THE LAST GREAT TABLOID WAR

By: Tony Case New York's 'Post' and 'Daily News' Battle


Correction: This story incorrectly referred to Xana Antunes, former editor of the New York Post, as ?the first female to ever run the paper.? In fact, Jane Amsterdam was the Post?s top editor for a time when Peter Kalikow owned the paper.


"Bloodbath in the Newsroom" might have been a fitting headline, or maybe "Black Friday." On June 8, after just six weeks on the job, Col Allan -- the experienced Aussie editor and longtime Rupert Murdoch charge who was brought in to run Murdoch's venerable New York Post after Editor Xana Antunes was shown the door -- made his biggest splash since arriving on these shores, abruptly turning out into the street four senior editors and two columnists, including Jack Newfield, the most liberal voice in the proudly right-leaning paper.

By bringing in Allan, shaking up the newsroom, aggressively going after readers with bargain-basement newsstand pricing tactics and investing a whopping $250 million in a new printing plant in the Bronx that can churn out a million-plus papers a day, many see Murdoch as not only positioning himself for the long haul in New York's rough-and-tumble newspaper market -- but, perhaps, executing an endgame strategy against the Post's central rival, Mortimer B. Zuckerman's New York Daily News.

With the weight of his mighty News Corp. behind him, Murdoch could have the upper hand as America's last great tabloid war rages on.

Considering the less-than-favorable economics nowadays, and the competitive nature of the market, the burning question is: Can New York possibly continue to support two tabloids -- plus The New York Times and the range of weeklies and minority-targeted papers dotting the landscape? "The market hasn't supported two tabloids," insists John Morton, a Silver Spring, Md.-based newspaper analyst. The Post, he points out, "has consistently lost money, and the News is only marginally profitable."

Morton is correct. The Tribune Co. concluded as much in 1991 when it fled town and sold the News to the British "press baron" and flim-flam man Robert Maxwell. The circulation at the time was almost 1.1 million daily and 1.4 million on Sunday. The Tribune Co., which has far more newspaper publishing experience than either Zuckerman or Murdoch, concluded there was no future for a tab in New York.

Ditto at the Post. When Murdoch was forced to sell the Post to real-estate developer Peter Kalikow in 1988, the paper began a downward spiral that led it to file for bankruptcy protection and put it briefly in the hands of a nudnik named Abe Hirschfeld, a bombastic figure in New York who is currently behind bars and fighting charges that he hired a hit man to kill a business partner. The future of the Post remained in doubt until Murdoch bought it back in 1993 after he obtained a waiver from the Federal Communications Commission (FCC) cross-ownership rule that prohibited him from owning WNYW-TV Channel 5 and a daily newspaper in New York.

The city has changed considerably since then. New York is now nearly devoid of department stores that don't say Macy's on the door. The Times owns both the classified advertising and upscale retail markets. There are more immigrants, and thus more people who do not speak English, in New York than ever before. It may turn out that if there is a winner in this tab war, the victory will prove Pyrrhic at best.

"Newspaper battles are bloody and financially irrational -- and usually, the guy with deep pockets wins," points out analyst Ed Atorino, with Dresdner Kleinwort Wasserstein in New York. He foresees a scenario in which the stronger of the tabs could force the weaker into a joint operating agreement (JOA) with the papers merging their business operations -- much the way The Denver Post's owner William Dean Singleton eventually cornered Rocky Mountain News parent E.W. Scripps Co. into a JOA partnership last year.

Col Allan's appointment was just the latest signal that Murdoch doesn't intend to get beat on this turf he's fought so hard to conquer.

Interestingly, it may not be the News, but Murdoch's own business aspirations that could put an end to the long rivalry. A recent plot twist in the epic has Murdoch seeking government approval of a $5.35-billion takeover of broadcaster Chris-Craft Industries, a deal that would give his company two TV stations as well as a daily paper in New York -- in violation of the FCC cross-ownership ban.

In seeking to buy Chris-Craft, which would add New Jersey's WWOR-TV Channel 9 to his stable, Murdoch faces off not only with the feds but also with several civic groups, including the Rev. Jesse Jackson's Rainbow/PUSH Coalition, which are dead set against the deal. (Jackson's opposition is not surprising: Murdoch's Fox News Channel has been loudly calling upon the Internal Revenue Service to investigate the relationship between Jackson's personal finances and those of the tax-exempt organizations he runs.) Furthermore, Democrats now in control of the U.S. Senate -- with Sen. Ernest "Fritz" Hollings of South Carolina heading the Commerce Committee -- are expected to try to block any waiver.

Hollings has confirmed that he will fight to keep the federal rule that bars daily newspapers from owning local broadcast stations. However, Hollings and the Commerce Committee have no direct authority over the FCC, which answers to the executive branch and is governed presently by a 3-to-2 Republican majority. What Hollings and company can do is withhold funding from the FCC, a tactic that has been used by Republicans in recent years to thwart the Democrat-majority commission during the Clinton administration. But it may appear somewhat disingenuous for Hollings to effectively silence the only conservative voice in New York in the name of diversity of voice, which is what the cross-ownership rule is supposed to protect.

Zuckerman, a Democrat, in a letter to the FCC and with the support of those groups trying to block the Murdoch/Chris-Craft deal, has stepped forward as a potential white knight, claiming he'd be more than willing to snap up the beleaguered Post.

'Post' operative

Even before the recent firings, the enigmatic Aussie, Col Allan, who has yet to consent to interviews and declined through representatives to speak for this story, already had begun to shake up the Post bit by bit, seemingly taking the tab back to its 1980s heyday -- others would say its pandering low point -- when irresistible headlines such as "Headless Body in Topless Bar" were the order of the day.

Slowly, Allan has been changing the face of the 200-year-old tab: radically altering the look of the paper by running copy on Page One (a la the overseas tabloids), beefing up the blood-and-guts crime coverage that was once the Post's hallmark, and taking the once staunchly liberal but now stridently conservative tab even further to the right.

After U.S. Sen. Jim Jeffords of Vermont switched from Republican to independent, the Post called him "Benedict Jeffords" and pictured the "turncoat senator" in 1770s garb. The paper played up a drug-related massacre above Manhattan's famed Carnegie Deli with the screaming headline "Murder in Midtown." Meanwhile, the Post's dogged coverage of Mayor Rudolph W. Giuliani's marital woes and alleged clandestine trysts with lady friend Judith Nathan so enraged the prickly politician that he threatened to sue the tab, which once had fawned over Rudy.

Then came the June 8 firings. Among those who suddenly found themselves without jobs in the midst of the worst newspaper contraction in a decade were two of the paper's three managing editors, Stuart Marques and Marc Kalech, and Associate Metro Editor Lisa Baird, the highest-ranking African American on the Post masthead. Baird, who is battling cancer, was told of her dismissal over the phone, on her day off. "Shell-shocked" is how Baird described Posties in the wake of the housecleaning.

A tough break, to be sure -- but perhaps not so surprising. Under Antunes, Australian media titan Murdoch took to popping in on news meetings and voicing his displeasure with the Post's softer turn.

Enter Allan, who helmed Murdoch's brash Daily Telegraph and Sunday Telegraph in Sydney, Australia, and who has been described as a cranky, "Crocodile Dundee" type. With Allan's arrival and then the swift expulsions this month, some saw the beginnings of an "Aussie invasion." As the pink slips flew, the Post promoted to the high perch of metro editor Jesse Angelo, a 27-year-old who most recently was the Post's deputy business editor and earlier worked for the Daily Telegraph and London's The Sun, which is also owned by Murdoch's News Corp. Angelo worked under Allan at the Telegraph, and is a pal of Murdoch's son, James.

In an industry where layoffs are accelerating as ad revenue and profit bottom out, the Post had already started shaving expenses here and there. But few attribute the most recent cuts to economic factors. Rather, those who were let go were told simply that the paper was moving in a "different direction."

Turning heads

While the Post has made waves, across town the Daily News has missed some obvious opportunities. The day of the Post's page-turning Carnegie murder coverage, the News, curiously, put Woody Allen's mug on front, with a rather so-what story about the filmmaker's lawsuit against a former business partner.

But the News has also had its moments, lately exposing everything from inept doctors to widespread food waste in public schools. A recent News report blew the lid off the city's filthiest supermarkets -- and ended up costing the tab some major ad business. "These things happen from time to time -- over time, the ads usually come back," News Editor in Chief Edward Kosner shrugs, adding, "I think this kind of investigative reporting is what can distinguish newspapers today."

The News tried to make amends with a fawning four-page advertorial about supermarkets June 13, but it remained to be seen whether the gesture would bring back the estimated $50,000 to $100,000 in weekly revenue the paper lost.

At times, the News seems to be copying some of the Post's racy ways. The day Timothy McVeigh was executed, the Post published an "Extra" edition with a front page that blared, "He's Dead." The next day, the chilling -- and very Postlike -- headline on the News' front page went one step beyond, declaring "He's In Hell," quoting an eyewitness to the execution of the death sentence given the Oklahoma City bomber.

But, more often than not, the staid, serious, and sometimes achingly politically correct News takes the upmarket approach, while the Post is having a ball camped out in the gutter.

Trash ain't nothin' but cash?

And New Yorkers seem to be eating up the Post's trash-and-flash formula.

The Post has been flying off the newsstand -- but not just because of its attention-grabbing headlines. Last fall, the paper chopped its newsstand price in half to a quarter -- and the ploy seems to have paid off in a big way, even though the paper took barely a nibble out of the News' commanding lead.

According to Audit Bureau of Circulations (ABC) figures for the six months ending March 31, the Post's weekday sales grew a whopping 11.6%, to 487,219 copies, and Sunday circ gained 2.8%, to 368,636, compared with a year earlier. Meanwhile, the News dipped 2% weekdays, to 716,095, while Sunday sales were level at 821,080.

"Post Soars! News Snores!" the Post bragged in house ads for days following the ABC report -- without mentioning its price cut, naturally.

This wasn't the first time the Post had spiked its circ by playing the giveaway game (remember the Wingo contest?) at the newsstand, even as the tab has lost truckloads of cash -- believed to be as much as $20 million or $30 million a year -- since Murdoch's second coming. Nobody knows for sure how much the paper is gushing, but one has to wonder: How wise can such deep discounting be when a paper is bleeding millions, especially in the midst of a crushing ad downturn?

"Sure, it costs money," Post Publisher Ken Chandler admits. "But we believe it's the most effective promotion. You're giving the reader more value for their money. It's a great sampling technique," he maintains.

Not surprisingly, executives at the News have a different take on Murdoch's business tactics. "We're here to make money. The Post has a different agenda," says Les Goodstein, president and chief operating officer of the News. Goodstein insists that the News will not match its rival's price. "The market leader doesn't chase after the competitor," he sniffs. "Once you do that, you fall into a trap."

News spokesman Ken Frydman says of the Post's circ growth: "They bought it; they didn't earn it."

But News Editor in Chief Kosner -- who, as editor of New York magazine, called Murdoch boss for more than a decade -- offers an even more blunt assessment of his competition's financial machinations: "The Post is not run as a business -- it is a vanity publication. The Post is [Murdoch's] mouthpiece in New York, both for political and for media purposes. Whether they lose 10 million or 15 million or 30 million a year doesn't really matter that much in the scheme of News Corp." Kosner predicts the Post's circulation fortunes "will melt away like an ice cube on a stove" once the paper hikes its price.

"The economics of [the Post's 25-cent price] defies me," pipes in analyst Atorino. "Murdoch obviously has infinitely deep pockets. The Daily News has a more serious financial issue -- I don't know how deep their pockets are, but certainly nothing like News Corp.'s."

Not everyone sees the Post's pricing strategy as misguided. "I'd like to see more papers do it," says Miles Groves, chief economist of the Maryland-based Barry Group, a newspaper adviser, noting that other big-circulation papers are economically priced -- including The Washington Post, which also goes for a quarter.

'News' buoyed

Even though the Post has made great circulation strides, the News remains the city's dominant tab in terms of reach, and has made some downright bold business moves of late under Zuckerman, Goodstein, and CEO and Co-Publisher Fred Drasner.

It launched a successful free evening daily, the Daily News Express, targeting commuters and giving advertisers a fresh print platform in the city. While other papers have scaled back their distribution, the News is aggressively expanding to Long Island to compete against Tribune Co.'s firmly entrenched Newsday -- this, as Newsday continues to make gains in the borough of Queens, where the News has long been top dog but has lost ground. In an unusual marriage, the News has teamed with its former owner and present-day competitor Tribune to sell national advertising across major categories.

All hasn't been rosy for the News. The ad falloff forced the paper to slice 2% of its staff, just as the Post and most all newspapers have cut back. And, like the Post, the News has witnessed some disruption in its highest ranks. The week of the Post bloodletting, News Sunday Editor and former George magazine Editor Frank Lalli abruptly resigned after less than three months. It was widely reported that Lalli wanted to return to the magazine world -- but the editor was said to be at odds with other top News editors, and Lalli also complained to E&P about limited resources making it "difficult to get things done."

While the Post is enjoying significant circulation gains and is breathing new life into the tabloid format, it has faltered elsewhere. As the News' free commuter paper has thrived, the Post pulled the plug on its 10-month-old sports weekly, New York Post Sports Week. The News also recently beat the Post to the punch in sponsoring the first debate between Democratic candidates for New York mayor.

Although their advertising has fallen precipitously, the New York tabs are still in there fighting the good fight -- although the ad volume of both papers appears woefully thin. "Let's face it: New York is a mature market. The Daily News is a mature brand. Broadcast is mature," the News' Goodstein says. "The lines are drawn, and everybody is fighting for that fringe."

Retail advertising, long newspapers' strongest segment, is evaporating with industry consolidations -- the closure of the Stern's department-store chain is but one example -- and slacking retail sales. Goodstein says retail, which used to account for more than a half of the News' ad business, now represents only a third.

The News' financial condition was dire enough in the spring of 1999 that Zuckerman threatened to shut the paper when its 400-plus drivers won a ruling from an arbitrator that awarded hefty pay raises plus back wages exceeding a staggering $18 million. Luckily for Zuckerman, a federal judge in the fall of that year overturned the arbitrator's decision, asserting that it "jeopardized" the paper's very existence. Zuckerman later told reporters the judge's ruling was "essential" to the News' prospects.

The Post's Chandler points out, "A lot of business is gone for good -- but there's still some business to be had out there." The publisher notes that by beefing up its business section, the Post managed to score several upmarket accounts of late, including the high-end department store Henri Bendel and Manhattan's Mercedes-Benz dealer.

National advertisers have not flocked to the tabs, with their largely working-class appeal, as they have other large dailies, including the Times. Goodstein is banking that the nascent News/Tribune national ad effort will create a bonanza for both those publishers. "They've [Tribune] got Long Island, Chicago, and Los Angeles -- the one piece of the puzzle they didn't have was New York," he explains. "It's not really so strange [an arrangement] when you take it apart -- we're not competing for national ads; we're competing with magazines and broadcast for those dollars."

The Post hopes advertisers and readers will give it a second look once it fully cranks up its state-of-the-art, color-printing facility in the Bronx -- a development that promises to give the old gray tab a brighter, cleaner look. On the news side, Allan and company keep turning up the volume -- mid-June brought titillating Page One stories on a yuppie sex club and Mayor Giuliani's financial troubles.

Although Rudy may be cash-strapped, it appears Murdoch isn't about to let a few measly million keep him out of the action in New York.

Chandler hints that the Post intends to win this war. "We are really focused on growing this paper, on improving the editorial product -- and, obviously, on the ad front we're going to be super aggressive in attracting new business," the publisher says. "We're building a foundation for the future here."



Case, a New York-based free-lancer, writes frequently for E&P's sibling, Mediaweek.



Copyright 2001, Editor & Publisher.