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From AJR,   December 2001  issue

Starting Over   

When David Black bought the Honolulu Star-Bulletin, he acquired little more than a nameplate and an editorial staff. In just over three months, he built a brand-new newspaper.


By Lucinda Fleeson
Lucinda Fleeson is director of the Hubert H. Humphrey Fellowship Program at the University of Maryland. She has trained journalists in Eastern and Central Europe, Africa, Latin America and, most recently, Sri Lanka, where she was a Fulbright Scholar. Her training manual for teaching investigative reporting in developing democracies has been published in 18 languages by the International Center for Journalists.     

Desolation Sound doesn't seem like the ideal place to begin rescuing a newspaper. It is a popular cruising spot off the wild western coast of British Columbia that attracts the hardy sailors. Like David Black, a wealthy Canadian newspaper entrepreneur who last year bought the Honolulu Star-Bulletin, an ailing afternoon daily whose assets consisted of little more than a nameplate and an editorial staff. In just over three months, he built a brand-new newspaper.

How he pulled it off against steady predictions that it could not be done--and for a few dark nights it looked like it could not-- is a tale of newspaper derring-do. For those who lived it, the startup was a grand adventure, maybe even a miracle.

But survival was never assured, and still is not certain.

The story begins in July 2000 as Black sailed his 77-foot ketch, the Esperanza, through Desolation Sound. His cell phone rang. It was Phil Murray, a Santa Fe newspaper broker.

Murray had not been able to find a major American publisher who was interested in buying the 60,000-circulation Star-Bulletin. It would mean getting into a newspaper war against the morning paper owned by Gannett, the largest owner of U.S. newspapers, with a reputation for putting its competitors out of business. Murray figured that Canadians were more used to operating in competitive markets and might not be scared off by the prospect of duking it out with Gannett.

Black immediately asked: "Is there a commercial printing press on the island?"

There was. "Is it for sale?" was his second question.

No, it was not.

"But the catchword was Hawaii," recalls Black, whose tall, thin, professorial appearance seems at odds with his vintage Jaguar and 3.5-acre oceanfront estate called Riffington in Victoria, British Columbia. There was the attraction of a challenge, one with big-time risk: a duel with powerhouse Gannett while trying to rescue a paper that no one else could. It would mean dissolving a 39-year-old joint operating agreement between the Star-Bulletin and Gannett's Honolulu Advertiser that had allowed both papers to share printing and business operations. And history provided little encouragement--there have been fewer than a handful of papers that have broken out of JOAs and survived.

On November 30, 2000, Black had a deal to buy the Star-Bulletin from Liberty Newspapers LP, which had planned to shut it down. The next day Black announced he had persuaded RFD Publications to sell him MidWeek Publications, the largest commercial printing plant in Hawaii.

After lengthy negotiations, Gannett and Black Press Ltd. settled on March 15, 2001, as the day the JOA would dissolve and the sale would become effective. Industry experts warned it would take at least a year to launch a new daily newspaper.

Black had 105 days.

After publishing for nine months, the scrappy, reconstituted Star-Bulletin is now sailing into troubled waters, facing layoffs, less-than-brilliant ad and circulation figures, and a depressed Hawaii economy. Black had steered headfirst into an old-fashioned, take-no-prisoners newspaper war. Whether he and his staff can elbow their way into the tough Hawaii market remains a question.

By anyone's estimate, the match shaped up as uneven from the start. In one corner was the established Honolulu Advertiser with its 100,000-plus daily circulation, fat Sunday edition, 920 employees and the backing of Gannett, owner of 97 dailies and other media properties.

In the other corner was challenger Black, a self-made press baron and owner of 80 community weeklies, shoppers and one small-city daily. He had never published a large daily, never operated in Hawaii. And under the terms of the JOA, the Advertiser owned virtually all the physical assets of the two papers.

Black had a press, but no advertising department, no circulation department or news carriers, no offices for reporters, no computers, telephones or furniture. He inherited the Star-Bulletin's 80 editorial staffers and MidWeek's 140 employees, and he would hire 260 more, for a total of 480-- slightly more than half the competition's manpower. His pockets, while deep, were tiny by comparison: Black Press earns $180 million in annual revenues compared with Gannett's $6.2 billion. Black purchased the Star-Bulletin for a mere $10,000, but pledged to sink $25 million into it.

The battle had mismatch written all over it.

SEPTEMBER 2000: The Canadians land on the island of Oahu on a scouting mission. Black and a dozen of his top executives meet with the largest Honolulu advertisers to assess the market. "We told advertisers we didn't need the same rate, but we needed the same linage, as the thickness of a paper is seen as a barometer of whether it would succeed," says Black. "They said, 'Sure, that makes sense. It's in the interest of society and our own interest to have competition.' "

Hawaii is a popular vacation destination for cold-weather Canadians, and many of the Black team were eager to relocate. But they were also charmed by the passion they found in the community for keeping the Star-Bulletin alive. Citizens had organized in protest when Star-Bulletin owner Rupert Phillips first announced in September 1999 that he would close the paper (see "The Pulse of Paradise," January/February 2001). When it was learned that Phillips would pocket $26 million from Gannett in the deal, Hawaii's Governor Benjamin Cayetano directed the state attorney general to investigate possible antitrust violations. Two lawsuits, brought by a citizens group and the state attorney general, led to a court order to keep the Star-Bulletin alive during a search for a buyer.

NOVEMBER 9: An agreement in principle is reached for Black to purchase the Star-Bulletin. In Canada, Black's strategy was to run his presses around the clock, churning out commercial jobs when he wasn't publishing his weeklies. Black intends to replicate this plan in Hawaii and secretly negotiates to purchase MidWeek to provide the core of a printing operation. In order to add enough pages and color to reconstitute the Star-Bulletin and continue to run other printing jobs, he must expand rapidly.

Black calls 10 press brokers, trying to find Goss Urbanite offset press units compatible with MidWeek's. They have to be used, because new presses would take too long to build, and they have to be idle--disconnecting them would also be too time-consuming.

NOVEMBER 28: Black learns Randy Coakley of All Press Parts and Equipment in Oshkosh, Wisconsin, has, providentially, already purchased a press with eight printing units discarded by a daily in Melbourne, Australia. Black buys them over the phone, sight unseen, for $615,000.

NOVEMBER 30: The deal closes. Black vows to immediately begin a morning edition in addition to the afternoon paper and plans a new Sunday paper. Gannett plans to start an afternoon edition. The stage is set: The two papers will both become all-day publications in a head-to-head contest.

DECEMBER: If Gannett's Advertiser wants to continue to dominate the Hawaii market, it's clear it will have to fight to do so. And Gannett is prepared to meet the challenge. It is building an $81 million production press facility, to open in May 2004, to replace the Advertiser's more than 30-year-old letterset press that produces blurry, muddy colors.

The Advertiser decides to retain all of the former JOA employees as well as increase its advertising, circulation and editorial staff. It makes most of the hires in news, where 31 people fill new positions or long-empty vacancies, bringing the editorial staff to 145. It adds sections for food and personal technology, as well as a stand-alone business section.

After Advertiser Editor Jim Gatti retires, Gannett brings in Saundra Keyes, a Knight Ridder veteran, most recently managing editor of California's Contra Costa Times and before that managing editor of the Miami Herald. Soon after her arrival, even Star-Bulletin executives admit that the Advertiser's news coverage is growing deeper and more thorough.

Keyes' counterpart at the Star-Bulletin is John Flanagan, editor and publisher since 1993. Flanagan had almost lost hope that the Star-Bulletin would find a buyer, so he had enrolled in a University of Hawaii executive MBA program. He dropped out when Black asked him to run the new Star-Bulletin. For much of fall 2000, he spent days at the Star-Bulletin in the Advertiser building on Kapiolani Street, then after-hours in a small rented office with the Canadians.

Flanagan takes December as vacation to work full time planning the new newspaper as Black's sole editorial employee. A serious, gray-haired manager, he's excited when he talks about those early weeks. "Trying to explain how we got the Star-Bulletin started is like trying to explain how bumblebees fly," he says. Previously he had been managing editor of Wilmington, Delaware's News Journal and editor of California's Marin Independent Journal, where he worked with a detailed game plan. For the Star-Bulletin launch, flying by the seat-of-the-pants and making up rules along the way were the orders of the day. "If we had stopped to produce a 2-inch-thick plan book, we wouldn't have had time to read it," he says. "We just sort of got all the arrows pointed in the same direction and pushed as hard as we could."

The Star-Bulletin's executive sales team's early efforts to secure commitments from the top 100 advertisers pay off. "Almost all of the advertisers followed through and gave us half their linage," says Black.

But the Advertiser's ad salespeople are also out in force, offering discounts for exclusive, yearlong contracts to a second tier of 300 next-largest advertisers. "That occurred when we had no sales reps on the street, so it was impossible for us to counter," says Black.

EARLY JANUARY 2001: The Australian press misses the boat out of Melbourne by two days.

On January 15, Flanagan resigns from the old Star-Bulletin and moves to the new Star-Bulletin offices in 7 Waterfront Plaza, a modern complex of office buildings, eateries and shops called Restaurant Row. Hiring is his top priority, and he plans to recruit his former staff, almost intact. In addition, he wants to hire 25 others, bringing the total editorial staff to 105.

He is immersed in so many details that he springs awake at 4 a.m. some mornings, mind racing. Even a new typeface is needed, as the old Star-Bulletin had used a mishmash of fonts, some of which had been licensed to the previous owner. Executives settle on a family of Cheltenham typefaces for a unified design.

Space is so cramped that the new managers use outside courtyard tables under umbrellas as temporary offices. President Don Kendall has a stock answer when friends ask him how he likes living in Hawaii: "I've heard they have a beach."

Meanwhile, on the northeast side of Oahu at MidWeek's Kaneohe plant, Production Manager Russel Retynski panics when he learns that he will be overseeing the production of a daily newspaper on top of the free, 268,000-circulation MidWeek, four military newspapers, several weeklies, grocery ads and even some inserts for the Honolulu Advertiser. "We were already a 24/7 business," he says. He goes into overdrive.

Star-Bulletin employees say the word on the street is that there's no way their newspaper will debut on schedule.

MID-FEBRUARY: While the Star-Bulletin possesses few physical assets, it does boast a home-delivery subscriber list of almost 50,000 devoted readers. But Black's team is not allowed access to Star-Bulletin subscriber or newspaper carrier lists for the important central Honolulu area until February 22. Still, the Canadians had assumed they could easily hire the old JOA Star-Bulletin carriers to deliver the paper.

Wrong.

By the time they get the lists, the Advertiser has signed up most of the old Star-Bulletin carriers to deliver the new Advertiser afternoon edition. Star-Bulletin circulation managers are so desperate for carriers that they drive up and down streets asking kids if they are interested in paper routes.

As if that weren't bad enough, for years each of the two newspapers had a set of front door keys to 700 high-rise condo and apartment buildings so that carriers could get into the buildings and deliver papers to tenants' doors. "We assumed that they would hand over the Star-Bulletin's set of keys," says Kendall.

Wrong again.

The Advertiser isn't going to make anything easy. The Advertiser's publisher, Michael Fisch, acknowledges: "We did not provide keys to multiple-family buildings. It was never negotiated by Mr. Black. It was not part of the sales agreement."

Incensed, the Canadians go to court to argue unfair business practices. They don't prevail, so two circulation employees work full time for a month, meeting with each building manager, paying new security deposits and obtaining keys. "We didn't see that one coming," admits Kendall. "Depending on what side of the fence you're on, it was either great strategy or dirty tricks."

FEBRUARY 22: Eighty Star-Bulletin editorial employees open letters with job offers at the new paper; an unlucky five are told, "Your services will not be required by the Honolulu Star-Bulletin." Some of the Star-Bulletin's best-known journalists are out of jobs.

Not hired is Ian Lind, whose dishy online diary during the Star-Bulletin survival saga had turned into the must-read media site of Hawaii. "There were some hard feelings about his Web site," admits Black. "He wanted to put all the news on it, whether or not it was hurting us competitively. We were entering a different world and had to keep our competitive secrets. He wouldn't cease and desist."

Two top editors would also be missing from the new Star-Bulletin. Editorial Page Editor Diane Chang and Managing Editor David Shapiro had earned acclaim in 1997 for running an op-ed essay headlined "Broken Trust" exposing corruption at the $10 billion Bishop Estate. It's a story often cited by community leaders as an argument for why Honolulu needs two independent newspapers.

In 1997 and 2000, Chang was named best columnist in the state by the Society of Professional Journalists. But Black says he had heard negative comments about her column, which he describes as single-mindedly focusing on women's issues. One of her severest critics was Gov. Cayetano. The fact that Black had apparently listened to the powerbrokers troubled some Star-Bulletin journalists. "If the governor and other movers and shakers complain about an editor, does that mean you fire her?" asks one.

Black also opts not to pick up medical insurance and other disability benefits for Shapiro, who is in a wheelchair due to multiple sclerosis. Shapiro, a key figure in keeping the Star-Bulletin alive, had gone on disability status before Black's takeover. Gannett steps forward to assume Shapiro's benefits. His weekly column, "Volcanic Ash," shifts to the Advertiser.

For some, Black's hero's halo is tarnished. For instance, Richard Port, spokesperson of the citizens organization Save Our Star-Bulletin (SOS), describes Black's failure to hire Lind as "a mistake." But for Port and others, the important prize was maintaining Honolulu's two-paper-town status. "We never considered either of the papers to be really great newspapers," says Port. "But we wanted two independent editorial voices for Hawaii."

Most journalists are just glad to have jobs. One reporter comments, as noted in one of Lind's reports: "If they said we have to all come to work in clown suits, I'd be asking, 'Where's my suit?' "

FEBRUARY 24: The press units arrive in Honolulu harbor, only to sit in customs for five days. It seems a fatal blow. Kendall and others worry that they will never be able to install presses in 13 days – an operation that usually takes several months.

MARCH 1: At last, the new presses are trucked over the steep Pali mountains to MidWeek, where the existing 10 press units have been pushed to one side of the plant and stacked to the ceiling. MidWeek's pressmen begin working harder. They'll go for two months straight, without a day off.

Ten new editorial department employees report to work and begin putting together prototypes. Black is allowed to post sign-up sheets in the old Star-Bulletin's newsroom for training on his new computer system, but the instruction has to be done on journalists' own time. Nary a chair or computer can be moved until March 15, when Black assumes command. Security guards keep watch at the old newsroom's entrances.

Black's classified sales department expands from two sales reps to 16 in a week. Most of the new workers are inexperienced and must be trained.

MARCH 12: The Advertiser sends letters to Star-Bulletin subscribers announcing that for the next 24 weeks they will receive free afternoon delivery of the new Honolulu Advertiser p.m. edition. "It meant that Star-Bulletin subscribers would receive a bill for us at the same time they received the Advertiser for free," says President Kendall. "I've never heard of any such promotion that gives away 40,000 papers for 24 weeks," he fumes. Black makes speeches in Honolulu complaining about Gannett's "predatory pricing"--a charge rejected by Advertiser executives. "I'm getting the Star- Bulletin at home for free right now," says Advertiser Editor Keyes. "I assume that at some point I'll get a call trying to sell me a subscription. Sampling is a long-standing technique for increasing competition. It's going on all over the country."

MARCH 14: Extra security guards appear in the newsroom as the staff prepares the final Star-Bulletin to be published by the JOA Honolulu Newspaper Agency. Advertiser employees from other parts of the building begin to flood the Star-Bulletin newsroom, carrying flowered leis to bestow on departing colleagues.

At noon, the newsroom staff walks through the lobby, surrounded by applauding and cheering Advertiser staff, and out the door. Led by a bagpiper they walk four blocks to their new Waterfront Plaza offices.

A kahuna presides over a traditional blessing of the premises. The journalists gulp quick refreshments, then bang out stories for the next day's first-ever morning Star-Bulletin. Reporters sit at folding tables or on the floor with their laptops or in front of Macs on cardboard boxes.

As the 10:30 p.m. deadline approaches, editors pore over page one. Splashed across it are large color photographs of the triumphant march of the editorial staff to their new offices. Yet, out at the Kanoehe plant, it's chaos. Wires lie all over the floor in makeshift electrical connections. Catwalks have been thrown up to reach the high presses, but there hasn't been time to install safety railings. The presses have been turned on to make sure they work, but there hasn't been time for a test run with paper. Not enough press parts could be located and purchased to allow for four sections, so the new Star-Bulletin will debut with only two.

Late in the evening, many of the advertising staff, television crews from Honolulu stations, and David Black and his wife and parents gather to watch in the pressroom.

MARCH 15: At 12:35 a.m. Retynski presses the button to start the presses. The crowd applauds as the presses begin to churn and gather speed up to 50,000 copies per hour. But then the machines go down, first for an hour, then for another two hours. After huddling, Black and Kendall decide to drop color on several pages. Because of the delays, they cut the number of papers printed to 40,000 from a planned run of 69,000.

What should have been a two-hour run has turned into a nearly eight-hour ordeal.

Kendall's 19-year-old son helps deliver the paper. Other family members and friends work until 10 p.m. distributing copies. Even so, the newspaper is down 350 carrier routes out of a total of 1,200.

More than 30,000 home-delivery customers phone in, complaining they received no paper. Phone lines are so clogged that they shut down. The newsroom operates on cell phones, for days. "Every newspaper in North America has two separate switchboards to prevent this problem, one for circulation, one for everything else," says Black. "We had only one."

Soon after the launch, the staff begins to gear up for its new Sunday paper, promised to debut April 1.

APRIL 1: Many of the Canadian executives trek to the Kaneohe printing plant for the historic run of the first Sunday paper. Kendall and Don Moores, vice president of marketing and advertising, work until 5 a.m. loading trucks, but the launch is a success.

APRIL 12: Only 125 of the 1,200 carrier delivery routes remain unstaffed, a level Star-Bulletin executives deem acceptable.

Russ Retynski, 48, the usually gruff production manager, calls a meeting with press crews to thank them for working seven days a week. He tells them: "If the Star-Bulletin doesn't survive, we have nothing to hang our heads about. We are in a newspaper war. Gannett is the biggest newspaper company in the nation. David Black doesn't have as much money as they do. If by chance it goes down, we can stand up and say we gave it our all."

Later, he wistfully recalls the old days when he could spend an afternoon on the golf course. "This was like starting all over. We did give it our all. But I don't want to go through another startup – I'm too old."

MAY 20: Black makes a brief appearance in the Star-Bulletin newsroom to announce that his Oahu Publications – MidWeek and the Star-Bulletin together – are making a profit after only three months.

JULY 2: New press equipment allows the Star-Bulletin to expand to four sections. After readers and staff express unhappiness about the new design, some of the old Star-Bulletin style is revived.

AUGUST 15: "Advertiser daily circulation up 38 percent" boasts a headline on the paper's business front. The story cites a specially commissioned 15-week Audit Bureau of Circulations publisher statement for the period ending July 1, 2001. On the jump page, the story reveals that the unprecedented circulation gain, to 151,808, was due to a promotion that gave free weekday subscriptions to more than 30,000 Sunday subscribers.

The Star-Bulletin claims that its own average paid Sunday circulation climbed to 85,072 from April to June, including 18,000 "controlled circulation copies." The term doesn't exist, according to the Audit Bureau of Circulations, responding to a complaint from the Advertiser.

In their previous incarnations, the feisty Star-Bulletin often bested the stodgier Advertiser, winning more newspaper awards and producing more enterprise stories. Now, even Star-Bulletin editors admit that the Advertiser is putting out the weightier news report. "It ought to," says Star-Bulletin Publisher Flanagan, noting that the Advertiser editorial staff has increased by almost 30 percent. The Star-Bulletin continues to show off its high-quality color printing with huge front-page pictures often illustrating soft features. "We've really just been concentrating on putting out the paper," says Managing Editor Frank Bridgewater. "The one thing that has been sacrificed is enterprise reports." Executives at both newspapers say they are making money. Neither side reveals how much. Black says his strategy of combining the Star-Bulletin with MidWeek's printing operations is working. "It's not very scientific as to exactly which product is contributing the most.... On the whole they are making money. I'm thrilled with where the Star-Bulletin is today."

SEPTEMBER 21: Black reshuffles his management team, with Editor and Publisher Flanagan stepping down to become a contributing editor. Kendall becomes publisher; Bridgewater assumes control of the newsroom and says that the paper is now able to devote more resources to enterprise reporting.

The Advertiser's parent, Gannett Pacific Corp., announces some moves of its own--it purchases Ladd Publishing, owner of Buy & Sell, a free classified newspaper published twice weekly and distributed statewide. A week earlier Gannett announced it would buy PennySaver, an Oahu classified paper. With a total gain of more than 100,000 freebie copies a week, Gannett is fast closing the gap between it and the Star-Bulletin's free MidWeek publication.

October 31: ABC figures show the Star-Bulletin's daily circulation has grown nearly 5.5 percent in the previous tumultuous year, to an average of 63,000 a day. Sunday circulation comes in at 64,344, about half of the 130,000 projected by Black before he took over. The Advertiser's daily circulation stands at 152,000, 38.9 percent more than last year, but its Sunday circulation has dropped 6.3 percent to 173,000. Both papers struggle to keep advertising, as the September 11 attacks have a disastrous impact on the tourist-dependent Hawaii economy.

November 9: In the first visible sign of weakness in the full-spend-ahead newspaper war, David Black blinks. Blaming the advertising plunge, Kendall announces the Star-Bulletin will lay off "about 20" employees, including five in the newsroom. Any staff member earning $40,000 or more will be asked to take a pay cut of 5 to 10 percent for an unspecified length of time.

Gannett, the national chain with deeper pockets, appears to be able to take the hit. The Advertiser says no such retrenchment measures are necessary.

From the beginning, David Black has said he doesn't want to be Hawaii's dominant paper; he simply wants a piece of the action. "I can continue forever if I'm making money," he says. "I don't have to make much. A dollar would do."

Contributing writer Lucinda Fleeson first

wrote about Honolulu's newspapers in AJR's January/February 2001 issue.