Chains Swallowing Other Chains   

The news-paper industry is nearing the final stages of ownership concentration.

The sale of a newspaper once connoted an owning family giving in to the lure of big money – usually in the tens of millions –
offered by a big chain. These days, though, it's the chains that are selling, and the prices reach to hundreds of millions and beyond, to billions.

Most recently, E.W. Scripps Co. agreed to acquire the six Harte-Hanks dailies (plus television and radio stations in San Antonio) for $505 to $775 million, depending on whether the deal ultimately qualifies as tax-free. Earlier this year, Knight-Ridder purchased the Fort Worth Star-Telegram, the Kansas City Star and two smaller dailies from Disney Co. for $1.65 billion.

Other recent chain deals include the sale of Park Communications' 28 dailies and 10 television stations for $710 million to Media General and Gannett's takeover of Multimedia's 10 dailies along with cable, television and other properties for $2.2 billion.

What we are seeing here is an industry approaching the final stages of ownership concentration, a process that came much later to the newspaper industry than to others. And the main reason whole chains are being bought and sold is that, after decades of chains buying single family-owned papers, there are not many attractive single newspapers left.

One of the tasks my firm performs every year is to count the number of companies that own two or more dailies. The most recent tally, through last January, showed 126 newspaper companies owning two or more papers. That total already has dropped to 120 as of this writing because of deals since January.

These multi-newspaper companies own 1,165 dailies, or about 77 percent of the nation's total. They account for about 81 percent of the nation's total weekday and 87 percent of total Sunday circulation.

Many of these multiple-ownership companies are small and could hardly be described as chains in the conventional sense of the term. Fifty-four of them have total weekday circulation of 50,000 or less, and another 29 total between 50,000 and 150,000. But whatever their size, the number of these companies has been shrinking as multiple-newspaper companies become acquisition targets.

For example, when I first started this tally 20 years ago, there were 169 multi-newspaper companies owning 1,037 dailies. That left about 725 single newspaper ownerships out of a total of 1,762 daily newspapers. Today there are about 1,520 dailies in the nation, of which about 350 are single ownerships (the data are necessarily imprecise because of constantly changing circumstances, such as newspapers suspending publication and dailies converting to weeklies, and vice-versa).

?ost of these single ownerships are of very small newspapers. Once you get past papers in New York (the Daily News); Milwaukee; Columbus, Ohio; Oklahoma City; Spokane; Fayetteville, North Carolina; Quincy, Massachusetts, which is up for sale; and a few others, you wind up with a lot of newspapers with circulations of 5,000 to 20,000. These small newspapers are not especially attractive acquisition targets for most of the big companies (an exception is Hollinger International's American Publishing unit). What the big companies really like are collections of larger newspapers whose revenue and cash flow bring instantly measureable expansion.

Most of these collections, of course, are themselves controlled by families, and one would expect that giving up the family jewels would be as hard for them as for a family owning just one newspaper. Newspaper ownership has always implied a strong emotional tie not always evident in other businesses.

The Disney Co. is tied to a family, but the company had never owned newspapers until its acquisition of Capital Cities/ABC last year. So it is easy to understand why Disney would view its newly acquired newspapers as disposable, valuable assets that did not mesh well with its entertainment businesses.

Harte-Hanks' decision to spin off its beginnings, though, was a surprise. The company was founded in the 1920s by the Harte and Hanks families, owners of dailies in San Angelo and Abilene, Texas, respectively. The company eventually grew to 27 dailies in several states, but in recent years has shed many newspapers in favor of investing in direct marketing businesses and shoppers. Still, I never thought I would see Ed Harte giving up his beloved Corpus Christi Caller-Times.

What all this signifies is that newspapering is a business, and in time the imperatives of business overcome all other considerations, regardless of whether the family business is a big chain or a small paper in the boondocks.