Ottaway Newspapers, Inc.

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Ottaway Newspapers, Inc.

Route 416, P.O. Box 401
Campbell Hall, New York 10916
U.S.A.
(914) 294-8181

Wholly Owned Subsidiary of Dow Jones & Co., Inc.
Incorporated: 1946 as Empire Newspapers-Radio
Employees: 3,500
Sales: $252 million (1994)
SICs: 2711 Newspapers

Ottaway Newspapers, Inc. is the community newspapers subsidiary of the publishing giant Dow Jones & Co., Inc. With 20 newspapers scattered throughout the nation, the company has averaged around 550,000 total circulation during the 1990s. The company’s largest circulation base is in the East, where its largest paper, New York’s Times Herald-Record, has an average daily circulation of 87,000. Such papers as the Massachusetts-based Peabody Times, however, serve readerships of just over 3,000. Founded during the Great Depression by newspaper legend James Ottaway, Sr., the company has maintained a reputation throughout its history for adhering to the highest standards of editorial quality and reporting objectivity.

The story of one of the nation’s most respected newspaper groups dates back to the fall of 1936 and the ambitions of a 25-year-old aspiring newspaper publisher, James H. Ottaway. Having grown up in the newspaper business—his father co-founded the Port Huron (Michigan) Times-Herald in 1900—Ottaway set out with his wife Ruth, with whom he had worked as editor of their college newspaper, to purchase a small newspaper and enter the publishing arena. When Endicott Bulletin of New York went on the market, the Ottaways, undaunted by their own limited financial resources, left their home in Port Huron to negotiate the purchase of their first paper. The owners of the Bulletin, however, were asking $50,000—in cash or certified check—for their modestly profitable paper, a sum the Ottaways did not have readily available. Showing a skill for bargaining that would serve him well throughout his career, Ottaway convinced the stubborn proprietor of the Bulletin to accept a down payment of $22,500 and $4,500 a year at six percent interest. The Ottaways’ publishing odyssey had begun.

Ottaway had selected the Endicott location largely because of the proximity of two large employers: Endicott Johnson, a long-time giant in the footwear manufacturing industry, and the rapidly expanding International Business Machines Corp. (IBM). Despite being in the midst of the Great Depression, which brought many local industries down to a four-day work week, Ottaway set his sights on transforming the Bulletin from a semi-weekly to a daily newspaper—a change that would require expanding the customer base of 4,000 by at least 3,000 to justify a higher advertising rate commensurate with a six-day operation.

Ottaway’s strategy for expansion was simple: market a better editorial product. In the 1930s commercial radio was in its infancy and television was only in the early stages of development; newspapers were the main source of news and information. Having learned his craft by serving as the vice-president and assistant general manager of a Florida paper owned by his father, the young publisher stressed concise writing, thorough local coverage, and a strong editorial page covering local, state, national, and world issues. Assisting Ottaway in his bid to bolster sales was Barney French, a holdover from the previous owners’ staff, whose selling strategies and business savvy were instrumental in the newspaper’s rise to profitability. In 1939, two years after becoming a daily paper, the Bulletin recorded its first profits and would continue to operate in the black for almost two decades before perishing in 1960.

As evidence of Ottaway’s emphasis on the editorial rather than the business end of publishing, the Bulletin introduced several innovations to the newspaper industry. Its typographical design, for instance, featured dropped column rules; lower case, flush left headlines; and bullets to indicate the important developments in a packaged story. Underlying this surface-level improvement was Ottaway’s commitment to the quality of the content of his paper and the well-being of his employees. “I’ve always figured that if we put out a good editorial product, the business end would take care of itself,” said Ottaway in Charles King’s history of the company. Ottaway Newspapers: The First 50 Years. Indeed, while Ottaway focused on producing a good paper, he lived off his savings and investments and borrowed money from his mother, who served as his chief banker during the early years. Despite the difficult economic times, the Bulletin never missed a payroll.

Although World War II took Ottaway away from direct involvement in his growing newspaper business, it did not prevent him from planning for the future of his company. In mid-1944, while serving as a lieutenant at his Navy post in Philadelphia, he learned that the Oneonta Star, with its 9,000 New York subscribers, had been put up for sale. Although Ottaway was not mustered out of the military until March 1946, he made his first acquisition, purchasing the Star for a down payment of $50,000—most of which was advanced by his mother—and notes payable over 20 years at four percent. The purchase of the Star brought Ottaway his first Associated Press membership, an organization for which he would one day serve as chairman of the board.

Although Ottaway’s purchase brought his company’s long-term debt to $193,000, he continued to expand his operations through the 1940s. “Jim Ottaway,” one veteran executive told King, “never worried about all the loans floating around. His mother told him he would die owing money.” In 1946, after a profitable year for both of his papers, he formed a new corporation, Empire Newspapers-Radio, Inc., which, as its name suggested, ushered the company into the first of its 23 years in the radio business, applying for its first FCC license that same year. In keeping with his philosophy of plowing profits back into the operation, Ottaway purchased his third paper, the Stroudsburg (Pennsylvania) Daily Record. Having already earned a solid reputation for the editorial quality of his newspapers, Ottaway was able to make up for his financial weaknesses at the negotiation table by convincing publishers that he would improve the quality of the papers he took over.

In his first 15 years of business, Ottaway managed to acquire three newspapers, build two newspaper plants, and start three radio stations. While such accomplishments were made largely through complicated and creative financial negotiations, Ottaway continued to build his reputation for producing newspapers of only the highest quality. As circulation and profits increased, Ottaway invariably reinvested the money into the corporation, improving the technology of his existing papers and purchasing new ones. This would be the key to continued expansion: borrow money to generate more cash, and reinvest in the operation to make a better product.

Ottaway’s aggressive growth strategy found a new ally in the 1950s and the free-market economic policies of the Eisenhower administration. With minimum government interference, he was able to add four more newspapers—three in Connecticut and one in New York—to his stable and bring the company into an era that would no longer be characterized by the huge financial risks of the early years. Chief among the major developments that signalled the company’s stability was the restructuring plan carried out in 1953. Having obtained a favorable ruling from the Internal Revenue Service in a bid for tax-free reorganization, the company divided itself into five separate corporations: Empire, which served as the operating-holding company, and four wholly owned subsidiaries. The new organizing strategy was designed to give the company better control over borrowing, centralize purchasing, enhance corporate prestige, and provide more power for acquisitions. Perhaps more importantly, though, as Ottaway explained in a letter to the IRS reprinted by King, the strategy facilitated the “formation of a closely-knit organization.”

With the new decade, came the addition of what would remain Ottaway’s largest paper into the 1990s, the Daily Record. The first daily paper in the United States to be assembled by photo-composition and printed by the offset process, the Record was founded in 1956 and had gained a respectable circulation of 19,000 in its first three years of operation. But it was losing money fast. And when its proprietor, Jacob Kaplan, met the Ottaways at an airport on their way to a vacation in St. Thomas, informal negotiations began. Several months of negotiations later, Ottaway made his most costly acquisition to date, paying an estimated $1.5 million for the paper and its pioneering brand of “community journalism.” As one of the paper’s early editors explained, the paper’s aim was to cover “mainstream issues at the local level” with editorial standards of in-depth and objective reporting not usually found in other papers in the category. Moreover, the paper would strive to avoid becoming “a mirror image of the community” and vowed not to succumb to the special interests represented by politicians or advertisers.

Two more multi-million-dollar expansions and the continued financial drain from expensive quality-improvement programs brought the company to a crossroads by the end of the decade. For the company to expand—and keep pace with the revolutionary era of electronic newspaper production on the horizon—the company had two options: merge or go public. The company had previously explored merger possibilities, but it had yet to find a party that it believed shared the Ottaway commitment to editorial quality. Not encumbered by any immediate financial trouble, the Ottaways could afford to wait for an offer that suited their high standards. And in the summer of 1969 that offer came; the publishing giant Dow Jones was interested in a deal. Once they were assured that they would lose neither their independence nor their editorial freedom, the Ottaways agreed to the terms of the agreement, receiving 914,038 shares of Dow Jones stock valued at approximately $36 million. Ottaway Newspapers, operating as a wholly owned subsidiary of Dow Jones, would benefit from the immense financial resources of its parent and would retain its autonomy and editorial freedom.

The merger with Dow Jones, to be sure, benefitted Ottaway’s expansionary vision. During the first 15 years of its alliance with Dow Jones, Ottaway International Newspapers invested more than $88 million in adding to and improving its operations. The parent company did not turn down a single project. The 1970s, for instance, saw the company make 14 acquisitions, increasing total circulation to more than 500,000 by 1977. One of the papers purchased during this period of rapid expansion made national headlines with its groundbreaking story on a child pornography ring. The efforts of the Traverse City, Michigan Eagle-Record exemplified the traditional Ottaway commitment to getting the story—whatever the costs. What started as a tip that a boy’s camp on an island in Lake Michigan was the setting for a child pornography ring evolved, after several weeks of tenacious reporting work, into the discovery of a nation-wide film and magazine distribution operation. With the help of other Ottaway reporters and police agencies throughout the country, the Eagle-Record gathered enough information to publish a series of articles that directly resulted in the passage of a landmark child pornography law. The governor, to honor the paper’s efforts, signed the bill right in the Eagle-Record newsroom.

The 1980s brought a changing of the guard for Ottaway Newspapers: the retirement of the company founder and the passage of the corporate reins to his son, Jim Ottaway, Jr., who had worked in the family business since he began delivering papers as an 11-year-old. Although his father’s 48 years of success in the business was difficult to follow, the younger Ottaway was well prepared to take over the company, having played an instrumental role in numerous acquisitions and other company decisions, such as the Dow Jones merger. Shortly after the 1984 transition, the new chief negotiated the purchase of the Sun City (Arizona) News-Sun, a six-day per week afternoon paper serving what the city’s developers tabbed the “world’s premier adult resort community.” The fast-growing 15,000-circulation paper became the 22nd under the Ottaway banner.

Having helped the company stay abreast of the latest in technology during his career, Jim Ottaway, Jr., made sure that he would keep Ottaway at the forefront of the computer revolution. By 1985, the company had begun to standardize its business systems at group papers throughout the company while centralizing its operations in a New York-based computer center. Although such a move went against the general trend of corporate decentralization, the strategy actually enabled the company to lead the industry in using the very latest computer hardware and software. With the financial support of the technologically-minded Dow Jones, the company was able to outfit its diverse publishing sites with world-class equipment, without compromising local autonomy. Freed of the responsibility of system selection, installation, and maintenance, individual papers were able to devote more time to editorial and business decisions. Fueled by such technological improvements, Ottaway Newspapers followed a pattern of steady growth through out the 1980s, largely on the strength of operating improvements and increases in classified advertising. By 1988, total revenue had jumped to $231.7 million, a steady seven percent increase from the previous year typical of this period.

The early and mid-1990s saw the company’s rate of growth slow. Although revenue and profits increased modestly, total circulation stayed around the 550,000 mark. Industry-wide weaknesses in retail and classified advertising, resulting from the recessionary conditions of the period, were largely responsible for the flattening of revenue and income. Increases in advertising rates and higher sales of preprinted advertisements, however, enabled the company to record modest gains. In 1994, for instance, revenue rose three percent to $252 million.

As Ottaway Newspapers entered the late 1990s, it was expected to benefit from an improved domestic economy and continued acquisitions, such as the March 1995 purchase of the Salem (Massachusetts) Evening News, which boasted a circulation of 30,000. In keeping with the vision of its founder, however, the company has maintained its principal emphasis on the editorial quality of its product. And in 1994 the company continued its award-winning tradition. Among the many Ottaway papers recognized for excellence were the Middletown Times Herald-Record, which was named “Newspaper of the Year” in the 30,000 to 100,000 category, by the New York State Society of Newspaper Editors, and the Gloucester (Massachusetts) Daily Times, which received the National Commission Against Drunk Driving’s print media awareness award for its year-long series of articles on alcohol abuse within the community.