Continuation of The Selling Of Small-town America   

Bob Jelenic has a lean face with a commanding nose, and short, wispy brown hair. Trim, with broad shoulders, he is said to work out daily. We are in JRC headquarters, in a conference room on the top floor of a Trenton office building that overlooks the state capitol complex.

Flashes of his ego and temper are almost immediately on display. I have mentioned Journal Register and Community Newspaper Holdings in the same breath. "All they're doing is amassing titles," he fumes. "I don't think Community's got a paper bigger than 25,000. [Our interview precedes CNHI's purchase of the 45,400-circulation Tribune Democrat in Johnstown, Pennsylvania.] I mean, they're totally different than us. I'm just trying to point out to you, we are a public newspaper company. Very substantial in size. We have no similarities at all with Community...whatsoever. Zero. Absolutely zero."

Unlike CNHI, he says, "We are looking for areas where there is growth--growth in people, growth in population, growth in retail, in the economy, and we have a plan to add on once we find those areas and totally focus only on those areas. We've been consistent for almost a decade now on that plan, and we've got some of the finest newspaper properties in the country. I think the New Haven Register is one of the best newspapers in New England and possibly the country."

Jelenic grabs a copy of the Register from a credenza stacked with JRC papers. "You take a look at that paper. That is hands down a phenomenal product. We have 117 people in editorial. By any rule of thumb that's...." He doesn't finish his point but lands on another. "The process color that we run. The graphics." Fully half the front page of the paper he waves at me is devoted to the mayor's unveiling of a developer's plans for a $431 million mall in a section of the city known as Long Wharf. It reads like promotional copy. Only in a separate, inside story does the reader discover that smaller towns and cities with their own agendas have the power and possibly the motive to sabotage the plan.

The New Haven Register, its circulation a mere 62 readers over 100,000, down from 106,000 in 1990, does not quite put Jelenic among the heads of the largest 100 papers in the country--the cutoff in 1998 was 102,000--but brings him close. He tells me that "Andy Barnes"--Andrew Barnes, CEO and editor of the St. Petersburg Times--"who is on the NAA [Newspaper Association of America] board with me, commented to me that he had spent some time in Old Saybrook, where he's got some kids, and he told me that we were hands down better than the Hartford Courant."

Jelenic says the frequency of management turnover at JRC is exaggerated, and often managers have just switched to better jobs within the company. He deflects criticism that he dwells on the bottom line. "We're a fine company, we put out great products, we treat our people well. I'm not going to apologize that we're No. 1 in margin. If it wasn't us, it would be Gannett."

I ask about circulation declines at JRC papers. He says what's important is not "circulation for circulation's sake," but rather "quality circulation.... We want the right people reading it...people who have got the disposable income to shop." He contends that it isn't fair to compare the circulation of JRC properties to national statistics that include thriving Sun Belt papers.

He doesn't want to discuss why T. Paul Mahony cleaned out his desk in Woonsocket. "I decided to make a change. I don't comment on internal matters."

And he says he had no choice about the layoffs in Norristown. "The paper was losing money. The paper was owned by a millionaire...a very eccentric millionaire that was funding the losses." How large the losses were, he wouldn't say, but "we're not talking about $50,000. We're talking about hundreds of thousands of dollars."

The interview lasts nearly two hours, and Jelenic appears to hate every question. "It's just so negative," he says. "It bothers me. Turnover....changes. They're just so negative." Maybe the question he hates most of all is whether Warburg, Pincus might consider selling some of the papers, as some industry observers have suggested. "It's so wrong and ludicrous that anybody who says anything like that.... It just shows that they have no financial acumen whatsoever. Zero.... So wrong that it's laughable.... If we've never sold a newspaper since 1990, and Gannett, Knight Ridder, Thomson, McClatchy, all sold papers since '90, why would there be a rumor that we're selling papers?" He chokes a laugh. "Other than, you've got a bunch of jealous, venomous people out there that try to pull down successful people."

A few days later I call Barnes in St. Petersburg and ask him whether he told Jelenic the New Haven Register was a better paper than the Hartford Courant. Barnes is flummoxed. "Why do you suppose he said that? That's the last thing I would have said. I can't imagine having said that and I certainly don't believe that." He searches for a diplomatic conclusion. "The New Haven Register is better than it was, having gone from being a totally unambitious paper. They're trying to get the late sports in.... I maybe said that it looks to me like you're improving some."

I also contact Tony Coyer, the Times Herald's controller from 1982 until shortly after the sale to JRC in 1993, to ask about the losses Jelenic claimed in Norristown. As a consultant to the former corporate ownership, Coyer still has financial records from 1968 to 1993. He gets back to me after reviewing them, and says that in none of those fiscal years did the paper suffer a net loss in overall income or cash flow. Indeed, in the five years before the recession of 1991, the Times Herald averaged nearly $1.5 million a year in profits. When owner Peter Strassburger died in 1993, the paper's balance sheet had over $2.5 million in cash and equivalents.

There is no record, Coyer says, that Strassburger ever pumped money into the newspaper, as Jelenic claimed he did. "As an independent paper in a niche market, with stable circulation, no debt and plenty of cash, we were certainly not the picture of a desperate and dying franchise," Coyer says, adding that he can, however, "understand Mr. Jelenic's actions in Norristown as a businessman looking to quickly validate a $30 million investment."

In recent months, however, employees at some papers have been wondering if they've been granted a respite from JRC's profiteering. The staff of the Delaware County Daily Times, in a Philadelphia suburb not far from Norristown, was braced for cutbacks after the company purchased the paper last July and fired four managers. (Within hours of the purchase, their parking-space nameplates were on the floor of the front entrance. "People were flipping through them to see who got canned," says political reporter Adam Taylor.) Since then, however, the only sign of a cutback in editorial has been a reduction in newsroom copies of the paper. "No," says Guild activist Joe Hart, "nothing's really happened."

And in Pottstown, following a Guild strike-authorization vote, the company surprised the union by agreeing to a 30-day extension of the contract with retroactive pay increases. In Pawtucket, where the number of editorial clerks had been reduced from three to one, a second has been hired, an arbitration settlement has opened a position for a second photographer, and new computers are on their way. At the New Haven Register, a second statehouse reporter has been added, though what was once solely a bureau serving New Haven now files to the five JRC-owned Connecticut papers. Even the Norristown Times Herald has gotten a fresh coat of paint and a refurbished lobby in preparation for its 200th anniversary.

And in January JRC launched the Journal Register News Service with an eight-day package of education stories and graphics, titled "From the Ground Up." Two dozen reporters worked on the series, says Charles S. Pukanecz, vice president for news. In addition, individual papers were asked to do local sidebars.

The writing in the series was rocky, and in showcasing charter schools and other educational alternatives the reporters were more enthusiastic than critical. But the series nevertheless was an ambitious undertaking for the small chain, and jammed with information. Pukanecz says he hopes to oversee two such projects a year.

John R. Speck, publisher of the Jacksonville Daily Progress, an east Texas daily until recently owned by Donrey, twists his pen nervously, an anxious expression on his face. He's about to be grilled by his new bosses--Ralph Martin, founder and president of Community Newspaper Holdings Inc., and Kevin Kampman, regional vice president--now sitting across from him at the blond wood conference table.

As Martin flips through the pages of a Daily Progress, Kampman peppers Speck with questions. Who are the advertisers? Who is the advertising director? Is he strong? Where do the ad takers sit? Who gets the overflow calls? What are the volume numbers? When are they going to a 100 percent commission system? CNHI converts all its papers to commission-only sales.

"Let's skip the numbers for a minute," Martin interrupts, looking up from his reading. "What are you going to do to make your newspaper better next year?"

The question takes Speck by surprise--budget meetings with his old bosses from Donrey had been all about numbers. He looks at Martin blankly. "I don't think there's anything we can do to make it significantly better."

Martin is clearly taken aback. He says, "I've never had anybody tell me that."

Speck recovers enough to start talking about hiring another reporter and making less use of the wires. Martin starts punching numbers into his calculator, but he waits until just before leaving to answer--and warn--Speck: "You got your reporter. Make sure you use it. Because we're going to be watching."

Since its debut less than two years ago, CNHI has behaved like no other newspaper company. The speed with which it has swallowed up papers has caught not just its new publishers off guard but the entire industry. "I thought we were moving fast," says Liberty's Peter Nolan, "but they've blown us away."

Alabama-based CNHI now owns 95 dailies, with a total circulation of 800,000, plus 102 nondaily publications. It owns more than half the daily papers in Oklahoma, three of which are the smallest in the chain--only 2,000 subscribers each. Its largest is the 45,400-circulation Johnstown paper.

At a time when most newspaper companies are paring editorial budgets, CNHI is taking some baby steps in the other direction. Martin says he doesn't have to squeeze newspapers for the returns demanded by Wall Street investors. Margins of 19 to 26 percent are sufficient to pay back loans totaling $1.1 billion from Retirement Systems of Alabama, or RSA, the pension source for every Alabama state employee from janitors to judges.

Martin, 45, is the son of a carpenter who labored in the West Virginia clay mines north of Wheeling. He got his start in newspapers as an ad salesman at the Salem News, a Thomson paper in Ohio. After 19 years, he was running Thomson's entire eastern division. Then, in 1995, after flirting with the idea of starting his own newspaper company, Martin went to work for Park Communications as vice president of newspaper operations. Park owned 106 newspapers, 22 radio stations and nine TV stations.

He'd been there less than a year when Park was sold to Media General, parent of the Richmond Times Dispatch, the Tampa Tribune and a number of smaller papers. When Martin learned that Media General was not interested in keeping all the Park papers, he dusted off his prospectus and started calling his contacts, including some he'd met through marketing junk bonds for Park. "Everybody we talked to--First Union, First Boston, lots of conventional banks, and even the people on Wall Street that I'd met through the Park offering--they all thought it was a great idea, they all thought they could finance a big part of it, and they all had people they could bring in from an equity standpoint."

That was the route taken by companies like Westward and Liberty. But it wasn't for Martin. "We were buying small papers that needed a lot of work and patience, so we didn't want to put ourselves on this ticking clock that says at this point in time we have to be ready for a public offering because that's the only way to take out this high debt." Martin ran into nothing but "dead ends" looking for alternative financing. He was beginning to wonder if he ought to start looking for a job, when an old Park colleague, Tom Lindley III, said he had a friend in high places.

That friend was David Bronner, head of the Alabama pension fund, whom Lindley had covered as capital bureau chief for the Birmingham News. Martin immediately went to see Bronner. It was not a hard sell. RSA, in fact, had provided the money when two businessmen, Donald Tomlin and Gary Knapp, first acquired Park Communications from the estate of media mogul Roy Park; in effect, it had loaned money for these papers once before.

To Bronner, putting money into stable, consistently profitable small-town newspapers was not only safe but rewarding. "When we got in," he tells me in a telephone interview, "the bond market was providing lousy interest rates, 6 or 7 percent, and the stock market was living on jet fumes." In a good deal for both parties, RSA has made loans to CNHI with interest rates from 8.5 to 10 percent to finance all of CNHI's acquisitions. Three-quarters of the company's stock is owned in equal shares by Martin, Tom Lindley and Jack Quick, another Park veteran and now a CNHI publisher in Georgia. Publishers and general managers own the remaining 25 percent. As the company pays down its debt, Martin says, it will offer stock to lower-level employees. But Bronner rules on every deal, and CNHI would need his permission to go public.

CNHI's money man is a Minnesota transplant with a law degree and a Ph.D in public policy--everybody calls him "Dr. Bronner"--who has boosted the assets of the pension fund from $500 million to $23 billion since taking over in 1973. Bronner, 54, is known for such unorthodox ventures as the $120 million, seven-course Robert Trent Jones Golf Trail across Alabama and a half dozen downtown Montgomery high-rises with distinctive green roofs. Although he wheels and deals as much as any master of the universe, Bronner says he earns only $240,000 a year. "He could go to Wall Street tomorrow and command a million dollars a year," says Lindley. "Some people like to be a small fish in a big pond. With Bronner I think it's more than that. I think Alabama suffered so many years, and he thinks that he can do things to really make that a better state."

One of those things was to order CNHI to move its headquarters from Kentucky, where it was first based, to Birmingham. Corporate headquarters mean a lot to a poor state like Alabama, Bronner says. "We want those people in the community making those sorts of salaries." Another was to compel CNHI papers to carry free advertising for the golf trail and other Alabama tourist attractions.

A few years back, when RSA tried to buy a Montgomery television station, a flood of articles raising First Amendment objections to government ownership of a media outlet forced Bronner to back off. In a recent transaction with Hollinger, CNHI acquired five small Alabama papers. As a lender, RSA was distanced from the purchase. Nevertheless, the Huntsville Times, owned by Newhouse, saw the potential for conflict of interest. Said a December 6 editorial, "When RSA owns outright or bankrolls the providers of news about Alabama government, the public can rightly wonder if it gets the independent coverage it deserves." Bronner says the CNHI papers are too small to have an impact. None is larger than the 7,500-circulation Courier in Athens. "They're little tiny things," Bronner says. "Who cares?"

When it comes to making money, Martin says his goal is to increase revenues, not cut costs. And to increase revenues, a paper must increase readership. "Without the readers, being a good old ad guy like I am, there's nothing to sell," he says. "If a reader says he doesn't want to spend 50 cents, it means he's not getting any value." One of CNHI's first hires was an in-house editorial consultant, Vickey Williams, who says she has visited some 55 properties to assist with redesigns, coach writers and run seminars. In January the company launched an Oklahoma news service, with a $125,000 yearly budget, a bureau chief and a capital correspondent. State stories are collected on a Web site and fed to more than 50 daily and weekly newspapers. Martin says the service, if successful, will be duplicated next year in Iowa, Kentucky and Texas. The CNHI president estimates that spending on editorial departments has increased in at least half the papers the company has owned for a year or longer.

In Lumberton, North Carolina, the seat of Robeson County, where gloomy economic clouds overhang the tobacco fields and textile plants, the future of the hometown paper, the 13,000-circulation Robesonian, has actually brightened. Editor Donnie Douglas says he has expanded the staff from 13 to 16 and boosted salaries 25 percent. Perhaps most significantly, he overran his overtime budget by $8,000 last year--"and nothing happened."

In Jacksonville, Texas, where the Daily Progress--circulation 4,600--is housed in a former mortuary, Editor Chris Fletcher and his staff of three full-time reporters published the paper's first election guide with interviews and endorsements, and investigated the death of a patient at a state mental institution. It was seen as a good sign there that CNHI management okayed $670 to copy police records. And when the Marshall News Messenger tried to hire the 35-year-old Fletcher after the paper won several awards in 1998, CNHI matched the offer with a 25 percent pay increase. The townspeople are in a state of shock, says Fletcher. "People at our level don't expect us to be a real newspaper."

Across the river from Louisville, Kentucky, the Evening News in Jeffersonville, Indiana, circulation 10,300, was starting reporters at $265 a week when Tom Lindley returned to his hometown as publisher three years ago. He wanted to hire new people--nobody fancy, he says, just college graduates who "could read and write and interview." One journalism school dean told him, "We don't recommend people to your paper." Now starting salaries have risen to around $350 a week and the paper is acquiring a reputation as a training ground.

Lindley says that when Roy Park owned the Evening News, profit margins reached 40 percent, but the paper was starved for equipment. When Lindley arrived, the phone system could handle only six calls and, until a new computer system was installed in circulation, "we couldn't tell you by name who 70 percent of our subscribers were." The News represented "everything that was bad and wrong with small-town newspapers," he says. "Take-take-take."

For all that may have gone right at CNHI, however, something has gone terribly wrong at a little paper in a corner of eastern Kentucky. The trouble began last spring when CNHI purchased the 9,600-circulation biweekly Floyd County Times in Prestonsburg and installed as publisher Ed Martin--one of Ralph Martin's four younger brothers who have worked for the company.

Two reporters at the time, Susan Allen and Chris McDavid, say that Martin took over the news operation, even though he was not the editor and had told them his background was in circulation. According to the reporters, he relegated hard-hitting stories about the county's troubled schools to inside pages, promised raises to the entire staff and failed to deliver, threw employees into turmoil with plans that never materialized to take the paper daily, told them they could be prosecuted for repeating what was said inside the building, and used the paper to introduce odd money-raising schemes, such as a lifetime telephone reminder service.

Perhaps what most offended her, Allen says, was Martin's declaration that he preferred "happy" news. Located in the heart of Appalachia, amid long-depressed coal fields, Floyd County has a full complement of social and environmental ills. Deep mines and strip mines have scarred the land and polluted its rivers and creeks, and miners have paid the price in injuries and lung disease. Poverty in this hard-pressed county is compounded by political corruption. In the last election, Allen says, four-fifths of all candidates running for county office had been charged with, or convicted of, crimes. Two were under federal indictment. Martin was pitching happy news, but Allen was thinking, 'You're not in a happy place.' "

Even a visit from the chain's editorial consultant backfired. Allen says Vickey Williams told them the paper needed more upbeat features--perhaps a story on Viagra. "In Floyd County, men won't even talk about having sex with their wives, let alone that they're on Viagra," Allen says. Adds McDavid, "We tried to tell her Floyd County probably isn't like where you come from."

Shortly after the Times was purchased, its editor and publisher, Scott Perry, resigned to become publisher of a competing paper in Paintsville. His departure was followed several months later by the resignations of Allen and McDavid. By the time I arrived in Prestonsburg, even Ed Martin was on his way out--the CNHI board having decided to employ permanently only three of the five Martin siblings. In addition to Ralph, brother Paul will remain senior vice president in charge of the eastern division; Charles stays on as publisher of the Clayton News/Daily in Jonesboro, Georgia. Michael Martin will remain with the Boca Raton newspaper until the likely event of its sale. (Says RSA's Bronner, "You don't want to have a huge company, presenting this as an employee-owned company, if it's all owned by employees of the same name.")

Grudges here in eastern Kentucky span generations. A court official fearful of retribution from the paper "for the next 50 years" should he identify himself complains that he rarely sees a reporter in the courthouse now. A county worker who was forbidden by her supervisor to talk nevertheless volunteers that the police don't follow through on cases as much without the Times bird-dogging them. "The paper has changed dramatically," she says. And school board member and environmental specialist Johnnie Ross, who is also an Episcopal priest, considers the shift to what he calls a "Happy Valley" format to have been "the biggest loss this county has had" in his lifetime. "It may be a little paper," he says, "but for most people it's the only news they read."

The Floyd County Times is housed in a modern, dove-gray building with a cylindrical tower and glass-block windows. I find Ed Martin in the publisher's office, surrounded by packing boxes. This is his last day with the company. Two ashtrays are filled with spent cigarettes, and the bright label of a box of Marlboros shines through his shirt pocket.

Martin acknowledges that the courthouse has been without a reporter since Allen and McDavid left late last summer. He has nothing but praise for Allen--"a class act," he says--but he and she just didn't see eye to eye. "In the past nothing good about the community ever was reported." Now, he says, "Good and bad have the same weight." He concedes he is "not an editor. What I am is a person who reads newspapers."

There is a lesson here. A newspaper, even a little one that comes out only twice a week, is a powerful thing. Newspapers are not just another business. "It's on your doorstep every day," says broker Owen Van Essen with feeling. "If you've lived there in the community a long time, there's a good chance your name's been in the paper or your kid's. People read it, advertise in it. A newspaper can affect the standard of living and the livelihood in that community by the positions it takes." And to the extent that it fails to do its job, the community suffers.

Susan Allen now covers education for the State Journal in Frankfort, by most measures a step up. But she says she is having a hard time letting go of what happened back in Floyd County. "We poured our hearts into that place for eight years. We tried to make it such a good paper, to tell people what was going on. Some small-town papers are just horrible. This wasn't like that. Everybody respected and read the Floyd County Times."