The Perils Of Buying The No. 2 Paper   

New owners in Boston and Chicago are facing an uphill battle.

Whenever a newspaper in competition with a larger, more prosperous rival is sold, I often wonder whether the new owner knows something nobody else does, or is just plain ignorant.

Clearly ignorance has been a factor in many second-paper sales over the years. The Cleveland Press, Philadelphia Bulletin and Washington Star were all bought by entities (a local millionaire, an oil company and Time Inc., respectively) that did not really understand what they were getting into. These papers, of course, eventually shut down.

What brings these thoughts to mind are the recent sales of the Boston Herald and the Chicago Sun-Times, both the second newspapers in their markets for a long time. Is there something going on in these two cities suggesting those newspapers might escape the trend of one-paper cities that has killed off so many dailies in the last four decades?

To find out what's been going on in Boston and Chicago, let's examine recent history. Circulation is the most reliable measure of how a newspaper is faring in its market, because circulation is audited.

When examining circulation performance, it is sometimes important to look beyond raw numbers. One newspaper may have strong circulation in the central city but be weak in the suburbs, the area of the greatest interest to advertisers – who contribute about three-quarters of newspaper revenue.

In addition to total circulation, the industry measures circulation distributed in areas called the "city zone" and the "retail trading zone" to account for these variations. The city zone usually is the city itself plus contiguous suburbs; the retail trading zone is that area beyond the city zone still close enough to be of interest to advertisers.

To assess a newspaper's standing in the market the important question is not whether circulation is growing or declining (in the Chicago and Boston markets, only the Boston Globe has had growth over the last five years, and that has been modest; the other papers have declined), but what share of the market's circulation a newspaper has and whether the share is growing or shrinking.

The Boston Herald's share of the total daily newspapers sold by it and the Globe in the most recently available annual audit (for the 52 weeks ending March 28, 1993) was about 39 percent weekdays and 21 percent Sundays. The Herald did slightly better in the city zone – 41 percent weekdays and 23 percent Sundays – and somewhat worse in the retail trading zone – 37 percent weekdays and 20 percent Sundays. These are weak market shares, especially on Sundays, which at successful newspapers often contribute more than 40 percent of total revenue.

Moreover, the Herald's position has weakened a couple of points over the last five years. Usually such weak market shares and a declining trend indicate a newspaper in precarious financial position. The Herald's new owner, Patrick Purcell, has been its publisher and bought the paper from the media conglomerate controlled by Rupert Murdoch. Without Murdoch's deep pockets, I suspect the new owner will be greatly challenged to keep the Herald's position from slipping even more.

In Chicago, the Sun-Times is in a stronger position relative to its competitor than the Herald is to the Globe. In total circulation, the Sun-Times in the most recent audit had 43 percent weekdays and 31 percent Sundays. In the city zone, which in Chicago consists only of the city and the small suburb of Oak Park, the Sun-Times outsells the Tribune weekdays with a 59 percent share and comes close to the Tribune on Sundays with 49 percent. Since the city zone in Chicago includes essentially no suburbs, its circulation is much less attractive to advertisers than circulation farther out.

Beyond the center of the market, the Tribune is strongly dominant. In the eight counties around Chicago, the Sun-Times' share falls to 37 percent weekdays and 28 percent Sundays, which explains the newspaper's struggles in recent years (the new owner, the Canadian firm Hollin-ger, Inc., is the third since 1982). Over the last five years, the Sun-Times' market share has remained about the same in the city zone and on weekdays in the suburbs, but has slipped nearly three points in the suburbs on Sundays.

Ordinarily, the Sun-Times' weakness in the suburbs would suggest a perilous position, if not so perilous as the Boston Herald's. But in recent years the Sun-Times has bolstered its position against the Tribune beyond the city by buying up 60 weekly and twice-weekly suburban community papers.

Whether this strategy is helping the Sun-Times with its suburban weakness can't be known without seeing financial data that are not available. A similar strategy years ago by the now-defunct Los Angeles Herald Examiner did not work. Still, Hollinger has the deep pockets needed to keep the Sun-Times alive and kicking. l