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From AJR,   July/August 1999  issue

Continuation of Newspaper Monopoly   


By Jack Bass
Jack Bass is a former Nieman Fellow who published his own weekly newspaper, covered politics for 10 years and taught journalism for 11 more.     

Clustering has even found its way to the tobacco-growing region of eastern North Carolina. In and around Greenville, economic development has come late. This is by far the least urban part of the state.

For 114 years, the local paper, the Greenville Daily Reflector, was owned and operated by its founding family, the Whichards. But in 1996, they decided it was time to sell. Recalls Jordan (Jordy) Whichard III, "The family wanted to find a buyer who produced good newspapers, who had resources and could provide good long-term opportunities for our employees, and who had exhibited good stewardship in communities where it owned newspapers." They settled on Cox, a private company whose flagship paper is the Atlanta Journal and Constitution.

After the sale to Cox, Whichard agreed to stay on as publisher of the 20,000-circulation morning daily and a companion group of weeklies. His newspapering apprenticeship had begun at age 14 and had touched on virtually every job, from stuffing inserts to writing editorials.

In 1996, Whichard's duties expanded after Cox acquired two nearby dailies from Thomson--the 14,000-circulation Rocky Mount Telegram in an adjoining county and the 12,000-circulation Daily Advance in Elizabeth City, roughly 100 miles in the direction of the Outer Banks.

The transition has gone "better than we expected, as well as we could have hoped," he says. "Cox not only has not interfered in the core group of newspapers and how we operated them, but has contributed significant financial support to secure acquisitions and to centralize and update our computer systems."

A new printing plant will open in October on the outskirts of Greenville. Besides providing a new home for the Daily Reflector, the facility will print both it and the Rocky Mount Telegram, an afternoon paper. It will also permit an already thriving commercial printing business to expand. Elizabeth City, a two-hour drive from Greenville, will continue to publish out of its own plant.

"I'm not sure there's a true model yet for newspaper clustering," Whichard says. "You can translate that concept into a wide array of operation initiatives that meet particular strengths and cultures of the companies. I'm sure we do it a lot different from Dean Singleton in California."

There is no universal copy desk here, and the newspapers run no common sections. Except for accounts payable, each newspaper operates its own local business as well as its own editorial offices. But all operate from a central computer system housed in Greenville, using high-speed telephone lines. The editors meet monthly at rotating locations and alert one another if their staffs are covering a story of regional interest. The sports editors work informally to coordinate and share their coverage of East Carolina University, the pride of Greenville, and Atlantic Coast Conference teams.

The three North Carolina newspapers and four others in east Texas form what Cox calls "regional groups." They are the only such groups among the company's 15 daily newspapers. The North Carolina group has only begun to develop joint "one buy, one bill" advertising sales among its dailies and weeklies.

What is unique about Cox is its areawide computer network, CoxNet, which links all the newspapers together with a common technology and software. It grew out of coverage of the 1996 Olympics in Atlanta. A team of more than 300 reporters, editors and photographers from all the Cox papers assembled in Atlanta to publish a separate newspaper covering the Olympics. The Daily Reflector used material from this operation to provide special coverage that included a package for advertisers.

The personal relationships and technology ties established that summer evolved into CoxNet, a daily internal wire service that provides the various papers with such material as a food page developed by the Journal and Constitution.

Greenville Executive Editor Al Clark says, "It allows us to use material from other papers regularly. We use a steady stream of material--food pages, for example, and health page material and commentary/insight for Sunday readers. At our staff levels, we're not able to create this material, and it frees up time for our local folks to work on local stories."

CoxNet also transmits editorials from its larger papers, which local editors may use if they wish. "We don't run editorials from other Cox newspapers," Clark says. "We run local editorials on local issues seven days a week. I'm concerned about some other papers that say it's too much trouble, or they don't want to stand the heat. There's a great big silence out there when the local newspaper isn't doing it."

Clark is enthusiastic about having access to a reporter in Washington, Eunice Moscoso. She has been hired to provide stories exclusively for the chain's smaller papers. "It's adding something we never had," Clark says. "It's the first time we've had someone who can go directly to our congressman's office and get reaction on national issues."

Moscoso takes calls from any of the small-paper editors and follows up on local stories that involve federal agencies or Congress. Clark and Whichard hope to develop similar local coverage from the state capital in Raleigh.

Cox has provided no influx of cash for the editorial side, Clark says, "but it's made things available to me, such as the Washington Post and New York Times news services, that we didn't have before. We find them valuable. There's no difference in how we approach community journalism, but there's people we can call on for advice and assistance. The Cox purchase has been positive from the sense of more resources."

In addition to transmitting news and features and a food or book page with a modular design that allows space for local advertising, CoxNet also produces spec ads, created by the 28-person graphic design staff of the Atlanta newspapers. An example might be an ad for an optometrist, which could be sold by a salesperson at any Cox paper. "A reader looks at the whole paper," says Arnold Rosenfeld, Cox's vice president for news, "and a side effect of better-looking advertising is that it makes the whole paper look better."

So why hasn't today's rapid spread of monopoly-like clusters drawn the attention of the Justice Department? Why isn't it an antitrust issue when, say, Thomson ends up owning every daily paper in a dozen adjacent counties of Wisconsin?

It turns out that although the Justice Department rarely challenges the regional consolidation of newspapers under a common owner, it does take a look at almost every deal. And this, in and of itself, has a deterrent effect, some antitrust lawyers maintain.

In the early 1970s, newspapers engaged in what were called "midnight mergers." One paper in a city would buy another, and Justice wouldn't know about it until the deal was done. To prevent that, Congress passed the Hart-Scott-Rodino Act, which requires automatic review of almost all daily newspaper sales before they become final.

"Justice is not giving a green light to consolidation," says Alan L. Marx, a former Justice Department section chief responsible for newspaper antitrust matters. Today he advises newspaper companies about mergers and acquisitions. "Private counsel will tell their clients, 'This deal has real problems; do you want to go along?' "

When the owners of the San Francisco Chronicle recently signaled that they might be looking for a buyer, Singleton told me that MediaNews would not be interested because of potential antitrust issues.

Still, some observers wonder how much deterrence there is. The issue, however, turns on whether competition is preserved within a market, according to Marx. Take the case of Thomson's purchase of the Oshkosh newspaper, the deal that gave it a monopoly of the five dailies around Lake Winnebago. Marx says the papers were contiguous, but their individual markets and circulation areas had little overlap. In such a case, he says, "the antitrust laws are not going to cover it."

When Justice talks about competition, it usually emphasizes competition for advertising business, because it's more difficult to ascertain "facts" about news. "When I was at Justice," Marx says, "the theory we always had [was] that if you find commercial competition for advertisers, you get the preservation of editorial competition. Preserving editorial voices was an important consideration, but under antitrust law the only question was whether there was competition" within a market.

Lee Enterprises owns four key dailies in Montana. But even though its Helena bureau dominates the coverage of state government, this doesn't raise antitrust issues. Its papers--in Helena, Butte, Billings and Missoula--have little commercial overlap.

"Justice asks a lot of questions about editorial competition," says Marx, "but has yet to see how to use the answers." The issue involves both First Amendment considerations and political sensitivity. "It would have bothered me a lot to figure out how to use differences in editorial content in deciding what kind of actions we bring."

In 1997, when MediaNews sold the North Jersey Herald & News to Macromedia, owner of the nearby Record in Bergen County, the sale was held up for eight months while Justice tried to determine that both papers would continue to operate separately and that their markets didn't overlap significantly. Charles W. Gibney, a Record executive who was closely involved in the investigation, says the government expressed concerns about whether "an independent voice would be leaving the community." Still, Justice's 19-page request for documents, which filled about 300 banker boxes, focused primarily on the sale's impact on advertisers.

Although the two papers continue to operate separately, they have consolidated their accounting, press and composing room operations, and they cross-sell advertising. The Record, with a daily circulation of 141,000, remains a regional newspaper, while the Herald, with only 43,000 circulation, remains highly local.

The fact that Justice is investigating a pending deal often means little. Usually, Marx says, it means "that some staff lawyer got authority to ask for more information on a deal. Any complaint almost automatically results in an investigation."

A little-heralded 1995 case from Northwest Arkansas, however, forced the resale of a daily paper to its original owner, with the result that newspaper competition there has been preserved. The Justice Department did not initiate this case, but it intervened in a lawsuit brought by private litigants.

Thomson had sold the Northwest Arkansas Times, in Fayetteville, to the Stephens family, whose Donrey Newspapers already owned the Morning News in Springdale. These two small cities adjoin each other in Washington County. The Springdale paper also competed with a smaller paper, the Daily Record, in adjacent Benton County.

In voiding the sale, U.S. District Judge H. Franklin Waters cited a 1953 U.S. Supreme Court opinion saying that for antitrust purposes daily newspapers have two markets: one for readers and one for advertisers. He noted that by owning both the Fayetteville and Springdale papers, the Stephens family would control 84 percent of the circulation and 88 percent of the newspaper ad revenue in the two-county market. This, he concluded, would deter the Times and Morning News from vigorous competition.

Craig Conrath, the current Justice section chief who participated in the case, says Waters' interpretation of market forces "is still the way we look at transactions today." The department, he says, doesn't want "to bring a case...where the evidence is weak."

After the sale was reversed, Thomson sold the Fayetteville paper to Hollinger, which continues to operate it. Since then, the Morning News in Springdale has responded by beefing up its coverage. It now has an expanded five-person news bureau in Fayetteville and an eight-person bureau in Rogers, the largest community in Benton County. A four-person bureau in Little Rock provides a flow of news from the state capital to Springdale and to Donrey's three other papers in the state.

Jim Morriss, the Morning News' executive editor, says the paper has also expanded its copy desk and sports coverage. "We're very strong on political and legislative coverage," he says. "We have improved the quality of our newspaper."

Not only do the Times, the Morning News and the Daily Record compete for local news, subscribers and advertisers, but the Arkansas Democrat-Gazette in Little Rock has installed a printing plant and a fully staffed newsroom to publish a Northwest Arkansas edition that circulates in 12 counties. Its daily Northwest Arkansas section provides strong news coverage for the region.

Unlikely as it may seem, Washington and Benton counties now constitute one of the most competitive daily newspaper markets in the country. Maybe Northwest Arkansas is a unique case, with little impact on the industry as a whole. Still, it does seem to suggest how the preservation of editorial competition can improve newspaper quality and provide for a better-informed citizenry.

And perhaps it's not so bad for business, either. Recently, the newspaper industry learned that for the last reporting period, overall daily circulation slipped another one half of 1 percent. The numbers were down at the Arizona Republic, at the Dallas Morning News, at the Boston Globe. But in Springdale, the Morning News is selling 2,500 more copies a day compared with a year ago. Circulation is 35,858--up 7 percent.


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