a new media owner approaches the paper with some civic pride, that's very different than looking at it like a widget factory."
Private ownership could have its own drawbacks, analysts caution. Owners could try to influence editorial content to benefit their own interests, be it a pet cause or promoting another of their profit-making entities. "Private ownership doesn't guarantee vigorous and independent journalism," says Steele.
A Different Path
Still, the status quo, of whittling down newspaper staffs to cut costs, looks like the most dangerous route to many in journalism. "I'm for taking a chance on the private moguls and getting away from the corporate guys," says Todd Gitlin, a professor at Columbia University's Graduate School of Journalism. "For them to succeed, they'll need deep pockets and a commitment to creating quality journalism. It's conceivable that Geffen, Broad, or Ronald Burkle would have that kind of patience, and not just be obsessed with the next quarterly earnings report."
The Los Angeles Times and other parts of Chicago-based Tribune may not end up in the hands of wealthy individuals. Gannett has also expressed an interest in acquiring the newspaper properties. And Tribune may end up deciding not to sell.
Nevertheless, many in journalism are cheering on the billionaires. "There's no guarantee, but it seems the odds of maintaining good journalism improve with local entrepreneurs," says Gitlin. "If you're lucky, you get the right one—one who understands the making of a good newspaper."
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