We own a newspaper?

By: Jim Rosenberg

AT&T acquires Utah’s biggest daily in its deal with TCI
This decade’s media megamergers placed some newspapers, at least temporarily, in the hands of unlikely owners.
Soon after the Walt Disney Co. bought ABC/Cap Cities in 1995, for example, chairman Michael Eisner said his largely entertainment-oriented company would not spin off its new newspaper properties. Almost two years later, however, it sold the lot to three newspaper groups.
As first reported in E&P Interactive (www.mediainfo.com), an unintended, somewhat ironic, consequence of AT&T’s March 9 merger with Tele-Communications Inc., the world’s biggest cable-TV operator, put the phone company into the newspaper business. Now, the question is whether, when, and to whom AT&T will sell its very own metro, The Salt Lake Tribune, with a daily circulation of 133,561, and Sunday circulation of 161,857.
Unlike Disney, AT&T concedes it has no interest in keeping the newspaper and will probably sell it. But the Tribune’s management group, to whom it must be offered first, has yet to hear from the new owner.
“At some point now,” says publisher Dominic Welch, “they have to call me.”
Whatever else it may have accomplished, Ma Bell’s breakup years ago hardly calmed a newspaper industry suspicious of a new breed of competitor able to control the network that would carry a then-new type of “content” ? audiotext information. Newspapers complained ceaselessly of the danger that local phone monopolies might give preferred treatment to their own future ventures in information services beyond directory publishing. Trying to rein in the Baby Bells he helped to create, U.S. District Judge Harold Greene was pressed by all sides ? telcos, publishers, even a federal appeals court.
By the mid-1990s, however, concern with the telcos evaporated along with interest in audiotext as a major future business. The Web had arrived, with its own new commercial competitors for newspapers to fret about. For the most part, local and long-distance phone companies spent the decade distracted by their own deals.
But now that the long-distance successor to the original phone company giant has merged with the cable-TV industry giant, it not only has captured control of considerable coaxial bandwidth but also has landed smack in the newspapers’ core competency: ink-on-paper content.
AT&T’s deal with TCI brought it Kearns-Tribune Corp.’s and Utah’s largest newspaper. The group was acquired by TCI in a 1997 transaction that included real estate and called for issuance and exchange of stock shares.
According to Denver Rocky Mountain News reports, that arrangement not only could have benefited Kearns-Tribune owners but also boosted TCI chairman John Malone’s shareholder-voting power and helped to pay taxes owed by the estate of TCI’s founder.
Last year, TCI sold The Daily (Nev.) Sparks Tribune, the Lewiston (Idaho) Morning Tribune, the weekly Whitman County (Wash.) Gazette, and The Moscow-Pullman Daily News (serving adjacent communities in Idaho and Washington, respectively) to employees under publisher and former owner A.L. “Butch” Alford.
To judge by media-affairs and investor-relations personnel’s buck-passing and inability to respond, AT&T initially seemed unaware that it owned its new Salt Lake City morning newspaper. (Following posting of the original E&P Interactive story, a call from another news outlet led an AT&T spokeswoman to say that her company was aware of the Tribune and that, although it had no plans for the paper, AT&T typically divests itself of noncore businesses.)
When it passed to TCI in a tax-free exchange of stock, Kearns-Tribune’s total worth was estimated at more than $620 million. Kearns-Tribune was owned by two families and the company’s employees. Former directors who continued to manage the Tribune autonomously under TCI were given the the right to buy back the business in 2002, or sooner if TCI chooses to sell. That arrangement has not changed under the new merged owner.
When the deal with TCI was announced, Tribune publisher Welch said it would occasion “no change in management, personnel, editorial policy, philosophical direction, or day-to-day operations.” That hands-off policy seems unlikely to change in the short term under the new owner ? AT&T hasn’t picked up the phone and called Welch.
“I don’t think AT&T knows we’re here, and I think it’ll take them a year to find us,” he said shortly after the merger.
Though there’s been no offer to sell since then, AT&T did finally reach out and touch the Tribune. “We’re adopting their employee benefits, and we’re adopting their accounting system,” says Welch.
“We ? will continue to own it ? in the near term, certainly,” remarked Derek Chang, TCI-AT&T executive vice president of corporate development and affiliate relations. Though a major presence in Utah, the paper is a comparatively small enterprise in the merged company’s vast realm.
According to Chang, ownership of the newspaper never came up in talks between TCI and AT&T.
As the company continually seeks to rationalize its holdings, says Chang, “we’re just going to figure out whether or not it’s a strategic asset and ? what to do with it.”
“At some point they’ll probably just spin it off,” predicted Frank Washington, echoing most other observers’ thinking. Known to newspapers as chief executive of System Integrators Inc. (SII), supplier of widely used publishing systems, Washington remains “really good friends” with AT&T Consumer Services president Leo J. Hindery Jr. Washington and the former TCI president partnered for several years in buying cable companies.
The Tribune has another newspaper company to thank for its new corporate boss. Hindery reportedly developed his interest in cable TV when he left a Wall Street investment bank in 1985 to become planning and finance chief at San Francisco’s Chronicle Publishing Co. Hindery went into the cable business himself, and TCI bought most of Chronicle’s cable holdings.
Along the way, Hindery and Malone became friends. When Malone needed a top executive for TCI two years ago ? at about the same time that TCI acquired Kearns-Tribune ? he sought out Hindery. The merger with AT&T subsequently put Hindery in charge of the unit responsible for the Tribune.
Hindery started his original cable venture with former San Francisco Chronicle managing editor Alan Mutter, whose other, subsequent ventures include Best Internet Services and Instant Objects (formerly Electric Classifieds Inc.).
When Hindery left the Chronicle, “he had looked at buying both newspapers and cable,” recalled SII’s Washington, adding that any print interest was left in the wake of Hindery’s success in cable.
Welch and Hindery are no strangers to one another. Remembering Hindery from the creation of a newsprint-production partnership, Welch remarks, “Leo was a good negotiator even then.”
The Chronicle and the Tribune are the dominant partners in their respective joint operating agreements (JOA). Along with other newspaper publishers and a large Canadian papermaker, the JOA companies ? San Francisco Newspaper Agency (SFNA) and Salt Lake City’s Newspaper Agency Corp. ? were early participants in forming the Ponderay Newsprint mill in Usk, Wash.
“It worked very well for a while, until they dropped out,” Welch recalls, referring to SFNA’s decision to join a similar venture with the same papermaker in British Columbia. The Ponderay mill is still producing, but the ill-fated Gold River mill in British Columbia is not.
Like most large U.S. newspapers and almost all those published in two-newspaper cities, Salt Lake City’s two dailies are owned by large organizations. (Interestingly, where JOAs include smaller, local part-ners, those independent owners invariably have the stronger publications.)
But in a situation unique among America’s few remaining two-newspaper cities, the owners of both dailies serving Utah’s capital are not generally understood as media companies.
The Tribune’s JOA partner, The Deseret News (with circulation of 66,138 daily and 69,444 Sunday) is an evening paper owned by the Mormon Church.
For the past 10 years, the News has seriously contemplated conversion to morning publication, following an industry trend of the last four decades. The trend toward two morning papers, however, is newer, beginning a couple of years ago in Vancouver, British Columbia, and building up steam more recently with The Seattle Times’ announced intention to convert in the near future.
“[The News] notified me in 1989 that they were going to exercise that right,” says Tribune publisher Welch (who is also president of the Newspaper Agency Corp., the papers’ joint operating company).
Serious discussion resumed a year ago, then unexplainably stopped, says Welch. He speculates that circulation losses that followed a late-1997 conversion to mornings at The Daily Herald, a Pulitzer Publishing Co. paper in nearby Provo, may have spooked News executives.
Noting rumors that the News will convert on July 1, he says, “You can’t move that quickly,” adding that conversion could be expected nine to 12 months after notification.
News publisher William James Mortimer did not return calls seeking comment on the possibility of converting to morning publication.

?(Editor & Publisher Web Site:http:www.mediainfo.com) [Caption]
?(copyright: Editor & Publisher June 12, 1999) [Caption]

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