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American Journalism Review
Plundering the Newsroom  | American Journalism Review
 AJR  Features
From AJR,   December 1992

Plundering the Newsroom   

How the cult of high profits triumphed at the expense of quality, staffing and the public trust.

By James D. Squires
     


The 24-story Gothic monolith Col. Robert McCormick constructed to house his beloved Chicago Tribune on Michigan Avenue was built from the winning plans in a worldwide architecture competition in 1925. The most modern and most unusual newspaper plant of the era, its many extraordinary features include cornerstones from the world's most famous shrines and structures.
Until about 20 years ago, it also featured one of the world's most unusual elevator arrangements. In the Tower and an adjoining annex was a caste system of elevators: one set accessible only with a special security pass that sped directly to the colonel's old office on the top floor; a second set serving all the floors below except the fourth; and a third set exclusively for the fourth floor, where the editorial department is located.
It was the "fourth floor only" elevators that were extraordinary, because they represented the newspaper's devotion to a phenomenon peculiar to the American press the separation of business and editorial functions known as "the division between church and state."
When I joined the Tribune as a reporter in 1972, the colonel's rule that business-side employees, especially those from advertising, stay off the fourth floor was still very much in force. By the time I left the Tribune 17 years later, after nearly a decade as its editor, all the annex elevators stopped on every floor. Business side employees came and went at will. The hallowed separation of church and state was hardly more than a pretense.
For this, no one was more responsible than I. And for the ease with which I let it happen, I can only offer the lamest of excuses, "I really didn't know at the time what I was doing."
Through much of their history, newspapers had been edited for and marketed to specific classes or socioeconomic groups. There were ethnic papers, labor papers, papers for the masses and papers for the ruling class. But then came television. By cutting into advertising revenue and changing people's information-consuming habits, television not only reduced the number of newspapers but forced the survivors to try to appeal to a wide spectrum of readers. By the late 1960s and '70s, newspapers were in enough financial trouble that they began to survey their own markets, using the tools of television marketing. And for the first time, newspaper executives, following in the footsteps of their television and radio counterparts, began to construct audience profiles and share them with advertisers.
Nobody thought much about this at the time because the traditional walls separating editorial from advertising were still firmly in place. But it was a critical development. Except for a few financial ads on business pages around the country, newspaper advertising had been placed without much consideration given to surrounding editorial content or what segment of the population was reading the page.
By the early 1970s, experts were telling uncertain managers of then not-so-profitable urban newspapers such as the Chicago Tribune and the New York Times that perhaps their way of doing things had become obsolete. The Times, as expected, resisted. But almost everywhere else, especially in the profit-conscious corporations whose stock was publicly traded, the policy of business-hands-off-the-editorial-departments began to change. Eventually this business imperative to match up the editor's content with the advertiser's desired audience profile would be the battering ram that broke through the wall between the editorial and the revenue-generating side of the press.
Between the time I went to the Orlando Sentinel as editor in December 1976 and the day I left the Tribune in December 1989, this separation although still given lip service throughout the industry had all but disappeared. Today, with few exceptions, the final responsibility for newspaper content rests with the business executive in charge of the company, not the editor. Editors such as myself who are willing to bridge the gap between editorial and business are now the standard in the nation's newsrooms. Those reluctant to do so don't last long.
Although we justified the shift as necessary for the paper's survival, we were in effect surrendering the editorial integrity of the press to the marketing interests of corporate owners. For the first time, American journalism has become truly a "news business" built on a successful three-way relationship among news content, advertising sales and target audience.

Profits Come First
All CEOs of publicly traded corporations eventually learn what Allen Neuharth said when he first offered Gannett stock on the public market: Investors are only interested in good news. And it must be delivered year after year.
In 1981, my last year in Orlando, the Sentinel out-earned its parent, the giant Chicago Tribune. Subsequently, its cash-flow margins would surpass 30 percent and rank with the best Gannett or anybody else could produce. During my next eight years in Chicago, the Tribune profit margin tripled from the high single digits to the mid-20s. During my last two years as editor in 1988 and 1989 the Tribune was among the biggest earners in the industry. It did not even feel the bite of the Bush recession until January 1992.
But long before that, the editorial side became too difficult for me to hold up. Each year the operating departments of the newspaper were forced to do more with less, while the demands for ever-increasing profits never ceased. I had to become a smoke-and-mirrors magician, juggling from the right hand to the left, and lying to myself and my staff about how successful we were. Enough would never be enough. The kind of reinvestment needed to stop the decline in market penetration and advertising share would not be made. No bold economic model would be adopted to provide the newsprint and staff to cover news. A marketing plan written in 1982 to take advantage of the Tribune's massive new $400 million printing plant to substantially improve the quality of Tribune coverage of its key reader base the Chicago suburbs remained unimplemented when I resigned at the end of 1989.
Each year I would build into the initial budget proposal the hiring of enough entry-level reporters and advertising sales people to expand local news coverage and advertiser service about $1.5 million in payroll costs. Each year, the proposal for new hires would be dropped because corresponding increases in production costs paper, ink and new press runs meant that another $1 million to $4 million was never available. In essence, management decided that this proposed investment in staff wasn't worth what it would return in increased circulation, improved household penetration and a higher level of involvement by smaller advertisers in the Tribune's second most important market segment the high income residents of the city's Northwest suburbs. True, the newspaper was at the time paying off its plant and investing $50 million to buy back a large share of its circulation system from independent distributors. But it was also setting profit records during those years, dumping more than a half billion dollars to the corporate bottom line during the 1980s instead of reinvesting it.
My experience was hardly unique. During the 1980s at newspapers across the country, many editors and publishers were feeling the same pinch. Each day they tried to serve up both good journalism and whatever cash flow corporate management demanded. Basic and much-needed improvement to enhance the quality of journalism was discussed, planned for and then either watered down or postponed while newspapers and their corporate owners became the stars of Wall Street.
This decade of corporate development changed the nature of the Tribune and other newspapers as surely as if they had been converted to fried chicken franchises. The pressure to generate profit became a straitjacket for the free press.
The late C.K. McClatchy, a good businessman but an even better journalist-proprietor whose family ran good newspapers in California, once turned to his business manager and ultimate successor, Erwin Potts, and said, "Do we really need to make this much?" McClatchy was a firm believer in the old priorities: the readers first, employees second and owners third. It was what kept both their communities and their employees convinced that the press was a special business.
Now, there is no longer even the illusion that public service is the primary goal. Despite the lip service paid by news executives to their readers' interests, the true priorities of the new press owners were never more clearly stated than by Philip J. Meek, head of the publishing group of Capital Cities/ABC, which numbers among its press holdings ABC News, the Kansas City Star and the Fort Worth Star-Telegram. Writing on newspaper profits in WJR's July/August 1990 issue, Meek said, "Management's obligation is to balance profit optimization, franchise strengthening, community service and employee development within the context of whatever external conditions exist. Excessive multiples [the relationship between earnings and purchase prices]..require a shorter-term view and more emphasis on profits near-term."
The first part of this statement, translated from the turgid prose of Wall Street, is pretty tame stuff: "We're going to provide as high a quality journalism as we can and still make our budget number." The colonels, generals and kings of journalism all uttered similar pledges at one time or another. But simply working within a realistic budget and returning a reasonable profit is not what Meek is talking about when he refers to "multiples" and "external conditions."
In a memorable speech delivered as part of a journalism lecture series at the University of California, Riverside, in 1988, McClatchy explained in the language of the press what Meek would later say in the language of Wall Street. "There are many [newspaper] chains..that face great pressure to bolster the bottom line," McClatchy said. "Cap Cities [and others], for example, are burdened with very large debts. These pressures fight against quality."
McClatchy was citing Cap Cities as an example of corporations that buy press outlets already earning respectable profits as almost all of the monopoly newspapers bought by Gannett and others were and finance them on the expectation that those profits can be doubled and tripled. This shackles them for decades.
Monopoly newspapers in metropolitan markets such as those in Kansas City, Fort Worth, San Jose, Orlando and Fort Lauderdale can easily hold their dominant positions in the market and still return pre-tax profits in the 20 percent to 35 percent range. When they are owned by companies with big debt obligations or ambitious acquisition goals, these monopoly newspapers are asked to maintain or improve contributions to corporate earnings without fail. Businesses whose revenue base rests on retail, help wanted and real estate advertising all cyclical economies are hard pressed to produce consistent numbers without sacrificing news coverage, staff development, and most important market penetration, the percentage of households that buy the paper in a specific area.
During the 1980s, the Chicago Tribune, the Orlando Sentinel and the Fort Lauderdale Sun-Sentinel were the workhorse profit-makers of the Tribune Company. Sometimes the Tribune alone contributed 30 percent to 50 percent of the company's total profits as the broadcast and newsprint holdings faltered. During the last half of the decade, these newspapers were consistently in the 25 percent to 35 percent range in operating income profits before depreciation and taxes.
Yet year after year plans for significant editorial investment and circulation promotion to expand their markets and enhance survival were restricted or postponed so the big earnings could fall to the bottom line. The new media managers' responsibility to the corporation demands that they weigh the payback from using the newspaper's profits to improve the quality of journalism against the potential return on investment from an acquisition or another line of business. And because most newspapers are owned by diversified media companies, the result is that the highly profitable local newspapers in monopoly markets have been financing the international competition among mega-media conglomerates. ABC/Cap Cities, Gannett, Times Mirror and the Tribune Company, among others, have all been scrambling to position themselves for global competition with the likes of Time Warner, Rupert Murdoch and the media giants of Europe.
A typical newspaper purchase of the last two decades occurred in 1986, when the New York venture capital firm of Adler & Shaykin paid $145 million for the struggling Chicago Sun-Times, which was still managing a double-digit cash flow despite a lousy plant and the fact that it was second to the Tribune in circulation. Despite the paper's adequate earnings, no publicly held corporation was interested in acquiring it for the simple reason that the Tribune dominance meant that the Sun-Times would never make the kind of excessive profits Wall Street had come to expect from newspaper-owning corporations.
This meant that if the newspaper was to survive, it had to be picked up by an eccentric owner and run as a charity case the way Murdoch did with the New York Post for a decade; or run on the cheap by one of the reputable bone-picker publishers such as William Dean Singleton, who owns papers in Houston and Denver where he is fighting an uphill battle against better-financed corporate giants.
But even Singleton, who finances some of his acquisitions with junk bonds, rejected the chance to own the Sun-Times. He left it to be "saved" by a leveraged buyout, in which the newspaper's assets were pledged to secure a high-interest loan that would soak up its cash-flow. In the case of the Sun-Times, the only real asset was its riverfront building, estimated to be worth between $70 million and $100 million at the time. In effect, the buyers simply put up only $7 million equity on a $145 million deal and pledged the future earnings of the newspaper to support the purchase of a piece of real estate they believed would appreciate significantly. This left the Sun-Times alive, but without resources to modernize its printing process or significantly improve its competitive position. As the real estate market declined and appreciation did not materialize, the newspaper was left to limp helplessly along, with no more committed purpose than to service a real estate debt.
True, Chicago was better off with two daily newspapers than with one. But the real significance of the demise of the Sun-Times is this: With its only competitor gasping on life-support, the No. 1 paper in the market will gradually increase its market share without having to invest. There would be no pressure for the Tribune to hire more reporters, improve advertising service or use more newsprint. Instead, we just opened up a storefront in a neighborhood, shifted a few reporters and advertising representatives from one place to another and congratulated ourselves.
While the Sun-Times predicament was linked to the interest payments of real estate speculators, its shackling by debt is no different than the plight of many other dailies whose earnings must be shifted to finance other obligations or speculative adventures by CEOs in search of a Wall Street reputation. The ownership of the press is rife with heavily indebted corporate ownership.
Paying corporate debt service and financing international adventures do not sell well as reasons for tight budgets and skimpy newspapers, either within the newspapers or the communities they serve. So corporate demand for ever-increasing financial performance is often explained in a less than candid fashion. "Declining market penetration, not profit levels, is forcing an analysis of priorities," Cap Cities' Meek maintained in 1990. "What information readers want to cope with with the increasing demands on their daily lives must be the constant objective of any newspaper, not what the newsroom professionals think the readers need and the newsroom wants."
Meek's statement is a perfectly accurate, respectable and expected explanation of the competitive strategy of any business that must survive in the marketplace. But it encompasses both outright deception and the kind of ill-conceived, shortsighted management philosophy that has already wrecked much of America's once-vaunted manufacturing capability.

Targeting Wealthy Readers
A permanent frown seems to have formed on the faces of media company executives over the 20-year decline in market penetration levels of daily newspapers. But if penetration levels were their real concern, why don't today's newspapers just employ the tactic proven so successful to Japanese manufacturers in quest of market share? Offer higher quality at a lower price.
But improved quality, better service and lower pricing all hurt a newspaper's bottom line in the short term. Why they are not employed is the dirty little secret of newspapering: Managers rely on a flawed and outmoded economic model that bases advertising rates on total circulation numbers, which by its very nature discourages the drive for higher quality and more readers. Because advertisers only want high-income, well-educated readers, publishers don't really want greater penetration in their market. They want what magazine publishers have always wanted: penetration in the top 35 percent of the market. But unlike magazine publishers, newspaper owners can't just admit that and begin basing rates on audience profiles.
Why? Two good reasons:
One, it would mean abandoning the practice of charging advertisers for all circulation, which would destroy the single unifying economic principle of the industry without anything to replace it. This would be interpreted as a public confession by the industry to what all smart advertisers already suspect that only a fraction of the newspaper readers they pay to reach even sees their newspaper advertisement and an even smaller fraction is inclined to respond to it.
Two, it would mean abandoning the legal basis on which the printed press has always stood before legislatures and courts wrapped in the flag of the First Amendment. The newspaper industry claims the right to put vending machines on public streets and in airports, the right to sit in courtrooms, the right to see public records, the right to question the president, the right to have a front row seat at the war all on the basis that it is an institution exercising the people's right to know. Never does it claim the right to such access on the basis that it is in the business of delivering advertising information for profit. But nowhere does the Constitution define "the people" as the predominantly white, 35 percent of the population from 25 to 50 years of age making $50,000 or more a year.
Yet newspapers routinely control costs and enhance profits by cutting off unprofitable circulation because it lacks value as a quality audience. When the customer is difficult to service, hard to collect from or does not make enough money, the market penetration of which Meek and his counterparts speak so often and so covetously is deliberately given up.
By reducing circulation efforts among low income, minority readers, newspapers actually improve the overall demographic profile of their audiences, which they then use to justify raising advertising rates. Thus, with few exceptions, the profitability of newspapers in monopoly markets has come to depend on an economic formula that is ethically bankrupt and embarrassing for a business that has always claimed to rest on a public trust: The highest profitability comes from delivering advertising sold at the highest rates in a paper containing the least number of pages and sold for the highest possible retail price to the fewest number of high income customers necessary to justify the rate charged to advertisers. Of course, such a strategy can't possibly produce anything but declining market penetration, for which television and illiteracy are getting the blame.
Businesses truly worried about penetration and market share would not have newspapers' uninterrupted record for consistent price increases both in advertising and circulation. Except for the relatively few cities where there has been head-on newspaper competition, both advertising and circulation prices have risen consistently for 20 years even as newspapers' share of advertising and their household penetration have declined.
When Gannett's Al Neuharth left USA Today, his parting words were that newspapers were still selling themselves too cheaply. They should be a dollar a copy, he advised, advocating the precise strategy he sold to Wall Street. It maximizes revenue, holds down printing and distribution costs while culling from the circulation base the unwanted low income reader.
This same approach, when applied to advertising policy, has a similar effect. Smaller advertisers are driven out of the newspaper and to other, less expensive media, such as free weeklies and shoppers. This creates an underclass of advertisers and their customers who are excluded from newspapers and ultimately alienated from them. But it is undeniably the most productive use of newsprint. The cost of paper, printing and circulation makes it more profitable to publish fewer pages of high-rate advertising than more pages of low-rate advertising.

Declining Penetration
Profit optimization then is compelled less by declining penetration than by the corporate owner's many and varied cash needs not the least of which, in many instances, is huge debt incurred by companies caught up in the acquisition mania of the 1980s. Newspapers purchased by expanding groups were immediately pressed into service to finance the next deal.
Today there are monopoly markets all over the country with circulation histories such as San Bernardino, California, where Gannett bought the Sun in 1969, and Nashville, where it bought the Tennessean a decade later. In 1969, the Sun had about a 77,000 daily circulation. In the 20 years since, the market's population has increased 108 percent. The newspaper's daily circulation, however, is up only 19 percent, to 91,966. In 1979, the year Gannett took over the Tennessean from Amon Evans, the Nashville market had 800,000 people and the Tennessean's circulation was 139,000 daily. Ten years later, the market had grown to more than a million a 25 percent increase but the Tennessean's circulation was still 139,000.
The reasons are simple. The Tennessean needed new presses to build its circulation. But because it was the dominant newspaper in a joint operating agreement, the Nashville profits were substantial and, more important, not threatened by competitors. So the Tennessean had to wait until 1991 to begin its quest for higher circulation. The money was needed elsewhere. Once it got its presses, circulation began to climb.
In the case of San Bernardino, the city is next door to Riverside, where the town newspaper, the Press-Enterprise, is still controlled by a local publisher, Howard "Tim" Hays Jr., even though Dow Jones owns about 20 percent of the stock. During the same 20-year period, the Press-Enterprise's circulation nearly doubled, jumping from 82,230 to 156,508.
In all fairness, television and other social trends affecting how Americans live have hurt newspaper readership. Many white, high income readers have moved to the suburbs, outside the papers' core circulation areas, and have been replaced in urban areas by minorities, many of whom either can't or don't read newspapers. White flight and the lack of low income readership are often cited by investment analysts and media management as prime reasons for their incessant gloom-and-doom predictions.
But there might be a better explanation. Ben Bagdikian points out in his book, "The Media Monopoly," that there have been only two periods of documented decline in newspaper readership during the 20th century. The first, between 1930 and 1940, was clearly the result of the Depression and the growth of radio. The second and by far the biggest came between 1965 and 1980. In 1965, long after radio and television had become entrenched, readership was still 105-newspapers-per-day for each 100 households. Today, after 25 years of the new ownership, it is 64 per 100 households, down 39 percent.
There is no corresponding profit index available because industry profits have been a well-kept secret, first by wily old publishers who did not have to tell anyone but the Internal Revenue Service, and now by corporate reports that hide the profit margins of individual newspapers in group numbers. But the old profit margins were known by industry insiders and today's margins can be easily extrapolated by experts willing to count advertising lines and interpret rate cards.
Using those sources and methods, a comparable earnings index for the industry between 1969 and 1989 shows that under the new ownership, profits have increased as fast as penetration has declined. The monopoly papers that groups such as Knight-Ridder, Gannett and Thomson began collecting in the 1970s had low double-digit cash flows in the 7 percent to 12 percent range, depending on how many family members were feeding at the trough and how good a newspaper the owner felt obligated to provide. Some margins were higher in the 20s. But assuming average margins were somewhere between 8 percent and 12 percent in 1969, the profitability of newspapers had about doubled by 1990.
One secret the industry has not tried to hide is that its profit record is poorer in towns without monopoly papers. During the 1980s, in cities where there was still real newspaper competition Dallas, Denver, Little Rock, Houston, Las Vegas and San Antonio usually only one paper was truly profitable and Gannett-size operating margins were unheard of. But in those cities the circulation and market penetration track record for the last 20 years was much better than the rest of the industry's. In Dallas, 1990 circulation was up 147,743 daily over 1970. In Houston, it was up 169,000; Denver, 110,055; Las Vegas, 65,091; Little Rock, 57,770; San Antonio, 89,572. Newspapers in these cities still marketed themselves the way they always did in the interest of penetration and market share.
Absurdly, the economic decline in 1990 sent newspaper industry stock into a deep depression, as if the collapse of the whole business was imminent. Newspapers responded not by improving the quality and increasing sales efforts as they would have if attacked by a new competitor, but by cutting content and laying off employees. Expansion plans were canceled, editorial bureaus closed, and special editions scuttled. By 1992, the economy had claimed as victims several more papers, all in competitive markets. Gone were the Arkansas Gazette, the Dallas Times Herald and the Knoxville Journal, all closed by owners who could not make their debt payments.
John Morton, a Washington, D.C.-based analyst for the New York brokerage firm of Lynch, Jones & Ryan, explained the hubbub. "All that is really happening is that instead of being two or three times more profitable than most businesses, newspapers this year [1990] are reduced to being only one or two times more profitable," he told the industry magazine presstime. "For newspapers, a recession means only that earnings may not grow and may decline, but it does not mean earnings disappear. There is nothing shabby about an average operating profit margin of 14.9 percent, even if it is down from 17.7 percent for the same period in 1989. There are lots of industries that do not see 15 percent margins in the midst of their biggest booms in history."
It took two straight years of recession and the near collapse of the department store industry before average newspaper profits fell back into line with what other industries made in their very best years. In 1991, Knight-Ridder, which publishes the highest quality newspapers of any group owning more than 10, reported that its newspaper division had operating profits of $259 million on $1.9 billion in revenues, or 13.5 percent. Most newspaper companies don't even break out profit numbers for individual newspapers and for a very good reason. The numbers would show many of them making 35 percent in good years, and 20 percent in years when they have slashed staff and reduced news pages. Moreover, the numbers would show them gouging advertisers and readers with rate increases at monopoly newspapers to subsidize competition or diversification elsewhere.

Wealth Addiction
To appreciate the certain consequences of excessive profitmaking and failing to reinvest in quality improvement, one has only to look at the great earnings eagles of the past. One by one, railroads, textiles, steel, automobiles and network television failed to reinvest enough of their earnings in long-term product improvement. The combination of shortsightedness and the onslaught of new technology eventually turned them into buggywhip makers.
Why then do the press managers keep plunging down the same primrose path? The answer is the same you might get from a crack smoker in a Washington, D.C., tenement, or the big spenders in the deficit-ridden Congress. They can't stop. And the core of this addiction is the kind of careerism, quest for personal wealth, and peer pressure so common to the Wall Street culture. Exorbitant compensation from fees and bonuses based entirely on profits have been widely blamed for the many headline-making scandals involving insider trading, junk bond financing and illegal trading in government bonds. American business spends 70 percent of payroll costs on its executives. The American press does the same.
While many of the old press barons became fabulously wealthy in the news business, most did it by reinvesting their profits and building long-term equity in their companies. Many were cautious about displays of personal wealth and paid their top executives modestly. In 1965, when Jack Knight's family was the sole owner of his newspaper empire, the publisher paid himself a salary of $202,000.
But the new corporate ownership has brought to the press a system of executive compensation based primarily on profits. The more cash a newspaper or broadcast operation returns, the more those managing it receive in their pay envelopes. In many instances, this compensation is tied directly to company stock, either in the form of lucrative stock options or "phantom shares," in which the executives receive the benefit of improvements in stock prices due to their management. Under this system, executives in place at the time of initial stock offerings, stock splits or mergers have the opportunity to become extremely wealthy. Because they're frequently among the company's biggest individual stockholders, their personal wealth climbs with the stock price, or in the salary and bonuses tied to it.
In 1989, the Tribune Company paid its top 14 executives $17 million in salary and bonuses. In the preceding three years, then-Chicago Tribune President and CEO Charles Brumback alone had earned more than $9 million and the company's board chairman, Stanton Cook, made about $11 million mostly in stock options. This level of compensation is typical of the industry and extremely important in a world where executives are judged primarily on their ability to produce profits. Once a profit standard is set by an executive, he must exceed it the following year to be judged a success on Wall Street. An executive who does not equal or surpass the earnings record of a predecessor is frequently judged and labeled as inferior by stock analysts.
At every meeting of newspaper industry executives I attended in my 13 years as an editor, charts and graphs were displayed showing the rate of annual decline in readership and advertising market share. Never did I see a chart on newspaper industry profits or executive salaries. No such records are kept. But if they were kept and charted on a graph, the profit and executive pay lines would be the inverse of those for readership and market share. From 1976 to 1989, for example, my compensation (salary and bonus) rose 600 percent, not counting stock options, which during the same period equaled the total of other compensation.
As stockholders, executives who engineer acquisitions and mergers are among those who benefit most from them. Warner Communications Chairman Steven Ross is said to have made $196.6 million on the deal that created a new giant Time Warner Co. with its $11 billion debt. Two years later in 1991, all the company's subsidiaries were caught in budget crunches that resulted in the loss of 605 jobs. Time lost 44 people. Assuming each employee cost the company $100,000, this saved Time Warner $4.4 million. The previous year, the company had paid Ross $4 million in salary and bonuses, in addition to paying him $74 million in the Time Warner stock swap.
One of the papers that folded in 1991, the Knoxville Journal, had been brokered to Gannett a decade earlier by a group of businessmen including then-U.S. Sen. Howard Baker and Lamar Alexander, who would go on to become governor of the state and secretary of education in the Bush administration. It was all legal, ethical and above board. But the group collected several million dollars in fees, all of which ultimately had to be recovered from the newspaper's share of a profitable joint operating agreement with Scripps-Howard Company. A decade later, after being discarded by Gannett, the paper died, leaving Knoxville with a single newspaper.
The sale of the Baltimore Sun papers to Times Mirror in the mid-1980s is a similar case in point. The sale was brokered by the Sun's publisher, Reg Murphy, who was reported to have received between $13 million and $16 million for his efforts. In 1991, after Murphy retired, the new management said that as part of cost reduction requirements it needed to rid the papers of at least 260 employees through buyouts or attrition.
All this adds up to a new system of ownership in which management drains traditional press institutions of the wealth derived from decades of service within a particular community often for short-term personal gain and then refuses to sustain them through cash-flow problems five or 10 years later. It is not that these businesses could not be returned to profitability, but that they might never be profitable enough to satisfy debt loads or stockholder demands. Many of these papers had been in business for 100 years or more under all kinds of owners. But under this new system of ownership, the wealth the press accumulates in good years is never there to see it through the bad ones.
In the process, the basic relationships between the institution and its readers and advertisers are radically altered. And just as has happened in the rest of U.S. industry, so too has the crucial partnership between employer and employee been sundered. To meet financial goals, ownership has had to view employees the same way it does newsprint, as a "cost center" that can be shrunk at will to maintain profit levels. This has resulted in a new era of employee distrust and disaffection, the same kind of fractured owner-worker relationship that is often blamed for the decline and perhaps the ruin of the U.S. automobile industry. The significance of the analogy cannot be overstated. However important the automobile industry was to the economic health of the United States during the 20th century, the free press has been to the country's social and political welfare for twice as long. l

Squires' journalism career has spanned three decades and included posts as reporter, city editor, national political correspondent, Washington bureau chief and editor. He was editor and executive vice president of the Chicago Tribune from 1981 to 1989. This year he served as a media consultant for Ross Perot's presidential campaign. This article is excerpted from Squires' book, "Read All About It: The Corporate Takeover of America's Newspapers," to be published next month by Times Books.

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