PULITZER’S PRIZE WAGER IN ST. LOUIS

By: Mark Fitzgerald

‘Post-Dispatch’ Owner Is Betting On Region


Moored on the Illinois side of the Mississippi River, just across
from the landmark St. Louis Gateway Arch, the Casino Queen
riverboat last year raked in $156,880,335 from unlucky gamblers,
according to Illinois Gaming Board figures. That’s practically
chump change compared to the bet Pulitzer Inc. CEO and President
Robert C. Woodworth laid down on the St. Louis market in 2000:
$471 million.

In quick succession, Pulitzer Inc. made a one-time payment of
$306 million to buy out all but 5% of the 50% joint operating
agreement (JOA) stake the Newhouse family’s Advance Publications
held in Pulitzer’s flagship St. Louis Post-Dispatch. Less
than a month later, Woodworth pounced on the unexpected
opportunity to buy the Suburban Journals of Greater St. Louis, a
group of 36 free-distribution weeklies that had tormented the
Post-Dispatch for three decades by luring away whole
categories of ads. Pulitzer paid $165 million.

And while Pulitzer has suffered the same ad slump and increased
newsprint costs afflicting other newspaper companies, Woodworth
is still adding chips to the St. Louis wager. This spring,
Pulitzer spent an undisclosed but undoubtedly substantial sum to
scrap its old newspaper-oriented Web site and create a city
portal, STLtoday.com, intended to attract a younger, hipper
audience.

“We wanted to make a statement about our confidence in the future
of this market, and our confidence in this industry,” Woodworth
says in his St. Louis office. Confidence in newspapers, sure —
but confidence in St. Louis? While some Rust Belt cities are
making celebrated comebacks, redevelopment in downtown St. Louis
remains pretty spotty. The central city these days looks more
like struggling Detroit than revitalized Cleveland.

Circulation of the Post-Dispatch has recently been
problematic: daily sales were down 2.6% from the year before to
300,852 — and Sunday sales were down 3.3% to 483,628 — in the
most recent Audit Bureau of Circulations reporting period.

Woodworth isn’t under the delusion that St. Louis is a boomtown,
but he argues Pulitzer — which gets fully 60% of its overall
revenue from its hometown, despite owning 13 other papers — had
such a modest share of market for so long it might as well be
virgin territory. Pulitzer now has the right structure to really
grow, he says.

In this vision, the Post-Dispatch dominates metro and
national advertising, the Suburban Journals act like 36 zoned
editions for local news and ads, and STLtoday.com wins the online
market in the 18- to 34-year-old demographic group.

Post-Dispatch President and Publisher Terrance C.Z. Egger,
who is also a corporate vice president, says Pulitzer has set
this goal for St. Louis: “Within 10 years, 100% of people in the
market will use our products every week.”

No prize (till now)

There’s a certain irony in this renewed Pulitzer emphasis on St.
Louis. True, Joseph Pulitzer began his newspaper empire — and
his brand of “Yellow Journalism” — at the Post-Dispatch,
which he created in 1878 by buying the bankrupt St. Louis
Dispatch and combining it with his friend John A. Dillon’s
11-month-old The Post. But, according to his biographers,
once Pulitzer turned his attention to the New York World
and its infamous war with William Randolph Hearst’s New York
Journal, he was constantly trying to sell the St. Louis
paper.

There’s no taking Pulitzer out of St. Louis now, though. When
Woodworth is seated at his desk, Joseph Pulitzer looks down from
a portrait over his right shoulder, and a bust of the Hungarian
immigrant stares at him from across the room. Other, later
Pulitzers gaze down from portraits, including a striking modern
oil painting of Joseph Pulitzer Jr., chairman from 1979 to 1993.
(Pulitzer’s wife, Emily, is said to hate it.)

Woodworth’s framed personal memorabilia lies stacked on the floor
along a far corner and seems unlikely ever to make it to the
walls. The office looks the same as the day he reported for work
more than two years ago, the CEO says.

“The legacy [of the Pulitzers] here is palpable,” Woodworth says.
“It really heightens my commitment to the company and
specifically to the Pulitzer family. They’ve been very supportive
of me, and you really feel a need to continue that legacy.”

When he talks about growing ad volume or serving the reader,
Woodworth can sound as if he’s channeling Joseph Pulitzer. What
he does not share, though, is the founder’s management style.
“Joseph Pulitzer was very much a micromanager and probably drove
his managers nuts with his frequent telegrams. He would summon
them to various locations, to his house in Maine or to his
yacht,” says W. Joseph Campbell, author of the recent book,
“Yellow Journalism: Puncturing the Myths, Defining the Legacies.”

By contrast, Pulitzer these days operates like dozens of separate
businesses. Publishers at the chain’s 14 dailies are given broad
authority to make business decisions. Even Pulitzer’s St. Louis
strategy is run by three separate businesses. It’s a style
especially welcome in times such as these, says Post-
Dispatch Publisher Egger: “No one has ever come to me and
said, ‘You have to cut X.’ There was no corporate mandate; we
made the decisions ourselves.”

Woodworth says, “We operate with a minimum of corporate
structure.” No kidding. The entire Pulitzer management corps fits
in three smallish executive suites in its aging downtown
headquarters. Executives also operate with a minimum of pretense:
In two days of visits, Woodworth is the only executive who ever
shows up wearing a tie.

It’s a style Woodworth very much wants to preserve. With Senior
Vice President for Finance Ronald H. Ridgway’s impending
retirement, Woodworth has been searching, so far fruitlessly, for
a financial chief for the better part of six months. “There’s a
lot of good people out there, but — .” He pauses. “I’m pretty
protective of the chemistry we’ve got.”

The chance to work with Woodworth in running his own company
convinced executives such as Pulitzer Newspapers Inc. (PNI)
Senior Vice President Mark G. Contreras and General Manager
Matthew G. Kraner to join him in St. Louis. “I had worked my
entire career at The Kansas City [Mo.] Star, and I
wouldn’t have picked up stakes … except to work with Bob,”
Kraner says. “He really fosters an environment where people get
developed. I’m a perfect example of that.”

STLtoday.com President and CEO Collette Hogan didn’t know
Woodworth and wasn’t inclined to move from Chicago when he asked
her to start up the portal. “[Chicago Tribune Publisher]
Scott Smith told me, ‘He’s one of the smartest persons in the
newspaper business, and one you would really respect.’ What I’ve
really appreciated about Bob is he’s given me the autonomy to go
do what I have to,” Hogan says.

Measure twice, cut once

Inside Pulitzer, Woodworth is renowned for his ability to analyze
business situations. “He sees things diagnostically,” says
Post-Dispatch Publisher Egger.

Woodworth, 53, spent 20 years running papers for the old Capital
Cities/ABC chain, including The Kansas City Star and the
Fort Worth (Texas) Star-Telegram. He credits former
Star-Telegram Publisher Phil Meek — “probably the best
I’ve ever seen at analyzing a paper” — with teaching him the
value of some key newspaper business metrics: share of
advertising market; ad revenue per subscriber; percentage of
businesses reached by sales force; and active accounts per ad
rep.

As soon as Woodworth came to Pulitzer, he ran the numbers for the
Post-Dispatch. “Was I shocked? Yes, I was shocked,” he
says. In every category, the paper badly lagged behind its peers.
Even now, the daily captures only about 26% of the advertising
dollars spent in the market. Add in the Suburban Journals and the
figure is still a relatively low 30% to 31%. Other papers the
size of the Post-Dispatch are capturing shares closer to
37%, notes financial chief Ridgway.

“Keep in mind that every point represents $6 million to $7
million in this market,” Ridgway adds. Advertising revenue per
subscriber was about $500 when Woodworth arrived. “Now it’s
something like $600, and we think we can manage to get that up to
the $700 to $800 level,” Ridgway says.

War chest fever

Just before he relinquished his CEO title, Chairman Michael E.
Pulitzer made Woodworth’s St. Louis strategy possible with one
critical decision: He decided to get Pulitzer out of the
broadcasting business by selling its nine TV and five radio
stations to Hearst-Argyle Television Inc. Woodworth arrived in
January 1999 at a company with no debt and $560 million in cash.

“The whole idea was to come out of the sale with a war chest, so
to speak, so we could grow the newspaper division,” says Ridgway.

Woodworth put PNI’s Contreras on the hunt for new papers. “In
that first year, I looked at 90 different options,” Contreras
says. “There were a whole lot of things on the market.”

The more they looked around the nation, Woodworth says, the more
they realized their best opportunity was right under their nose –
– the Post-Dispatch or, more accurately, the 50% of the
paper’s revenue that Pulitzer didn’t own.

Though it has not published a paper in St. Louis since 1984,
Newhouse had continued to share profits in the 50/50 JOA with
Pulitzer. It was a sweet deal: In 15 years, it earned some $177
million — and the JOA had extensions that could have kept it
going to nearly the end of this century.

It took nine months of negotiations — and an upfront $306-
million payment plus a promise to make another undetermined
payment in 2015 when Newhouse relinquishes its final 5% stake —
but Pulitzer at last won the right to its revenue.

Among the legacies of the JOA were high distribution and
production costs, which Pulitzer spent most of the 1980s and
1990s trying to reduce. The concentration on cost-cutting hurt
everywhere, Publisher Egger says: “Even the journalism had fallen
back because we kept cutting costs, cutting costs, cutting
costs.”

Now Pulitzer’s clear emphasis is on top-line, or revenue, growth.
(Operating revenue last year was a bit more than $407 million.)
In the Post-Dispatch newsroom, expansion began even before
Woodworth came aboard. Since Egger arrived in 1996 from
Pulitzer’s Tucson Newspapers, he has added at least 75 full-time
positions. The paper also has a new editor, Tribune Co. veteran
Ellen Soeteber, who most recently was managing editor of the
South Florida Sun-Sentinel in Fort Lauderdale, Fla.

So far, at least, she hasn’t lost staff in the current downturn.
“In the newsroom,” Egger says, “even with the tough economy the
industry is going through, our hope is to give her a chance to do
what she came here to do before we make any decision” on
reductions.

Throughout the chain, publishers were encouraged to beef up their
ad sales staff — and to keep them up even now. “We want our
publishers to be entrepreneurial,” PNI’s Contreras says.” We
don’t impose a lot of corporate control. But one of the few
things I will [tell] publishers is not to cut back now. We want
them to establish relationships with businesses that will pay off
long term.”

At the Suburban Journals, President Joseph Pepe has replaced a
centralized management system with nine group publishers for the
36 papers. He has added some salespeople, but forced turnover as
well. The Journals are distributed free to 600,000 households
weekly.

The STLtoday.com portal, meanwhile, is off to a fast start. The
Internet measuring firm Jupiter Media Metrix found that barely a
month after its launch, STLtoday.com had a market penetration of
21%, far higher than any other St. Louis-oriented site.

Before the market for newspapers dried up, Pulitzer added to its
revenue by acquiring two dailies and several weeklies. It also
sold, for a combined after-tax loss of $1.9 million, its
Troy (Ohio) Daily News and its St. Louis-based
Internet service provider.

Pulitzer a plum?

“I know Ron Ridgway was surprised at how fast all that
[broadcast-division sale] cash went,” Woodworth laughs. Even so,
Pulitzer is still sitting on a couple of hundred million dollars
that could be used for further acquisitions. Given the economy
and the slim pickings on the auction block, however, Woodworth
says Pulitzer’s immediate future will be concerned with the
operational issues of the newly enlarged company.

Despite the economy, Pulitzer (PTZ on the New York Stock
Exchange) has become that rare thing on Wall Street: a pure-play
newspaper company that investors like. For months, its stock has
been trading on the high end of its 52-week range of
approximately $39.50 to $57. And Pulitzer doesn’t get punished
much for bad news: The day it reported a 63% decline in second-
quarter net earnings — and that it was unlikely to meet
analysts’ consensus earnings estimates of 31 cents per share for
the third quarter and $1.20 for the full year — Wall Street took
it in stride: The share price fell just 50 cents to $50.90.

One reason for its high price centers around speculation that the
company will be sold. Closely watched investor Mario Gabelli of
Gabelli Asset Management in Rye, N.Y., has fueled the speculation
on financial TV shows for months, touting the stock as
undervalued and, just last month, “a plum takeover target.”

Pulitzer is enjoying the stock bump, but insists it’s not for
sale. “The Pulitzers and the board have stuck a stake in the
ground on newspapers,” Woodworth says. “That commitment is
unwavering.”

It’s a declaration that, in this particular executive suite,
seems to reflect not only the sentiment of current Chairman
Michael E. Pulitzer, who nowadays spends most of his time at his
Santa Barbara, Calif., home, but all those other Pulitzers on the
wall of the CEO’s office in St. Louis — including the one who
looks over Woodworth’s shoulder and, somehow, never could seem to
part with the Post-Dispatch, either.



Mark Fitzgerald (mfitzgerald@editorandpublisher.com) is editor at large for E&P.



Copyright 2001, Editor & Publisher.

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