The Death of the JOA
City by city, paper by paper, an experiment aimed at saving newspapers is withering away.
By Paul Farhi
Senior contributing writer Paul Farhi (email@example.com) is a reporter for the Washington Post.
ONE WINTER MORNING last year, Walter E. Hussman Jr. stood before the assembled newsroom staff of the Chattanooga Free Press and proclaimed a new day. Hussman, the son of a son of a newspaper publisher, had just claimed the venerable Free Press in a bidding war.
To the assembled journalists, Hussman was reassuring: He pledged to invest in the paper and to maintain a joint operating agreement with the morning Times, whose owners had bid unsuccessfully for the Free Press. The JOA, after all, had kept little Chattanooga (population 150,000) a two-newspaper town for nearly 20 years. "We're a family business just like the McDonald family," Hussman said, referring to the Free Press' founders. "We've got a lot on our plate to finish the job the McDonalds started."
Within six months, Hussman began negotiations with the Times' 13 owners, the great-grandchildren of Adolph S. Ochs. Ochs had acquired the paper in 1878, 18 years before buying another Times--this one in New York.
By November, Hussman's WEHCO Media Inc. had a deal--but not the one he had promised his staff. For an undisclosed price, the Little Rock-based company would take over the Times and fold it into the Free Press to create one morning paper. "Newspapers," Hussman declared in his second moment of triumph, "have to combine resources to do what they do best."
In fact, that is exactly what the Times and Free Press had already done. After an almost ruinous period of business and editorial competition, the papers in 1980 had declared a truce, combining all their business and printing operations and splitting the profits between them while maintaining independent editorial operations. Mergers of this kind in almost any other industry would invite a lawsuit from federal antitrust authorities. But the newspaper industry is different.
Would-be daily rivals are permitted to set ad rates jointly, run one set of presses and generally pool resources, thanks to Congress and Richard Nixon. Together in 1970, they pushed through the Newspaper Preservation Act, which exempted newspapers from antitrust laws and sanctioned existing and prospective JOAs. As Congress explained, the law was necessary because "economic conditions have created a situation in which a large majority of American communities have already become one-owner newspaper communities." The law's intent, according to its sponsors, was to maintain "a newspaper press editorially and reportorially independent and competitive in all parts of the United States." Two newspapers could share a monopoly, the government decreed, as long as they kept their editorial operations separate and independent.
But as the events in Chattanooga make abundantly clear, neither the Newspaper Preservation Act nor the JOA has stopped the inexorable decline of two-newspaper towns. In the late 1970s, 28 cities had two papers joined at their wallets via JOAs. Today, only 13 do--and the vital signs of papers in many of those towns are weakening by the month.
In the past 15 years, JOAs have ended--and newspapers have died--in St. Louis, Miami, El Paso, Nashville, Tulsa, Shreveport, Knoxville, Pittsburgh and Columbus, Ohio. Last year, Evansville, Indiana, joined Chattanooga among places where JOAs had succumbed.
In August, the joint operating agreement that has kept two papers alive in San Francisco since 1965 came apart, five-and-a-half years before its expiration. The morning Chronicle, the largest independently owned paper in America, was sold by its family owners for a reported $660 million to Hearst, parent of the Chronicle's JOA partner, the afternoon Examiner. Hearst announced it would close the Examiner (circulation: 114,776) if it couldn't find a buyer.
Hearst's emergence came as no surprise. The JOA gave each partner the right to buy the other in the event one wanted to sell, or to match any third-party offer that came along. Hearst wasn't about to let the Chronicle (circulation: 482,268) get away; buying the Chron gives Hearst a clear monopoly on newspapers in San Francisco.
The prospect of anyone buying the Examiner, meanwhile, seems dismal at best. The JOA with the Chronicle had been the Examiner's lifeline; by agreeing to publish in the afternoon, the Examiner long ago had doomed itself to an inferior market positon. The buyer of the Examiner could convert the paper to morning publication, but it would have to struggle along without the presses, delivery trucks, advertising staff or guaranteed share of the profits that the Chron-Ex JOA had ensured.
And so another town is likely to lose another paper that a JOA was designed to preserve.
Not only are existing JOAs in jeopardy, the prospects for new ones are virtually nil. The last applications for joint-publishing status were approved by the Justice Department (whose antitrust division oversees enforcement of the Newspaper Act) nearly a decade ago, when rivals in York, Pennsylvania, and Las Vegas were permitted to combine.
The reason for this is simple: competition in the daily newspaper business is so feeble that there aren't many competitors left to merge with. Only 14 markets still have completely separate, competing papers, and in most of those markets one paper is so far ahead that there's little incentive for the leader to agree to peaceful coexistence.
"I think it's safe to say it's unlikely we'll ever see any more JOAs," says John Sturm, president and CEO of the Newspaper Association of America, the trade group whose predecessor organization was most responsible for passage of the Newspaper Preservation Act. "It's just the way the world has developed."
SOME JOA PAPERS have died simply because time--and the agreement itself--ran out. JOAs aren't forever. Their length is established in advance by the two partners, and either partner can walk away at the end of the term. When that happens, the weaker partner--most often, the evening paper, or the one that doesn't publish on Sunday--typically goes on life support. That was the case last year in Evansville, where the evening Press folded after its partner, the morning Courier, declined to renew a JOA that dated back to the latter part of the Great Depression.
But the cause of death for many JOA papers over the past 15 years seems more closely akin to homicide than advanced age.
In a number of JOAs, publishers have mutually decided it's better for their bottom lines, if not for their readers, if one of the partners dies. To be sure, JOAs aren't ironclad fortresses that can forever shelter publishers from the vicissitudes of newspaper economics. But the suspension of solvent JOA newspapers does seem to raise a question: Exactly what is the Newspaper Preservation Act preserving?
Despite the continued march of JOA papers to the grave, the Justice Department has demonstrated waning enthusiasm for making publishers live up to the deal they made with Congress in 1970--namely, the continued operation of "separate and independent" editorial voices.
The pattern may have been set in St. Louis. By 1983, the Newhouse-owned Globe-Democrat had become so weakened by suburban competition and a lengthy strike that its operating losses began to wipe out the monopoly profits of its JOA with Pulitzer Publishing's Post-Dispatch. So the partners moved to kill the Globe--profitably. In exchange for an agreement to close its paper, Newhouse got what amounted to an annuity from Pulitzer: a share of the Post-Dispatch's profits until the middle of the 21st century.
Before the deal could be consummated, however, Justice intervened. It forced Newhouse to shop the Globe to would-be buyers. The paper was eventually sold, but it lasted only two more years under an inexperienced new owner, Jeffrey Gluck, and died in bankruptcy. Today, under its agreement with Pulitzer, Newhouse still reaps a share of the profits from the Post-Dispatch, a paper it never owned.
In St. Louis, Pulitzer and Newhouse could at least argue that the end was near for one of the partners. Not so in Miami in 1988, when, for the first time, a newspaper in a profitable JOA was closed without intervention by the federal government. The Miami JOA involved Cox's News and Knight Ridder's dominant Herald. That year, Cox chose to close the lowly News rather than face certain extinction once the JOA expired eight years later. By making an early withdrawal, and leaving the Herald with the greater Miami market to itself, Cox got a lovely farewell gift. Knight Ridder agreed to renegotiate the JOA and extend it to 2021. Thus, for not publishing in Miami, Cox got a share of the Herald's profits well into the next millennium. Justice's reaction: an inquiry, but no attempt to force Cox to look for a buyer for the News.
Critics say such pay-for-not-playing deals--repeated with variations in Knoxville, Tulsa, Pittsburgh and other cities--pervert the spirit and intent of the Newspaper Preservation Act.
"It's bullshit!" thunders Bruce B. Brugmann, the feisty publisher of the equally feisty San Francisco Bay Guardian, an alternative weekly that delights in regularly skewering the "Ex/Chron," as it calls the Bay Area's dailies. "These billionaire crybabies decided long ago that they don't want competition, and they brought in the government to license [them]. Now they can't even make it with a government-sanctioned monopoly! The minute they get into a position to do it, they kill the other paper."
Brugmann has been inveighing against the Chronicle and Examiner's JOA in print and in person for more than three decades. In 1970, he joined in an unsuccessful lawsuit that challenged the JOA on antitrust grounds. Ignoring much of the evidence of the past 60 years, he suggests metropolitan dailies could compete against each other without JOAs, if only they weren't wedded to bloated profit margins and skimpy news budgets. "We compete head-to-head against [other local weeklies], against America Online, Microsoft City Search, the dailies, and we do just fine," he says. "We know how to cover our territory from an alternative point of view. Why can't the dailies figure that out?"
Brugmann's intellectual soul mate is Stephen Barnett. Now a law professor at the University of California-Berkeley, Barnett is appalled by the fact that JOAs can simply kill off one of the partner papers. "Legally and morally what's going on is wrong," he says. "These papers used the act to set up JOAs that stopped economic competition, on the justification that they would still publish two papers. It's absolutely shameful how little the government has done about it."
Responds Gina Talamona, a spokeswoman for the Justice Department's antitrust division, "We look at them on a case-by-case basis to decide if any action is warranted." (Implicit in this is that no case, since Miami, has warranted any action.)
Justice officials take the position that in the current media landscape, with its plethora of Web sites and cable television outlets, there is plenty of economic competition. Besides, they say, the formation of a JOA puts an end to any real competition between the newspaper partners.
But Barnett says there's no legal justification for simply allowing publishers to close JOA papers when there are alternatives. For instance, he says, Justice officials could require the publisher of the weaker paper to put it on the market and force a sale if a legitimate buyer emerges, as it did in St. Louis.
Or the government could require a sale that includes the paper's interest in the existing JOA, Barnett says.
A third way might be to have both papers compete in the morning, which long ago became the cycle preferred by readers and advertisers. That's what Seattle's JOA partners, the Times and Post-Intelligencer, recently agreed to do. Fearing that the Times would eventually wither in the afternoon slot, the Blethen family that controls the paper persuaded Hearst, which controls the P-I, to tear up their existing agreement. They struck a new arrangement, running to 2083, that will make the Times a morning paper starting in about two years. For its part, the P-I will get a larger share of the profits.
WALTER HUSSMAN HAS no regrets. ###
"It's a shame towns the size of Chattanooga can't afford to have two separate papers, even in a JOA," says the amiable publisher one afternoon, several months after engineering the deal that turned Chattanooga's two papers into one. "The Times' owners and ourselves had both come to the same conclusion. We couldn't continue to have two papers in a JOA. The problem was neither could be as good as a merged entity."
In fact, the death of the venerable Chattanooga Times didn't have to happen--or at least it didn't have to happen when it did. Both papers could have continued in their JOA, which by all accounts was still profitable, for at least another five years, and perhaps as long as another 16 years.
The Chattanooga JOA, signed in 1980, was supposed to run until 2015. It gave the Free Press the afternoon slot and the Times the morning, with the Free Press also getting an exclusive franchise on Sunday. Indeed, the JOA was unusual in that the afternoon publisher was the stronger of the two partners. Although at its death the Times sold slightly more copies than the Free Press (41,229 vs. 40,119), the Free Press had the Sunday market to itself and owned the printing plant. It collected 63 percent of the JOA's gross profit, with the Times getting the balance.
By design and tradition, the two papers were bitter rivals, with a long history of economic and journalistic competition and a healthy dose of mutual antagonism. For years, even under the non-aggression pact of the JOA, their editorial pages and news judgments were tailored to different parts of the community, the Times leaning more liberal and the Free Press more conservative (only about 5,000 subscribers took both papers). In short, "competing editorial voices" prevailed in southeastern Tennessee.
This homeostasis began to deteriorate the day Hussman stood in the Free Press' newsroom and announced WEHCO Media's purchase of the paper. Both owners knew the JOA contained a critical clause: Both papers had the right, with five years' notice, to terminate the agreement.
Hussman never invoked that clause, but he didn't really have to, says Paul Neely, a former Times publisher. "The price he paid for the Free Press could only be justified by [his eventually] turning this into a one-newspaper monopoly," Neely says.
As the junior partner in the JOA, the Times was vulnerable. "The minute that [termination] letter gets sent, the clock would be ticking down" for the Times' survival, Neely says. "The paper would become less valuable with every passing day."
He adds, "Walter is well capitalized [WEHCO owns six dailies, several cable TV systems, two radio stations and a TV station]. The [Times' owners] were not. The JOA could have ended in handsome or ugly fashion, and Walter was prepared to go either way."
Given this situation, the Times had two alternatives, says Ruth Holmberg, the paper's former chairwoman: It could sell to WEHCO right away, getting the most it could, or it could gear up to fight Hussman after the JOA ended. From Holmberg's vantage point, the latter course wasn't attractive. For one thing, WEHCO has shown that it's a tenacious competitor; in the early 1990s its Arkansas Democrat outlasted Gannett's Arkansas Gazette and now has a monopoly in Little Rock. Furthermore, there were no heirs apparent among Holmberg's children. "We didn't want to get into a pitched battle" with Hussman, Holmberg says. "It would be very difficult and very expensive."
So the Times' owners decided to sell, under terms that weren't disclosed. The JOA was scrapped, and WEHCO became the monopoly publisher, moving the Free Press to the morning. As for the Justice Department, Hussman says, "They didn't object."
The decision to do away with the Times still rankles in Chattanooga. "People feel betrayed," says one politically connected Chattanoogan, a close observer of both papers who asked not to be named.
"It's very evident that day-to-day competitive journalism has been harmed," says Larry Bowers, executive editor of the nearby Cleveland Daily Banner and a former Chattanooga Times sports editor. "You don't see that competitive level with one paper, because there's no need."
Hussman has kept alive some remnants of the Times, including its editorial page and even its name--the paper is now known, awkwardly, as the Chattanooga Times/Chattanooga Free Press. Even so, "I miss the paper," Holmberg says. "Selling a paper isn't an easy decision."
But Hussman is upbeat. He says after an initial round of layoffs, in which each paper cut 19 newsroom positions, the combined newsroom has 107 full-time journalists, more than either paper had alone. He says the paper can now do a better job covering the region because "we've eliminated duplication.... Instead of having two reporters [from rival papers] covering the high school football game, we've got one. Instead of two reporters at the school board meeting, we've got one." The Free Press' newshole has grown by as much as 12 pages a day, he says, and the financial news staff has gone from two to six.
But what of "competing editorial voices," that noble, if now rather quaint-sounding principle embedded in the Newspaper Act?
"The world has changed since the 1970s, when that law was passed," Hussman replies. "Back then, a far larger percentage of the community got its news from the papers. Now, there's more of everything--more TV, more radio. The Internet didn't exist then. We've got direct mail. There's competition all over the place."
"Regardless of whatever public policy principle was behind [the Newspaper Act]," says John Sturm, the newspaper industry's top representative in Washington, "the law cannot suspend the laws of economics, and the economics are driving the elimination of JOAs." As a result, he says, "I don't think the government should change a thing" about the way it enforces, or doesn't enforce, the act. "Even if a JOA served merely to postpone going to one paper, that has some value."
Agreed, says Neely. "At best, the [act] helped preserve X number of competing voices for X number of years. If the act hadn't existed, in virtually every case, the second paper would have been out of business sooner. We'd wind up where we are today anyway. But we got a few more happy years out of it."
And arch-JOA critic and law professor Barnett has mixed feelings. "When you calculate the balance sheet," he says, "the bottom line isn't clear. We no longer have competition in all these cities where it was supposed to preserve it. But maybe it did save some papers. At best, maybe it just delayed the inevitable."