By: Lucia Moses
divergence over convergence created rift between CEO AND BACKER
Amid a swirl of speculation, daily newspaper empire- builder Ralph Martin resigned last week from the company he’d built from scratch in two short years.
Bankrolled with 1.3 billion dollars from the powerful Retirement Systems of Alabama (RSA), Martin’s Community Newspaper Holdings Inc. (CNHI) amassed 95 small dailies and 100 or so weeklies in the South and Midwest, creating clusters of papers that share operating expenses and generate higher profit margins than stand-alone papers.
The word on the industry circuit is that Martin and RSA rainmaker David Bronner grew more and more at odds over the future direction of the newspaper group.
Martin himself acknowledged some of those differences. Just a couple of weeks ago at a meeting of the Inland Press Association, Martin said one point of departure between CNHI and its retirement system backer was that Martin had begun buying options for 25 to 50 percent stakes in radio properties in markets where the company owned newspapers. “The lender thinks I’m crazy,” Martin said at the time. “The FCC [Federal Communications Commission] has let in everybody but us, so they’ve got to. Not this year, but probably within three years.” Martin, a self-professed true believer in the coming convergence of all media, added, “One way or another something is going to change. Either my job or the rules.”
It wasn’t the rules. “We’re trying to be a newspaper company,” said Bronner, emphasizing that he and the retirement system’s board of directors want to stick to Martin’s original plan of buying small newspapers. “He was looking at TV, cable, the Web. We’re sort of a conservative investor.”
Some observers inside and outside CNHI claimed that Martin’s ambitious expansion caused the company to become financially overextended. One CNHI publisher who insisted on anonymity said some payments to vendors were late due to the transition to the company’s central accounting system, although things are improving.
“CNHI’s got a very simple system, but very sophisticated and computerized, and a lot of people are still accustomed to pencil and paper,” the publisher said, adding that finances get a little tight twice a year just before the RSA interest payments are due. “They want to make sure the lender’s paid first.” But Martin’s successor as CEO, 33-year-old Mike Reed, told E(and)P that talk of financial problems at CNHI ? either late payments to vendors or delays in meeting financial obligations to the RSA ? is “just not true.” He said all CNHI’s interest payments to the RSA have been timely, and said he hasn’t heard of any vendors being paid late.
Overall, said Reed ? formerly CNHI’s executive vice president and chief financial officer as well as a co-author of its original business plan ? the chain’s newspapers are hitting target profit margins of 26 to 27 percent this year, up from 17 percent last year. RSA’s Bronner also said the company was sound. He said the third quarter was CNHI’s best ever, and the company is on track to meet its earlier estimate of 110 million dollars in profits on revenues of 380 million dollars. Reed has assured publishers in the group that no structural changes are planned and that they will retain local control.
CNHI plans to continue its consolidating efforts for another six months, Reed said. Then, it will focus on buying papers in the 25,000- to 75,000-circulation range. After a swap with Liberty Group Publishing earlier this year that shed some papers that didn’t fit the company’s clustering concept, CNHI isn’t looking to sell papers, Reed added. As for diversifying along lines envisioned by Martin, the new CEO said he’s not opposed to such thinking, but said CNHI isn’t in a position to look at other types of media yet.
For his part, Martin isn’t cooling his heels. He resigned on a Friday, and the following Monday he was on the road exploring business ideas ranging from building another newspaper company to buying all media in a single market. Before starting CNHI, Martin spent 19 years climbing the corporate ladder at Thomson Newspapers, then joined Park Communications, whose newspapers became the nucleus of CNHI.
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(copyright: Editor & Publisher November 20, 1999) [Caption]