Leaving Dailies Behind p.12

By: MARK FITZGERALD NEARLY 75 YEARS after west Texas newspapermen Houston Harte and Bernard Hanks struck up a friendship and began to buy Texas newspapers together, Harte-Hanks Communications is getting out of the daily newspaper business.
San Antonio, Texas-based Harte-Hanks announced it has retained Donaldson, Lufkin & Jenrette Securities Corp. to explore the divestiture of its six daily newspapers and their 25 associated community papers and niche publications. Harte-Hanks said it is also looking to shed
its only television station, CBS affiliate KENS-TV in San
Antonio.
Up for sale are five daily newspapers in Texas ? the 64,819-circulation Corpus Christi Caller-Times; 41,265-circulation Abilene Reporter-News; 37,984-circulation Wichita Falls Times Record News; 32,222-circulation San Angelo Standard-Times; and 12,538-circulation Plano Star Courier ? plus the 41,965-circulation Anderson (S.C.) Independent-Mail.
Harte-Hanks chief executive officer Larry Franklin said the company has decided
to concentrate on its direct marketing and shopper business, which has become its increasing focus in recent years.
Franklin noted that direct marketing now accounts for 50% of Harte-Hanks' revenues, with its extensive shoppers business contributing another 25%.
Harte-Hanks owns and operates shoppers zoned into 580 separate editions that reach almost 7 million households in four markets.
"When we went public for the second time in 1993, we focused on the targeted market sector," Franklin said in a telephone interview. "The direct marketing business is a very fragmented industry that is consolidating very rapidly ? and we are one of the consolidators.
"At the same time," Franklin continued, "we see opportunities on the shopper side."
With the daily newspaper business consolidating as well, Franklin said, Harte-Hanks concluded "it's just the right time, we think, to separate them apart. Our newspapers are a well-run, high-quality business."
Harte-Hanks sees concentrating on shoppers and direct marketing as the best way to keep up with a transforming marketing environment, Franklin suggested.
"Our vision . . . is that newspapers are moving from mass communication to saturation, and direct marketing is moving from targeted marketing to one-to-one relationships," he said.
With much of the daily newspaper industry concentrating on increasing its target marketing capabilities, does the Harte-Hanks divestiture indicate newspapers are simply a bad vehicle for target marketing? Absolutely not, ceo Franklin says.
"I don't think that's right at all," he said. "All our newspapers have been very successful in targeting niche markets with [printed] products, Internet, audiotex. To me the key is to have a very strong, very high-quality primary product ? meaning the broadsheet newspaper ? and leverage it into other revenue opportunities."
Niche publication revenue has been increasing by 25% a year since Harte-Hanks went public again in 1993, Franklin said.
Three of Harte-Hanks' Sunday papers ? in Wichita Falls, Abilene and San Angelo ? rank among the top 20 in the United States in terms of paid household penetration within their metropolitan statistical areas.
"[Newspaper] is not incompatible at all with target marketing. In fact, we think the newspaper industry is a terrific business," Franklin said in the interview.
In the statement announcing the divestiture, Franklin said the target marketing "businesses, particularly direct marketing, are very different from the newspaper and television businesses, which by their very nature serve local markets."
Harte-Hanks' direct marketing business offers a full range of specialized and coordinated services ranging from database, service bureau and creative services to personalization and mail and fulfillment services.
Franklin said Harte-Hanks would like to sell the newspapers to a single acquirer.
Wall Street loved the divestiture idea, pushing stock up 3 to 29 3/4 by the end of trading March 6, the day after the announcement.
Begun in the early 1920s as an informal partnership between Houston Harte and Bernard Hanks, Harte-Hanks operated as a family-owned business for the next half-century. Harte-Hanks Newspapers Inc., as it was known, went public in March 1972 and began trading on the New York Stock Exchange the following year.
The company grew rapidly during the '70s and early '80s, changing its name to Harte-Hanks Communications and making the Fortune 500 list.
Company officers and board members took Harte-Hanks private again in a 1984 leveraged buyout. The company went public again Nov. 4, 1993.
?(Harte-Hanks chief executive officer Larry Franklin noted that direct marketing now accounts for 50% of the company's revenues, with its extensive shoppers business contributing another 25%) [Photo & Caption]
# Editor & Publisher n March 15, 1997