Reading David Cole's useful
News Inc. newsletter yesterday, I saw that he capped a summary of writedowns, credit crises and Steve Ballmer's prediction that there will be no print media in a decade with the observation: "There may have been worse weeks in the newspaper business, but I'm not certain I could put my finger on one."
Uh, David. That was last week. How about this one?
Goldman Sachs analyst Peter Appert (apologizing, as I do, for circumstances making us dwell on the negative at times) noted that net operating earnings of a group of public newspaper companies he tracks are down an average of 15.1 percent so far this year and unlikely to get better with higher newsprint prices on the way.
So what does that mean?
The New York Times and
Business Week reported that the issue was recent investments and dismal returns in newspapers.
Fortune and
Portfolio said no, that was just an obvious-suspect guess and that the conflict was really over something else.
Hearst made its last substantial newspaper acquisition in November 2007, buying Tribune's dailies in the well-heeled Connecticut suburbs of Greenwich and Stamford. It has done numerous joint ventures with Dean Singleton's MediaNews, bought an interest in the company and thus has been poised to take over, should the company falter under its debt load (discussed in
my last Biz Blog post). Hearst has also been among the
leaders in R & D experiments with the development of electronic tablet technology for facsimile newspapers.
Until Wednesday, I would have put Hearst at the top of the very short list of potential buyers for the many newspapers currently up for sale. Now, all bets are off.
Ganzi, a lawyer, will be succeeded --
at least temporarily -- by former CEO Frank Bennack Jr., 75, whose earlier career was in the newspaper and magazine divisions. Newspaper division head George Irish and Interactive head Kenneth Bronfin stay in place for now. None of that signals a pullback on newspapers.
Speaking of which, the company has an unusual digital strategy, described in
a readable essay on its corporate Web site. Rather than make big bets on acquisitions, Hearst acts more like an early-stage venture capitalist taking positions in promising companies. An early hit was
iVillage, which has grown to a top Web site for women's interests (now owned by NBC). Even low-tech me recognizes some of the more recent portfolio additions,
Brightcove (a video server we use here at Poynter) and
SlingBox (a nifty gadget that allows you to tune into your home television wherever you are).
The Web site even includes an invitation for business plan proposals.
Tea-leaf readers are also wondering whether these bite-sized Internet positions may seem too little too slow for Hearst's board, who would want to swing more quickly away from old media to bigger digital investments (as dissident investor/board members are pushing at the New York Times Co. and Media General). That's not as nifty an idea as it sounds because developed Internet ventures command huge premiums, and there is barely a market for selling old media properties.
In more tranquil times, Hearst developed a strong reputation as a quadruple-threat player with successful magazines, local television stations and cable networks as well as newspapers. Though tighter than tight with financial information, Hearst boasts of record earnings 15 of the last 16 years.
One infers a very healthy cash flow if only because the company carries the San Francisco Chronicle, which disclosed in a court proceeding that it had lost hundreds of millions of dollars even before the unpleasantness of the last couple of years. And the company paid in cash for a glittering new headquarters building in Manhattan like The New York Times'.
Most extraordinary of all is its corporate structure. The owners are Hearst family members through a trust. The trust itself, not the 60 or so family beneficiaries, is the sole owner of the huge company. And the trust dissolves after the death of the last family member who was alive in 1951, when William Randolph Hearst (a.k.a. Citizen Kane) died. A similar pair of trusts controlling the Boston Globe expired in the early 1990s, precipitating its sale to the New York Times Co.
That is going to be a heck of a business story circa 2035, and I'm sorry I won't be around to cover it.
For now we might invoke the words of Nixon's dour Attorney General
John Mitchell, "Watch what we do, not what we say."
What Ganzi's dismissal means and what future direction his dissatisfied bosses have in mind will play out soon enough. At least one scenario, however, is that one of the strongest remaining optimists within the newspaper industry is losing faith.
