MediaNews Group, Inc.

views updated

MediaNews Group, Inc.

1560 Broadway, Suite 2100
Denver, Colorado 80202
U.S.A.

Telephone: (303) 563-6360
Fax: (303) 894-9327
Web site: http://www.medianewsgroup.com

Private Company
Incorporated: 1985
Employees: 10,000
Sales: $754 million (2004)
NAIC: 511110 Newspaper Publishers; 513112 Radio Stations; 513120 Television Broadcasters

MediaNews Group, Inc., is the seventh largest newspaper company in the United States. The company owns and operates 40 daily newspapers and about 65 non-dailies. The company owns newspapers in Alaska, Colorado, Connecticut, Massachusetts, Pennsylvania, Texas, Utah, Vermont, and in both northern and southern California. Many of its properties are clustered in suburban areas. For example, MediaNews owns 17 papers in the Los Angeles area, including the Los Angeles Daily News and smaller papers such as the Long Beach Press Telegram, the Pasadena Star News, and the Whittier Daily News. MediaNews owns 11 papers in Massachusetts and nine in Texas, similarly clustered in suburban markets. Its larger papers include the Denver Post and the Salt Lake Tribune. The combined circulation of MediaNews Group's daily papers is 1.7 million, with circulation of 2.3 million for Sunday papers. The company operates several regional divisions as well as a web site division called MediaNews Interactive. MediaNews also owns four radio stations and an Alaska television station. The company's principals are Richard B. Scudder and William Dean Singleton.

Company Origins Steeped in Ink

The MediaNews Group was founded in 1985, but its chairman, Richard B. Scudder, already had a long career in the newspaper industry by that time. The company's vice-chairman and chief executive officer, William Dean Singleton, though many years younger than Scudder, also had done much in the newspaper world before forming MediaNews. Richard B. Scudder was born into the newspaper business, as his grandfather had founded the Newark (New Jersey) News in 1882. Scudder fought in World War II, then returned home to run the family paper, which was New Jersey's largest and most prominent. A big problem in the newspaper industry in the postwar years was lack of newsprint. By the early 1950s, there was such a shortage of newsprint that one newspaper in Philadelphia went to print on brown wrapping paper. Scudder met an inventor who claimed that he could remove the ink from old newspapers so they could be recycled. This inventor turned out to be wrong—he could not do what he promised—but Scudder nevertheless continued to investigate newspaper recycling. Working with various industry experts and in his own kitchen with a blender, Scudder eventually came up with a workable process for recycling newspapers. Although the paper industry was extremely skeptical, Scudder managed to get financial backing for a newspaper recycling plant. He founded Garden State Paper Company in 1961, the first company in the nation to make 100 percent recycled newsprint. Garden State Paper continued to operate through the early 2000s, but Scudder sold it, and his family newspaper, in 1970. The buyer was a Virginia firm, Media General. Scudder continued to work as the Newark News' publisher until 1972, when the paper closed, and he was chairman of Garden State Paper until 1994.

William Dean Singleton was born in 1951 and grew up in a small town in west Texas. Singleton was keen on business from an early age, earning money by selling greeting cards and raising livestock. He became a reporter for his hometown paper when he was 15, and then founded his own weekly paper a few years later, after dropping out of college. In his 20s, Singleton worked for Texas financier Joe Albritton. By the time he was 27, Singleton was president of Albritton Communications, the newspaper arm of Albritton's empire. He had finessed the purchase of the Fort Worth Press, that Texas city's second place newspaper, in 1975, and then folded it within months when it did not prove financially viable. By 1977, Singleton had put together several groups of dailies for Albritton Communications, and he was busy running a new purchase, the Paterson (New Jersey) News. The New Jersey connection brought Singleton and Scudder together. In fact, the Paterson News owed Scudder's Garden State Paper some $400,000, and Scudder called on Singleton to collect the debt. Although Scudder was old enough to be Singleton's grandfather, the two men found they had much in common. Within a few years, they began investing together, as MediaNews Group.

Assembling Chains in the 1980s

Singleton and Scudder made their first purchase in 1983, when they picked up the Gloucester County (New Jersey) Times for $3 million. The pair founded MediaNews Group in 1985, and soon controlled strings of newspapers in several states. Scudder's role in the partnership was mostly to put up the money, while Singleton's expertise was in handling the day-to-day operations of the newspaper business. The company that bought out Scudder's family paper, Media General, also provided much financial backing to MediaNews. Singleton, as the hands-on manager, quickly acquired a reputation as a ruthless cost-cutter. The papers his company bought were mostly small town dailies, often family-owned businesses. Singleton closed papers that did not thrive, but he also managed to bring many of his acquisitions back to life. Some of the papers Media General purchased might not have survived without his management. Yet his was apparently a thankless task, as Singleton practiced what Time magazine (September 28, 1987) called "radical budget surgery," laying off personnel and making editorial and format changes in order to make the papers more profitable.

By 1987, MediaNews Group owned 56 newspapers. At one point, the company was growing so fast that it was buying on average one paper every ten days. It had become the eleventh largest newspaper conglomerate in the United States by 1987. All of its papers were relatively small in circulation, and followed a pattern whereby the company bought in clusters in particular markets. An exception was the Dallas Times Herald, a large urban newspaper with a circulation of 247,000. MediaNews bought it for $110 million in 1986. The next year, the company bought another large Texas paper, the Houston Post, for $150 million. That paper, with a circulation of 309,000, was the number-two paper in the Houston market, notably less profitable than the leading Houston Chronicle. After these two uncharacteristic buys, MediaNews bought one more large paper, the Denver Post. Like the Houston Post, the Denver Post was the number-two paper in its market, and it was locked in a competitive battle with the market leader, the Rocky Mountain News.

By 1988, MediaNews Group had spent more than $700 million on its acquisitions. Much of the cash had been put up by Media General, and MediaNews was highly leveraged, meaning it skated along with a high degree of debt. Aside from Media General, the company had another significant backer, the media company Times Mirror. Times Mirror loaned MediaNews $60 million in 1986 for the purchase of the Dallas Times Herald, and then loaned the company another $70 million in 1987 for the Denver Post. MediaNews, which was privately owned and did not give out financial information, seemed to be doing well off its investments for the most part. Scudder claimed to have recouped ten times his initial $3 million investment. Yet not all of the company's purchases became profitable. MediaNews sold the Houston Post and the Dallas Times Herald within a few years of buying them, and both papers soon folded. The Denver Post, on the other hand, did turn into a profitable paper. It continued to do well through the 1990s, while competition weakened its rival, the Rocky Mountain News.

Going Coast to Coast in the 1990s

While the Denver Post became the flagship paper of the MediaNews Group, the company continued its original strategy of focusing on small-market dailies and weeklies. The company built up a presence in New Jersey in the 1990s. It owned many small papers, such as the North Jersey Herald News in Passaic and Today's Sunbeam in Salem, and weekly papers in the counties of Bergen, Passaic, Union, and Warren. In 1997 MediaNews bought a group of 14 New Jersey weekly papers and four buying guides from Forbes, Inc. The papers had a combined circulation of about 86,000, and 130 employees. Two years later, MediaNews made another big transaction, bringing the number of California dailies it controlled up from 12 to 22. This deal was a merger between a MediaNews subsidiary, Garden State Newspapers, and an Arkansas-based newspaper group called Donrey Media. The merger gave MediaNews management control of a cluster of small papers in the Los Angeles area with a combined circulation of 500,000. By 1998, MediaNews had clusters of newspapers in 13 states, with Western properties in Texas, Utah, New Mexico, Arizona, Colorado, and California, and Eastern groups in Connecticut, New Jersey, Pennsylvania, Massachusetts, and Vermont. By 1999, company revenue had grown to more than $800 million.

Company Perspectives:

Our corporate mission is to be the leading provider of local news, information and services in our strategically located markets by continually expanding and leveraging our news gathering resources. We will proactively identify and develop strategic partnerships and relationships to enhance our content and services while integrating our content for dissemination across all available distribution platforms in our markets, starting with the local newspaper. We will continually strive to improve our profitability, while being a strong community partner and strengthening our work environment for our employees.

Competition at the End of the 20th Century

By 1999, MediaNews had only one atypical paper in its stable. Amidst its many small-town and suburban newspapers, the Denver Post was a large-circulation, urban daily. When MediaNews bought the Denver Post in 1987, Time magazine (September 28, 1987) characterized the paper as "ailing," and it was considered the junior newspaper, behind the more successful Rocky Mountain News. Yet a dozen years after the purchase, the Denver Post was evidently in fine financial shape, in spite of cutthroat competition with its rival paper. Singleton told a reporter from the Rocky Mountain News (May 22, 1999) that the Post had "been profitable every quarter since the 1980s." On the other hand, the News had lost at least $120 million over the past ten years. In 1999, MediaNews bought out half of Media General's 40 percent stake in the Denver Post, and agreed to purchase the rest of Media General's stake over the next five years.

The next year, the parent company of the Rocky Mountain News, E.W. Scripps Co., announced that it had invested some $250 million in the paper over the past 15 years, and never seen a profit. The two papers had battled for subscribers and advertisers, until both businesses were practically giving subscriptions away. While the Post had remained profitable, the News found itself in dire financial straits by 2000, and the two papers announced a joint operating agreement. The new arrangement combined the two papers' business offices, though each paper continued to publish its own daily paper. The deal, which cost E.W. Scripps $60 million, was supposed to end the detrimental competition and assure the continuance of both papers for the next 50 years. Singleton told the New York Times (September 2, 2002) that he had decided in 1999 to build the Denver Post into a strong newspaper. Singleton's reputation was founded on his cost-cutting management style rather than on his fostering of fine writing, but he told the Times that he "wanted to build a great newspaper." He made executive changes at the Post to facilitate improvements in the paper's regional and national coverage, and he increased the paper's budget in 2001 in order to send 15 reporters to the Middle East. Also in 2001, Singleton took the title of publisher of the Denver Post, in addition to his role as vice-chairman and chief financial officer of MediaNews Group.

Another Urban Market in the 2000s

Meanwhile, MediaNews continued to buy small-market papers, and to sell them. The company unloaded its New Jersey papers in 2000, claiming its collection of papers there did not have enough impact on the total market. It also bought a group of Connecticut papers, including that state's largest, the Connecticut Post. By 2000, MediaNews owned 130 newspapers in 13 states. MediaNews Group's most notable purchase, however, was its acquisition in 2000 of Utah's Salt Lake Tribune for $200 million. The Tribune, with a circulation of 135,000, was, like the Denver Post, an urban paper on a much larger scale than the typical MediaNews property.

Its financial situation was complicated on several fronts. The paper had long been family-owned, but the McCarthey family had sold it in 1997, while staying on as managers. The Tribune went through several owners, until MediaNews bought it from AT&T Broadband. The Tribune had a longstanding joint operating agreement with Salt Lake City's rival paper, the Deseret News, which was owned by the city's dominant political and religious force, the Mormon (Latter Day Saints) Church. The two papers had shared their business operations since 1952, but their newsrooms had become increasingly antagonistic in the late 1990s, with the Deseret News accusing the Tribune of overly aggressive reporting on church affairs. When MediaNews unexpectedly bought the Tribune, the McCarthey family felt sideswiped, as they had hoped to buy the paper back themselves. Rumors raged that Singleton had made some kind of deal with Mormon Church officials regarding news coverage in order to continue the joint operating agreement.

This situation led to a lawsuit by the McCarthey family. In a decision in 2003, a federal appeals court upheld the family's option to buy the newspaper back. The family declared victory. But MediaNews also announced that it had won the appeal on all counts. So this decision seemed to do little to resolve the conflict between the parties. The McCartheys had only won an option to buy, and they still disputed the appraised price of the Tribune, set by a third party at $352.5 million. This seemed $100 million too high to the McCarthey family. As of early 2005, the Salt Lake Tribune was still part of the MediaNews stable.

Other Developments in the 2000s

In July 2000, MediaNews Group sold its New Jersey papers, including the Gloucester County Times, which was the first newspaper the company bought when it got its start in the early 1980s. Singleton told Editor & Publisher (April 30, 2001), "It broke my heart to turn over our first paper," yet his company seemed to be turning in a new direction. MediaNews Group's revenue was close to $1 billion by 2000, but it had passed up acquiring several newspapers that had come up for sale recently. Instead, MediaNews spent $7 million to acquire the number-two television station in Anchorage, Alaska, KTVA-TV. The company declared it was actively looking for more radio and television opportunities. The company made an arrangement with a Denver television station, KWGN-TV, in which the Denver Post and KWGN collaborated on a subscription news service on the Internet. MediaNews opened a new division to handle Internet business, called MediaNews Interactive, in 1995. By 2005, the Interactive division provided web-based versions of the reporting from 49 of the company's daily papers, often in partnership with area radio and television broadcasting. Singleton explained his strategy to Forbes (July 3, 2000): "If all I had was a newspaper in Podunk City, over the next ten years I would deteriorate. But if I had a newspaper in Podunk City and full Internet technology and a radio and TV station, the combined entity would survive."

Nevertheless, growth into new media did not come quickly. Until June 2, 2003, the Federal Communication Commission (FCC) prohibited the owner of a newspaper from also owning a television or radio station in the same market. When the rule was relaxed, MediaNews was quick to announce its intentions to increase its so-called "cross-ownership." Yet by 2005, the company still had only the one television station in Alaska, in addition to four radio stations in Texas. And MediaNews continued to buy plain old newspapers. It strengthened its hold on the Los Angeles area in 2004, buying two weeklies, the Grunion Gazette and Downtown Gazette, with a combined circulation of 65,000. Around the same time, the company lost a bid to buy the Orange County Register, a leading area paper with a circulation of more than 360,000. The company's revenue in the early 2000s dropped off from its peak in 2000.