Selling Newspapers   

Why are so many companies shedding properties?

Thomson Corp. is essentially getting out of the newspaper business altogether. The New York Times Co. has put four of its dailies up for sale. Journal Register Co. is selling five. Early last year, Donrey Media spun off 10 of its papers to a partnership controlled by another company. Gannett Co. has sold off 11 dailies over the last three years, and Hollinger International sold 92 over the last two.

Most recently, of course, the Chandler family decided to give up to the Tribune Co. control of the Los Angeles Times, Newsday on Long Island, the Sun in Baltimore and other papers owned by the family-controlled Times Mirror Co.

What's going on here? Does this portend a loss of confidence in the daily newspaper business by some of the largest newspaper companies in the country? The short answer is no. And the short explanation for why these companies are shedding properties is that there has never been a better time to sell newspapers: Prices are high and not likely to get higher. Times change and companies change. What might have made sense five or 10 years ago in newspaper investments may not make sense now.

What these developments really say is that the corporatization of the American newspaper industry is complete. Sentimental attachments to particular newspapers is old hat. Newspaper properties now are economic units to be bought, sold and swapped to further long-term financial strategies.

This is not intended as criticism, for it is useless to criticize the inevitable. Newspapers are caught up in the same wave of economic trends that has sucked the profit and romance from owning the neighborhood grocery or family farm. A difference is that newspapers still publish and, one hopes, continue to inform the public despite the vicissitudes of ownership.

Although all of the companies mentioned at the beginning of this column reached the same decision--to sell--their reasons for reaching the decision differ. Thomson, for example, for a long time had been shifting its investments into electronic database businesses, including legal research, financial information, science and health care. Earlier it had shed investments in travel and oil production.

Still, the company recently had been active in acquiring new newspaper properties and swapping papers with other companies to create clusters of ownerships in several states, taking advantage of economies of production and selling. And just last year, Thomson created its own in-house school to train reporters and editors in the Thomson way of journalism.

So Thomson's decision to withdraw from the newspaper business was unexpected and apparently the result of a recent change of strategy. Newspapers had been the foundation of the company in the 1930s, and as recently as the early 1990s Thomson had owned more than 120 dailies in the U.S. (as well as numerous papers in Canada) with a total circulation of more than 2 million. But by last year, the newspaper operations Thomson will unload contributed less than 13 percent of the company's revenue.

Thomson made clear its intentions: to invest the $2.5 billion it expects to gain from the sale of its papers in more electronic businesses, most of which already have higher profit margins than the newspapers. (Thomson will keep its Canadian national newspaper, the Globe and Mail, in Toronto.) It's clear that Thomson has made a strategic decision that its financial future can best be served through investments in electronic information.

The Chandlers appear to have been attracted to a maximum cash-out. As for the others, it is significant, I think, that most of the papers being put up for sale by the New York Times Co. and already sold by Gannett and Hollinger have small circulations. I surmise that managing these small papers is no longer worth the effort for companies that have become as large as these.

This calls to mind a conversation I had with Katharine Graham, matriarch of the Washington Post Co., in the 1970s. When asked why her company was not following the lead of Gannett and others in picking up small-town newspapers, she replied that it takes almost as much management attention to run a small newspaper well as it does a large one, and that the rewards in absolute numbers of dollars received are much less. This explains, I think, why the Times, Gannett and Hollinger, all much larger than before, are willing to give up their small dailies.

As for the Journal Register Co., its motivation probably is the need to reduce debt. The company is unique in the newspaper business in having negative net worth--in other words, the debt it incurred in assembling its newspaper properties surpasses the value of the properties. As Wall Street legend Bernard Baruch famously said long ago, buy cheap and sell dear.