Analysts See Pros and Cons of Local Group Buying Philly Papers

By: Jennifer Saba
The emergence of Philadelphia Media Holdings as the new owner of The Philadelphia Inquirer and Daily News has industry watchers mainly applauding that the two papers ended up in the hands of locals. But there are reasons to be wary, as well.

The group, led by public relations executive Brian Tierney, construction magnate Bruce Toll, and investment manager Leslie Brun, placed a bid for over $500 million -- besting experienced newspaper players like MediaNews Group and Mortimer Zuckerman, owner of New York's Daily News, not to mention a handful of private equity firms like the union-backed Yucaipa Co.

Newspaper analyst John Morton pointed out some advantages of chain ownership -- everything from newsprint to paper clips being cheaper -- and executives are less likely to meddle in the newsroom.

On the other hand, "what we know is that local news succeeds," said George Harmon, associate professor at the Medill School of Journalism at Northwestern University. "People who live in the community are going to have a better feel for local news and how they can use it to increase their business."

Aside from knowing the ebbs and flows of the Philadelphia area, this group will not have to worry about appeasing Wall Street, which has been extremely restive the past few years. "A guy like Brian [Tierney] may want it more for personal reasons, like to have a voice in town," explained Edward Atorino, an analyst with Benchmark Co. "He might be able to tolerate a low level of profitability. He would have a longer time to figure out how to adjust the business model."

Most notably, no public newspaper company has expressed interest in the papers as several press reports indicate. For those newspapers beholden to Wall Street, the Philadelphia papers could be seen as toxic. "A lot of publicly held companies take one look at Philadelphia and see major challenges," Atorino said about the papers' declining margins, circulation, and advertising revenue. "Who needs this kind of headache given this environment?"

Even the private companies, like MediaNews, have barriers with this bid, Atorino speculated. "If I'm [Dean] Singleton and I've got a billion-dollar commitment to buy the other papers, do I want to get in a bidding war? Probably not. [Philadelphia Media Holdings] has a big checkbook -- Dean isn't playing with his own money."

McClatchy agreed to sell the San Jose (Calif.) Mercury News, the St. Paul (Minn.) Pioneer Press, the Contra Costa (Calif.) Times, and The Monterey County (Calif.) Herald to Singleton's MediaNews Group.

"Think of it: If you own the paper, you can yell at the mayor, you can yell at the president or anybody. Freedom of the press -- not bad," Atorino added.

But for all the appealing aspects of local ownership, it does not always equate to good business -- especially since some have concerns that local owners could use the paper as a soapbox.

"Whatever the local owner might say, the fact is the group can have a strong impact on the journalistic mission of the newspaper for good or ill," analyst Morton said. "Local owners often use [newspapers] as the voice of their will. A lot of that disappears with chain ownership."

Morton said it doesn't help that Tierney is an active Republican. "It raises that specter," he said.

Though Tierney has people wondering how his political views and past scuffles with the paper will play out, he is known as a shrewd businessman.

"One thing about Brian is that he is very savvy about perceptions and the media and the sensitivity people will have," said a source close to the paper. "My hunch is he will lean hard in the other direction to prove the new ownership is fair and doesn't have a private agenda."

***

Related stories:

McClatchy Announces Sale of Philly Papers to Local Group

Newsrooms React to Sale of Philly Papers