Philadelphia Investors Buy Two Newspapers
By KATHARINE Q. SEELYE
Published: May 24, 2006
A group of local investors bought The Philadelphia Inquirer and its sister paper, The Daily News, yesterday, promising not to interfere with news-gathering operations, although critics question whether editorial independence will be possible.
The new owners paid the McClatchy Company $562 million for the papers, and said they would keep publishing The Daily News, a tabloid with a declining circulation whose future has periodically been in doubt. And they pledged not to interfere in the running of the newspapers, addressing concerns that the papers might cater to their business interests. The new owners paid homage to the history of The Inquirer, one of the country's oldest newspapers, which won 17 Pulitzer Prizes during a period in the 1970's, 80's and early 90's. They said they had agreed to leave much of the current newsroom management in place and honor union contracts.
"The next great era of Philadelphia journalism begins today with this announcement," Brian P. Tierney, an advertising executive who is a lead investor, said at a news conference.
The group, which calls itself Philadelphia Media Holdings, consists of 10 local investors representing corporate and labor interests as well as entrepreneurs. The buyers, none of whom have owned newspapers before, have said they want the papers to concentrate on local news, particularly business news.
Bruce E. Toll, a home builder who is the biggest investor with a contribution of $25 million, will be chairman of the new company. He owns automobile dealerships and recently sold shares in UbiquiTel, worth more than $30 million. As a businessman in the area and a co-founder of Toll Brothers, the home building company, he has been frequently mentioned in The Inquirer in the last two years.
Other investors, who have also been covered in the papers over the years, include Leslie Brun, chairman of a diversified holding company, the Sarr Group; the Carpenters Pension and Annuity Fund of Philadelphia and Vicinity; Bill Graham, chief executive of a large insurance brokerage firm; and Michael Hagan, chairman and chief executive of NutriSystem
Mr. Tierney, who will be the chief executive, has been involved in Republican politics, served as a corporate spokesman for Sunoco and has represented the Roman Catholic Archdiocese of Philadelphia.
At the news conference, Mr. Tierney said all the investors had signed a pledge that they would not attempt to influence or interfere with either the news coverage or the editorial pages of the papers. In an interview, he said the pledge would extend to the papers' endorsements of political candidates.
"I understand the concern, but we don't want to be involved in that," Mr. Tierney said. He said his expertise was in advertising and marketing and he would focus his energies on those. "The best way to kill this as a business," he said, would be to tamper with the integrity of the papers, "so I pledge to you that won't be the case."
At one time, newspapers were frequently owned by business interests but that has been less true since the middle of the last century, when media companies began consolidating. Walter Annenberg, a wealthy businessman whose family owned The Inquirer from the 1940's until the late 1960's, used The Inquirer to settle personal scores, promote his own political views and crush his business and political rivals.
"Annenberg treated The Inquirer as an arm of his own will," said John Morton, a newspaper industry analyst, who said that having local businesspeople own a newspaper created potential conflicts of interest.
"That's the danger," he said. "And that danger may be aggravated by the fact that these new owners don't come out of a newspaper culture and might not be sensitive to the damage to a newspaper's journalism and to its future by using it for some kind of personal agenda."
Joseph Natoli, the publisher of The Inquirer, said in an interview that he took Mr. Tierney at his word that he would not interfere with news and editorial functions.
"I and a lot of other folks will be quick to call them on it if we see a problem," Mr. Natoli said.
Similarly, Zach Stalberg, the former editor of The Daily News and now president of the Committee of Seventy, a nonpartisan local civic watchdog group, said of Mr. Tierney, "He's an honorable guy, and he knows the world will be watching."
Mr. Stalberg said he was surprised that the Tierney group won the bidding, because its members had no newspaper experience. But he said it was a good outcome for the papers and the city.
"He's a forceful advocate for the things he cares about," he said, "and what these papers need is someone who will fight like hell for them."
Others are less sanguine. Ralph Cipriano, a former Inquirer reporter, got into a battle with Mr. Tierney when Mr. Tierney represented the archdiocese and Mr. Cipriano covered religion for the paper. Mr. Tierney objected to a pending article, which Mr. Cipriano said was then watered down before publication. (The episode led to Mr. Cipriano's dismissal in 1998 and his filing of a libel suit against The Inquirer. The case was settled out of court for an undisclosed sum.)
Mr. Cipriano attended the news conference yesterday. "For an advocate kicking down editors' doors, I don't think he showed much respect for the integrity of the newsroom," he said.
The new owners said they wanted to market and sell ads for the newspapers aggressively and upgrade the joint Web site, www.philly.com.
"I want to try to grow these publications, not manage their decline," Mr. Tierney said. "There's no plans to close The Daily News. I love The Daily News."
The sale ends one chapter of uncertainty and turmoil at both papers. But it could open another as the owners get to know the newspaper business, which is still profitable although troubled. Advertising is in a slump, classified ads are migrating to free online sites, readers are decamping for the Internet and newspapers have yet to figure out how to make money from their increasingly popular Web sites. Philadelphia is further hobbled by a lagging economy, and the papers are saddled with expensive union contracts.
Mr. Tierney emphasized that the company would be private, freeing the investors from meeting the demands of Wall Street. As a measure of investor commitment, he said all had pledged not to sell any of their interest in the papers for at least five years.
The group will give McClatchy $515 million in cash and will assume $47 million in pension liabilities.
Knight Ridder, which owned 32 daily newspapers, including The Inquirer and The Daily News, was sold under pressure from shareholders to McClatchy in March for $4.5 billion. McClatchy immediately announced it would sell 12 of those papers, including the two in Philadelphia, because their markets were not considered growth markets.
Knight Ridder's profit margin in 2004 was 19.3 percent, about average for the industry. Morgan Stanley, which examined the company before its sale, said the profit margin in Philadelphia was 9 percent, while company executives said it was somewhat higher, even with severance payments last year as the papers trimmed their staffs.
Both papers have been losing circulation at rates that exceed the industry average.
Circulation at The Inquirer, once the jewel of the Knight Ridder chain, fell to 350,457, a drop of 5 percent, for the six-month period ended March 31, compared with the period the year before. Circulation at The Daily News dropped 9.4 percent, to 116,590.
The average circulation loss for the industry was 2.5 percent.
― scott seward (scott seward), Wednesday, 24 May 2006 02:11 (nineteen years ago)
David Carr on May 22nd!!!:
In Print, Staring Down a Daily Worry
By DAVID CARR
New York Times
A YEAR ago, I was talking on the phone to the editor of a major newspaper for a column I was working on. With business concluded, we had The Conversation, the one about the large boulder that seems to be tumbling through the newspaper business. "How old are you?" he asked. Forty-nine, I told him. "Me too. Do you think we outrun this thing?"
I said I thought so. But I wonder whether it will be the same for my friend Michael Schaffer.
At 32, Michael Currie Schaffer one of two Michael Schaffers who writes for The Inquirer is one of many bright young things in journalism. A Fulbright scholar, he was a freelancer who quietly elbowed his way into a staff job at The Washington City Paper when I was the editor there. He became the second in command at age 25, and ran the paper for a month while I was sick.
He became a national correspondent at U.S. News & World Report and then moved on, with a great deal of excitement, to The Philadelphia Inquirer, as a general assignment reporter. He did a tour as a war correspondent in Iraq, and is now working in the City Hall bureau. After three years at the paper, Michael loves the job.
But in March, The Inquirer was sold by Knight Ridder to the McClatchy Company, which promptly put it back on the block because even though it makes $50 million or so a year, it is not growing at a rate that suits McClatchy's corporate strategy. So sometime in the next few weeks, McClatchy will sell The Inquirer, a former crown jewel of American journalism that won 17 Pulitzers in 18 years during its heyday in the 1970's and 1980's under the editor Eugene L. Roberts Jr.
Michael and I sat on a bench in the brilliant sun last Wednesday outside Philadelphia's massive City Hall and chatted between his calls for a daily story about an impasse in the municipal budget.
"There are people at the paper, some of whom have been there for a long time, who are rightfully traumatized," he said.
Several offers for the paper came in last week, including one from a bidder who talked about cutting newsroom jobs by half. Amanda Bennett, the editor of The Inquirer, said that the staff remained focused on the task at hand. "Our people, despite the uncertainty, are producing a fabulous newspaper," she said in a phone call.
Michael is happy to be one of them. "I step back and think, I am getting paid to do something that is really fun and satisfying. But I'm interested in what comes next, and some of those versions of the future are pretty unappealing to me," he said.
While we had our own version of The Conversation, a lucky pigeon in front of us found a lone chip in a foil bag, but it was quickly lost amid a crush of others rushing in for a taste.
This summer, Michael is taking a two-month trip with his wife, but is not precisely sure what kind of paper he will be returning to. In times past, he would have been viewed as a comer, someone who was bound to be snapped up by a large national paper, but newspapers like The Washington Post and The New York Times have been making their own cuts lately.
"Something happened to our generation where we were not raised to do something that our parents did every day," he said. "I have friends here who are smart people, who are very well informed, but they don't feel the need to get a paper."
The Inquirer was once a sprawling enterprise with bureaus all over the world and a sniper's mentality on the news, picking off story after story, but it slowly abandoned the city, as did many Philadelphia residents, tilting its resources toward the suburbs. But now that Philadelphia is being reinvaded by the middle class and has a vibrant, residential downtown, Michael wonders why a decent daily paper in a resurgent city seems to have gone begging.
"This is a city that never recovered from deindustrialization. Paradoxically, there has been a huge influx of yuppies who want to live in a city and have a taste for cute Belgian bistros," he said.
Over time, the leadership at The Inquirer was pushed hard for cuts and greater profits by Anthony Ridder, chief executive of the papers even though the paper had earned hundreds of millions of dollars after being purchased from Walter H. Annenberg in 1969. According to The Columbia Journalism Review, Mr. Ridder responded to a huge prize year in 1987 by saying that he would like the paper "to win a Pulitzer for cost-cutting."
He got his wish, with round after round of cuts, but lost control of the papers in an effort to satisfy Wall Street. Fewer reporters and a smaller amount of space for news stories does not generally attract new readers or new revenue. Perhaps Mr. Ridder can use some of his $9.4 million severance to fund a study on the demise of the American daily newspaper.
"I think that quality newspapers could go on for years and attract a very solid readership, but you have an industry with problems that is still struggling to be among the most profitable in the country," said Mr. Roberts, the former editor of The Inquirer (and a former managing editor at The New York Times). He mentioned John Carroll, who left the Tribune Company after tiring of spending all of his time on the cost side of the business. "John said there used to be a dozen ways to measure success in our business and now there is only one."
Back on the bench, Michael took a call from one of the council leaders who suggested that a compromise was imminent. He hustled several blocks to The Inquirer's gorgeous newsroom, a churchlike place of soaring ceilings animated by the controlled chaos of a daily paper on deadline. Michael tapped in a new lead on his story a nice, tidy 15-inch tale of conflict, competing agendas and a denouement. Nothing fancy, just a bit of craft that will give the people who read it a little better idea of what's happening with their money.
"I love city politics and I cover a doozy of a city," he said.
He's right about that. With mass transit, a downtown full of history and warm bodies, a tabloid (The Philadelphia Daily News, which is also owned by McClatchy and also on the block) to stir the pot and newsstands on many corners, Philadelphia is a glorious newspaper town. I happened to stop by one of those newsstands near city hall for the second time last Wednesday. The guy behind the counter recognized a repeat customer. "See you tomorrow," he said.
― scott seward (scott seward), Wednesday, 24 May 2006 02:22 (nineteen years ago)