The Deal from Hell (10 page)

It's hard to believe that these momentous changes failed to generate panic in newspaper publishing circles. But they didn't. For one thing, growth in Sunday newspaper circulation offset some of the financial
and civic damage; the number of papers publishing Sunday editions fat with ads jumped 55 percent between 1971 and 2003, pushing up Sunday circulation by about 8.8 million copies. With feature sections designed to lure advertising, Sunday papers not only gave readers a wider choice of content, but included an overview of the week's events in a tidy section. And thanks to a chance encounter between a Massachusetts newspaperman and a guy who made atomic bombs, Wall Street had arrived on the scene.

Critics characterize newspaper companies today as backward, sclerotic outfits, plagued by stagnant thinking and journalists trapped in the past. Actually, that's not quite true. Until recently, newspapers were pioneers in new technology, both in the newsroom and in the boardroom. Nowhere was this more evident than with Prescott Low, the publisher of the
Patriot Ledger
in Quincy, Massachusetts. In the early 1950s, Low, a progressive newsman whose paper had once published letters to the editor from John Quincy Adams, witnessed a new photocomposition process at a Boston demonstration organized by Vannevar Bush, a key scientist involved in the development of the atomic bomb. Invented by a Frenchman just after World War II, the photon, which Bush showed Low, used photocomposition to set type on film instead of the Linotype, a clanking, cumbersome contraption that had more than ten thousand moving parts and took four years for union operators to master. Low was astonished. The photon set type six times faster than the Linotype and had the potential to significantly lower labor costs. Low immediately ordered one and installed it in the
Ledger
's offices. With the photon, the
Patriot Ledger
no longer required $4-anhour union operators to set type—off-the-street clerical workers could compose the paper with the new film process. Significantly, Low reinvested his savings into his editorial department, making his paper a prosperous and respected journal throughout New England. As word spread of Low's innovation and cost savings, other newspaper publishers embraced the new technology and started hard bargaining with their unions, leading to a couple of decades of labor strife and sweeping technological changes that would transform the industry.

Unfortunately for the newspaper families, the financial windfalls spurred by the new technology also drew the interest of the Internal Revenue Service. As newspapers converted to photocomposition, profits soared, prompting IRS appraisers to reassess the way they valued the assets, dramatically increasing potential estate taxes and offering newspaper families huge incentives to sell out to people like Paul Miller and Allen Neuharth, men who worked for a company that acquired newspapers like Imelda Marcos bought shoes.

Miller became the forerunner of what would become a fixture of American newsrooms—the respected working journalist who assumed a high-profile position in the corporation to give cover to corporate predators like Neuharth, whose second wife compared marital life with Al to “riding a roller coaster with a snake.” Assuming control of a sedate group of twenty-five newspapers owned by Frank Gannett in upstate New York during the 1960s, Miller, as a figurehead chairman, and Neuharth, as his number two (though in reality Neuharth was the true power broker of the deal), converted the Gannett Newspaper Group into a journalistic juggernaut, acquiring other papers at a blistering pace in the 1960s and 1970s. In 1971, the year I started at the
Register
, Gannett averaged one newspaper acquisition every three weeks, and by the time I left the paper to join the staff of the
Chicago Tribune
in 1979, Gannett had acquired fifty-four newspapers, or an average of nearly seven papers a year, a pace that brought the total number of newspapers under the chain's umbrella to seventy-nine. Eventually, my first paper, the
Des Moines Register
, fell into the hands of Gannett, which Neuharth acquired for $200 million in 1985, ending a relationship between the Cowles family and Iowa that had lasted eighty-two years.

To increase its ability to acquire other papers, ease the bite of estate taxes, and fill the pockets of newspaper dynasty descendants, Gannett embarked on a trail blazed by Dow Jones, best known as the publisher of the
Wall Street Journal
, and became a publicly held company. Starting in the 1960s, newspaper companies big and small had become publicly held firms, a fact that enabled organizations like Gannett to use shares of stock instead of cash to build empires that would change the face of
American newspapers. By the 1970s, many major newspapers had gone public, including influential heavyweights such as the
New York Times
, the
Washington Post
, and Times Mirror, publisher of the
Los Angeles Times.
Some of the family dynasties benefited from public ownership but still maintained control of their fate by issuing two classes of stock, one for the family that carried more weight in matters of corporate governance and one for the public that didn't. But many families sold their papers outright to chains. By 1977, 170 newspaper groups owned two-thirds of America's 1,700 daily newspapers. By the time the Tribune Company acquired Times Mirror in 2000, a mere seventeen publicly held newspaper companies controlled nearly half of the daily and Sunday circulation in the nation. The
Chicago Tribune
went public in 1983, but the significance of the structural change was lost on the newsroom, which remained focused on journalism. By joining the ranks of stockholder-owned companies, Tribune executives and newspaper owners across America fell under the thumb of Wall Street. In the process, they agreed to be measured by different yardsticks, not just journalism prizes and civic pride but also profit, efficiency, shareholder value, cash flow, and the price of a share of stock. From 1983 on, the industry would answer not just to readers but also to shareholders with their eyes fixed on the bottom line and Wall Street analysts.

Unquestionably, the new order had a significant impact on the journalism practiced at papers owned by the public companies. “Going public forces management to tighten the belt, to come out of the ivory tower, to invest less in editorial,” said one Wall Street analyst, whose views were typical of several surveyed by a group of University of Iowa researchers in the late 1990s. “Staffs are leaner and there is less investigative reporting. The quality of newspapers degraded, and part of that is due to going public.”

Some critics suggest that the change in newspaper structure created a brand of corporate journalism that caused many of the problems plaguing the industry today, particularly the practice of targeting content to wealthier, elite audiences sought by advertisers, the source of more than 80 percent of the industry's revenue. There's some truth
to that view; ownership of newspapers by a far-flung group of stockholders unquestionably created pressures that led many newspapers down a perilous path that ended at the doors of bankruptcy court. But the death of journalism that those with a dark view of changing corporate structures predicted didn't really materialize. Despite the financial pressures and tighter budgets, editors working at newspapers owned by public corporations continued to produce outstanding journalism throughout the 1980s and into the new millennium; reporters continued to write stories that angered advertisers and their bosses. Newspapers controlled by public corporations were most often the recipients or finalists for Pulitzer Prizes, because creative and determined journalists still managed to get the appropriate resources to finance excellent journalism.

Far more significant to the decline of newspapers was a change in human dynamics and leadership spawned in newsrooms and newspaper offices across America. Tensions had always existed between editors responsible for writing and editing a paper and those responsible for making the money. Historically, many publishers thought of themselves as journalists first and business people second; they abandoned their editorial perches reluctantly, referring to their editorial departments as “upstairs” and the business offices as “downstairs.” James Schermerhorn, publisher of the long-gone
Detroit Times
, told an Associated Advertising Club audience in 1909: “Upstairs was the region celestial in a sense that three can keep a secret if two are dead, and upstairs and downstairs can keep the peace if there is no downstairs. Then came the serpent in the form of the inevitable business expansion of an eager, glorious young nation. The alluring red apple of advertising, plucked from the tree of knowledge, caused the expulsion of the newspaper publisher from his editorial paradise.”

To protect editorial departments from the undue influence of big advertisers who would become the industry's major source of revenue, publishers erected a philosophical wall between the editorial and business operations to discourage their biggest customers from using their financial muscle to get positive coverage. On one side of the wall were
the editors who pursued the public service mission that made newspapers responsible for the
news
, defined by the Hutchins Commission on the Freedom of the Press in the 1940s as, “a truthful, comprehensive, and intelligent account of the days events in a context which gives them meaning.” On the other side sat circulation, production, and advertising directors responsible for producing the paper, keeping and winning readers, and selling ads to people who were not always pleased with the headlines and stories journalists produced. Traditionally, the person with the authority to breach the wall was the publisher, who was responsible for the overall health of the paper.

Smart publishers kept their noses out of the news. If a big advertiser threatened to cancel his ads because he didn't like some aspect of the newspaper's coverage, a publisher could always throw up his hands and cite the paper's policy that prohibited anyone from tampering with the integrity of the public's business. Practically speaking, though, the business and editorial sides rarely functioned independently of each other. At their core, newspaper publishers run a manufacturing operation. Everyday, they make a complex new product that requires workers with clashing personalities to write and process hundreds of thousands of words that are packaged into a newspaper and delivered rain or shine for less than a dollar to the doorsteps of customers before they leave for work. For decades, the road to the top in the business office passed through the pressroom where editors and their counterparts on the production side got their hands dirty as they struggled to solve common problems, embracing processes and practices that built a mutual respect for each other and the jobs they had to do.

Stan Cook, the chief executive officer who took the Tribune Company public, recalled how he worked closely with editors like Clayton Kirkpatrick. “I met him doing mundane things,” Cook said, relating a story about how he and Kirkpatrick stayed at work late one night fixing the color mix on a page one cartoon. “I looked to Kirk for his wisdom in what he thought about the paper because he was a reporter who dated back to 1940. He had fifteen years of experience and he was a city editor.... It was like a little university. If I had questions, I would
go to Kirk.” Similarly, when Kirkpatrick decided he wanted to reject the Colonel's brand of journalism and lead the
Tribune
in a new direction during the Watergate scandal, he sought help from Cook. Kirkpatrick knew he would be courting controversy with the
Tribune
's heavily Republican board of directors, and he knew he would need Cook's help for a campaign to reform the Colonel's
Tribune
.

Cook recalled:

Cook and Kirkpatrick published the editorial anyway, making national headlines and taking heat from traditional
Tribune
readers, fellow Republicans, and members of the board. Many felt the repudiation of Nixon by a newspaper that was considered an arm of the Republican Party convinced the troubled president to step down. It unquestionably improved the
Tribune
's credibility among readers who had come to expect the paper to simply parrot the GOP line. In subsequent maneuvers that one editor compared to turning around an ocean liner, Cook and Kirkpatrick managed to not only make a profit but also turn the
Tribune
into one of America's best newspapers.