Managing With a Bolo Knife   

Did Times Mirror give up toos oon when it killed New York Newsday?

When he killed New York Newsday after six weeks on the job, Mark H. Willes, Times Mirror's new chief executive, was demonstrating the kind of bold action – cost cutting! – that Wall Street loves. It didn't really matter whether the decision made sense: The company's stock jumped 12 percent on the first trading day after the announcement. This is management by bolo knife, and it toppled a distinguished newspaper created by ten years of effort and a $100 million investment.

Unlike the company's failed newspaper investments of the past in Denver and Dallas, the New York Newsday venture was born from a sensible strategy: outlast the city's two troubled tabloids to become the only surviving tab in the city, in a unique position to prosper because of a symbiotic relationship with Newsday on Long Island. At the same time, reaching into middle-class neighborhoods of Queens and Brooklyn – plus adding whatever circulation could be picked up in the rest of the city – offered growth opportunities that had largely vanished in the paper's traditional Long Island market of Nassau and Suffolk counties.

There is an old saying on Wall Street that those who wait for the bottom of the market to buy or the top to sell never do well. Times Mirror got this logic half right. The company certainly did not wait for the bottom to invest in New York Newsday in 1985. The Daily News then had circulation of 1.4 million weekdays and nearly 1.8 million on Sunday; the weekday-only New York Post was at 900,000.

Although their circulations were high, the two tabloids had consistently lost money and there was considerable doubt about their long-term futures. Much of the Daily News' traditional middle-class readership had fled to the suburbs, and its circulation, high though it was, was sharply off from the glory days of the 1950s, when the paper sold more than 2 million on weekdays and 3 million on Sunday.

Times Mirror might have expected that by now the tabloid war in New York would have played out to its advantage. Indeed, it almost did. Twice the Daily News was rescued from near death, first by Robert Maxwell and again by its current owner, real estate entrepreneur Mortimer Zuckerman, who also owns U.S. News & World Report. And Rupert Murdoch rescued the New York Post from its bankrupt owner as well.

Though saved from death, both papers continued to fade. The Daily News circulation is now 725,000 weekdays and 975,000 Sunday, and the paper still faces formidable obstacles in its struggle to survive. The New York Post, now with a circulation of 410,000, seems safe, with Murdoch apparently resigned to underwriting its losses.

The continued existence of the two tabloids, and most particularly the Daily News (the more flamboyant Post is not much of a factor for a quality paper like New York Newsday), no doubt blunted New York Newsday's circulation performance. In 1985, Newsday was selling about 56,000 weekdays and 59,000 Sunday in New York City. With the advent of New York Newsday, city circulation grew 30,000 to 40,000 a year until it got a big boost in 1991, largely because of a lengthy strike at the Daily News. Circulation jumped to 278,000 weekdays and 326,000 Sunday. (These are audited numbers, somewhat lower than the gross distribution numbers that have turned up in press accounts.)

New York Newsday hung on to much of the strike year's circulation, settling at about 260,000 weekdays and 255,000 Sunday until its numbers plummeted this year to 228,000 weekdays and 216,000 Sundays. This drop, coupled with continuing losses, made Newsday an easy target for cost-cutting. Willes commented that the paper's "opportunities to earn an appropriate rate of return are limited."

The closure is likely to have a dramatically negative impact on Newsday's total circulation, which averaged 670,000 weekdays and 746,000 Sunday in the six-month audit period ending March 31. Those figures represent gains of almost 24 percent weekdays and 22 percent Sunday over ten years ago, and almost all of the growth came from New York Newsday.

New York Newsday's publisher has said he thought he could cut his paper's losses – said to be up to $10 million a year – to $3 million or lower. Newsday had spared little expense in establishing the paper, hiring numerous high-salaried columnists, for example, and sending reporters from both Newsdays to cover the same events. Trimming some of the excess, rather than wielding a bolo knife, is the kind of management that might have kept a valuable property – and an excellent newspaper – alive until Times Mirror's original strategy finally paid off.

Creating a new media franchise is always a long-term investment. USA Today, for example, took ten years to turn a modest profit. What Times Mirror did, in effect, was to decide to "sell low" when it killed New York Newsday. l