Newspapers
The big Newsday puzzle: Who gets it?
By Diego Vasquez
Mar 27, 2008 - 1:10:23 AM

The latest chapter in the long-running New York tabloid wars isn’t taking place in the newsrooms but rather in the boardrooms of the two crosstown rivals. Rivals Rupert Murdoch, owner of the New York Post, and Mort Zuckerman, the man behind the New York Daily News, are both pursuing Newsday, the publication Tribune Co. reportedly put on the block. Immediately speculation began over where the Long Island daily, which has an affluent readership and the country’s 10th-largest circulation, would best fit. Murdoch’s News Corp. could fold it into a joint operating agreement with the Post, which has long lost money. That would give the downmarket Post an advantage in pursuing advertising. Meanwhile, some see Zuckerman’s move as more of a defensive one, trying to block any potential Newsday-Post synergy that could hurt the Daily News’ advertising. The move has also drawn attention because new Tribune owner Sam Zell promised last year not to sell off pieces of the company, but he apparently changed his mind after a recent listening tour at his new newspapers. Whatever the reason for putting Newsday up for bid, Tribune won’t lack for suitors. Cablevision’s James Dolan is also rumored to be in the mix. John Morton, president of Morton Research and columnist for American Journalism Review, and Steve Greenberger, executive vice president and media director at SLG Advertising in Greenwich, Conn., talk to Media Life about Rupe, Mort and the future of Newsday.

Which of the moguls rumored to be pursuing Newsday do you think would be the best fit for the newspaper -- Rupert Murdoch, Mort Zuckerman or James Dolan? Why?
 
Morton: I’m far from convinced that Sam Zell has any interest in selling Newsday, but if he does none of the three mentioned buyers stands out as the best fit.

Certainly Zuckerman and Murdoch would each have a strong interest in keeping Newsday out of the grasp of the other, since Newsday would add what neither the Daily News or the Post now has--a strong presence on Long Island. In effect they would have a compulsion to do a deal, which would drive up the price.

As for which prospective buyer would help Newsday the most, it would probably be Dolan, since his cable system could be used to promote Newsday's circulation, even offering, for example, to add the cost of a subscription to the monthly cable bill.

Greenberger: I think good old Zuckerman would be a decent fit. I think the content of the Daily News and Newsday have a little more synergy than I would think the New York Times or a Wall Street Journal would have.

I think there could be a little bit more of a potential for a multi-paper buy for advertisers. I think the demographics might in fact be similar. So, in many respects, I think it would be an easier transition and an easier sell than if it were to go to the other players.
 
Now, the question is whether Mr. Zuckerman wants to stay in the newspaper industry.

Say Murdoch's News Corp. gains control of Newsday. Do you foresee them combining under a joint operating agreement? What would be the advantages of such a relationship?
 
Morton: Actually, a formal joint-operating agreement under the Newspaper Preservation Act requires separate owners, who join all non-news operations under one company (the agency) to provide all commercial, production and distribution functions. A central requirement is that one of the newspapers entering into a JOA must be in danger of financial failure when considered by itself, without regard for its owner's other assets.
 
Only the Post would qualify, since according to Zuckerman’s past comments the Daily News had been at least marginally profitable. The advantage of a JOA is cost reduction through the elimination of duplication and selling to advertisers as one entity. Most of these advantages would accrue to the Post.

I doubt there would be enough advantage for Newsday for Tribune to enter into such a deal. Tribune now keeps all of Newsday's considerable profit; under a JOA the two owners split the agency's profit, and the only way for Newsday to benefit from a JOA is if the agency's profit considerably surpasses what Newsday already makes, and I doubt that any presumed synergies in a JOA would do that.

Greenberger: I just think that if in fact Murdoch’s News Corp. gets a hold of that, The Post in the evening and Newsday in the morning would make for an interesting synergy, which isn’t the case with the Daily News.
 
The truth is The Post, because it’s been a predominantly evening paper, could be complemented to those who live out on Long Island. I’m not sure if people are inclined to buy two newspapers a day, however, especially today.

How could News Corp. also leverage its Wall Street Journal ownership in this case?
 
Morton: Keeping in mind that The Wall Street Journal is above all a national newspaper, there are no obvious synergies between owning it and Newsday, although there could be some news sharing.
 
Greenberger: I think they’d have to keep it separate. I don’t think it’s apples to apples. I think The Journal’s read for other attributes than what Newsday is read for. So they’d have to keep that separate I think.

What effect would a combined Post-Newsday operation have on Zuckerman's Daily News? 
 
Morton: The Post’s owning Newsday would be a considerable blow to the Daily News, since it could allow joint selling of advertising in a region--Long Island--that the Daily News now does not penetrate significantly.

Greenberger: Well, it could certainly deteriorate some of the circulation, but that really depends on whether Mort wants to hang in there. And I‘m not sure.

He’s always been dedicated but you read that maybe he’s not going to be around for the long term. As this shakes out a little bit, ultimately it will prove who’s really interested and who really wants to pay for this in the current economic climate.
 
I personally think Newsday is a well-written newspaper that most people will want to keep reading. I know that it’s certainly remaining one of the top 10 newspapers in the U.S., despite the fact that it’s supposedly and predominantly for Long Island. I don’t think, then, that whoever owns Newsday owns the market, but it will certainly complement whatever company buys it.
 
And I’m not quite sure it’s an ego thing. I think it’s more of a share story and a synergy story.

Does this make Zuckerman's pursuit of Newsday seem like more of a defensive move?
 
Morton: It is certainly partly a defensive move, but more important would be the attraction of jointly selling advertising in a region that the Daily News does not now reach significantly.

Greenberger: To tell you the truth, any purchase of anything this large isn’t a defensive move, it’s an offensive move.

Last year Sam Zell said he did not intend to start selling off Tribune Co. properties, but now Newsday is on the block. What does this say about the state of the company in general?
 
Morton: The question assumes Newsday is on the block, which may turn out to be a presumption.

If there are asset sales, it may be more likely that some of the television stations in smaller markets where Tribune does not own newspapers would be more likely candidates. Tribune had been doing this before Zell took over.

And there are Tribune's investments in cable programming and in other areas that could be candidates. Clearly media businesses are declining more rapidly than Zell or anybody else had anticipated, and I suspect Tribune’s bankers have become nervous about the company’s ability to service its $12 billion debt.

Greenberger: I’m not quite sure it says anything about the state of his company, but it says something about the state of the newspaper medium and whether large companies are realizing that newspapers aren’t a long-term positive investment. Unless they’re ready to make a similar and large investment in the internet versions of those papers, making them destination brands.
 
You have to invest in that digital area in order to see its growth for the future. If you’re willing to invest that money, groovy. But if not, maybe it’s time to find another outlet for making money.

Do you foresee any other Tribune papers going on the block? 
 
Morton: Right now I don’t expect Newsday or any of the other large newspapers being on the block; that might not hold true for some of the smaller ones--Allentown, etc.

Greenberger: [Laughs.] You know I hate to say it, but once they find out how much they can get for Newsday, maybe you’ll see the LA Times on the block [laughs]. It would be interesting to see if [Newsday] has depreciated marginally or substantially and how it plays out. But good God, who knows?

Newsday, because of its affluent readership, is actually a fairly lucrative property for Tribune. Why choose to sell it off, when it perhaps could help the company in the longer term?
 
Morton: This question goes to the heart of why I doubt Newsday is for sale. With $12 billion in debt, Tribune needs all the cash flow it can capture, and with newspaper values currently low by historical measures the considerable cash flow they generate is likely much more valuable to Tribune than capital it would realize from a sale.

Greenberger: I really wish I was in that meeting. I couldn’t tell you. It’s one of those things that, if you’re not looking at the numbers, you can’t tell. What’s the overhead? I have no idea.
 
It’s like when people ask me if TV Guide will go out of business. How do I know? But honestly, unless you know all the cost of all business, there’s really no way to know. I would like to think that Newsday is profitable.