By Dan Kennedy • The press, politics, technology, culture and other passions

Tag: Ottaway

How Rupert Murdoch saved the Boston Herald — not just once, but twice

As I noted Thursday, one of the few positive contributions Rupert Murdoch can take credit for is preserving The Wall Street Journal as a great national newspaper. Another is that he saved the Boston Herald — not once, but twice. Larry Edelman of The Boston Globe writes about the first time (he interviewed me). I tell that story as well as the tale of Murdoch’s second rescue in my 2018 book “The Return of the Moguls,” which I excerpt below.

The Hearst chain, which had converted the Herald (known then as the Herald American) to a tabloid during the final years of its ownership, had run out the string by 1982. I remember one old-timer telling me that, with closure just hours away, workers came in to rip out the vending machines from the paper’s hulking plant in the South End. At the last minute, Murdoch reached a deal with the unions and the paper was saved.

Under Murdoch’s ownership, the Herald established itself as a feisty alternative to the Globe, sometimes beating its larger rival on important local stories. That continued in the 1990s after Murdoch’s protégé Pat Purcell bought it from him. To this day there are people who believe that Murdoch continued to pull the strings behind the scenes, but I never believed it. Murdoch just didn’t care that much about the Herald, and I don’t doubt that he let Purcell have it on extremely favorable terms.

Unfortunately, the Herald’s financial model pretty much stopped working in the early 2000s, and today it’s owned by the New York hedge fund Alden Global Capital, famous for sucking the life out of its papers. Alden owns two other Massachusetts papers as well — The Sun of Lowell and the Sentinel & Enterprise of Fitchburg.

At one time Murdoch also owned the Ottaway chain, which included the Cape Cod Times and some small weeklies, including the Middleboro Gazette, where I grew up. Murdoch is fondly remembered by taking a hands-off approach, but I honestly wonder whether he even knew those papers were part of his empire. The Gazette was later closed by the Gannett chain, and today Middleborough is served by an independent startup, Nemasket Weekly.

Here’s what I wrote in “Moguls” about the Herald and Murdoch’s TV station, WFXT-TV (Channel 25), which he sold off a few years ago. The “endless struggle” I refer to was the Herald’s long-time ownership of Channel 5, an existential threat to the Globe that was removed when the Globe reported that its rival had gained the broadcast license because of corruption at the Federal Communications Commission. The Herald was stripped of its license in 1972, and Hearst swooped in to pick up the pieces.

The Globe’s endless struggle with the Herald’s broadcast ambitions played itself out in one last, faint echo in 1988, when Murdoch, who then owned the Herald, purchased Channel 25. Ted Kennedy, by then a leading member of the Senate, quietly slipped a provision into a bill that made it almost impossible for the FCC to grant a waiver to its rule prohibiting someone from owning both a daily newspaper and a TV station in the same market. At the time, I was a reporter for The Daily Times Chronicle, which served Woburn and several surrounding communities north of Boston. I remember covering a local appearance by Kennedy as he was dogged by the Herald reporter Wayne Woodlief. “Senator, why are you trying to kill the Herald?” the persistent Woodlief asked him several times.

Murdoch chose to sell off Channel 25, thus saving the Herald; he repurchased the TV station after selling the Herald to Purcell. But the Herald columnist Howie Carr remained bitter. He told me years later that Kennedy’s actions were worse than [Globe ally Tip] O’Neill’s, since O’Neill was just trying to help one of several papers rather than destroy the Globe’s only daily competitor. “I think Tip was just trying to get an ally,” Carr said, “whereas Ted was trying to kill the paper in order to deliver the monopoly to his friends.”

The liberal reputation the Globe developed during the Winship era was cemented during Boston’s school desegregation crisis of the mid-1970s, when the Globe wholeheartedly supported federal judge Arthur Garrity’s order to bus children to different neighborhoods in the city to achieve racial balance. It was a terrible time in Boston, as white racism ran rampant and bullets were fired into the Globe’s headquarters and at one of the paper’s delivery trucks. The Globe took the right moral stand, and its coverage earned the paper its second Pulitzer for Public Service. Winship in those years enjoyed a reputation as one of the finest editors in the country. But it was also during those years that the Globe became known as the paper of Boston’s suburban liberal elite and the Herald that of the urban white working class, a dichotomy that has persisted to this day.

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BBJ scores big on two local media stories

The Boston Business Journal has come up aces during the past week with two meaty stories on local media news.

• A shaky future at the Globe. The first, published last Friday, found that confidential financial documents put together by the New York Times Co. suggest The Boston Globe was in slightly worse shape than outside observers might have imagined when the paper and several affiliated properties were sold to Red Sox principal owner John Henry for $70 million in early August. The BBJ’s Craig Douglas writes (sub. req.):

In essence, Henry is buying into a borderline breakeven enterprise already teed up for $35 million in cost cuts over a two-year period before he even walks through the door.

How bad is it? According to the documents cited by Douglas, advertising revenue at the New England Media Group (NEMG) — mainly the Globe, the Telegram & Gazette of Worcester and Boston.com — is expected to be 31 percent below the 2009 level next year. And paid print circulation revenue continues to slip despite price increases at the Globe and the T&G.

You may have heard people say at the time of the sale that Boston.com was worth more than the Globe itself. Well, I don’t think you’ve heard me say it. Print advertising remains far more valuable than online, and that holds true at NEMG as well. Douglas writes:

The Globe is by far the biggest revenue generator of the group, accounting for 69 percent, or about $255 million, of its forecasted revenue this year. The Telegram & Gazette in Worcester is next in line at $42.5 million in forecasted revenue this year, while Boston.com is on track to book about $40 million.

Print products account for about 88 percent of NEMG’s total annual revenue. That heavy reliance on print-related advertising and circulation revenue has proven particularly problematic of late, as both categories have lost ground since 2009 and are forecasted to see continued deterioration for the foreseeable future.

Douglas’ story is protected behind a paywall, but if you can find a print edition, you should. Suffice it to say that John Henry has his work cut out for him. The picture Douglas paints is not catastrophic. But it does show that the Globe is not quite as far along the road toward figuring out the digital future as some of us might have hoped.

• Tough times ahead for local papers. The other big media splash, which I linked to last night, is Jon Chesto’s analysis of the sale of Rupert Murdoch’s Dow Jones Local Newspaper Group (formerly Ottaway Newspapers) to an investment firm affiliated with GateHouse Media. The papers sold include three prominent Greater Boston dailies: The Standard-Times of New Bedford, the Cape Cod Times and the Portsmouth Herald, on the New Hampshire seacoast.

Chesto’s article is part of the BBJ’s free offerings, so by all means read the whole thing. It’s a real eye-opener, as he explains as best anyone can at this early stage what the sale and simultaneous bankruptcy of GateHouse will mean for local papers and the communities they serve. Unfortunately, indications are the news will be very bad indeed.

Fairport, N.Y.-based GateHouse, which publishes about 100 local papers in Eastern Massachusetts (including The Patriot Ledger of Quincy, The Enterprise of Brockton and The MetroWest Daily News of Framingham), will somehow be combined with the entity that holds the former Ottaway papers into a new company with the uninspired name of New Media (that may change). (Update: Chesto is a former business editor of The Patriot Ledger, which no doubt helped him write his piece with a real air of authority. And thanks to Roy Harris for reminding me of that.)

The deal with Murdoch — at $82 million, quite a bit more than I had anticipated — was done through Newcastle Investment Corp., a real estate investment trust that is part of Fortress Investment Group, which in turn is GateHouse’s principal backer.

The powers-that-be are already talking about slashing the Ottaway papers, which are among the best local dailies in the region. Chesto writes:

The papers are described as “under-managed by News Corp.” with “expense reductions of only 6% since 2010.” Translation: We can take more out of the expenses than News Corp. did. GateHouse has been an aggressive cost cutter in recent years, most notably with efforts to consolidate most of its page design and layout functions. That work was centralized in two locations, including an office in Framingham. But it will soon be downsized further, into one location in Austin, Texas.

Yes, Murdoch, the “genocidal tyrant,” is likely to prove a better steward of local journalism than the people he’s selling to.

Post-bankruptcy, with $1.2 billion in debt off their backs, the executives now running GateHouse are going to be empowered. According to a presentation put together for investors, Chesto writes, New Media may spend $1 billion to buy up local media companies over the next three years.

Chesto doesn’t say so, but if I were working for the Eagle-Tribune papers north of Boston (The Eagle-Tribune of North Andover, The Daily News of Newburyport, The Salem News and the Gloucester Daily Times), I’d be polishing that résumé right now. On the other hand, those papers have already been cut so much under the Alabama-based CNHI chain that it’s not like a new owner could do a whole lot worse.

At a time when there are reasons to be hopeful about the newspaper business thanks to the interest of people like John Henry, Jeff Bezos and Warren Buffett, the GateHouse deal shows that there are still plenty of reasons to be worried about the future.

Murdoch sells local papers to GateHouse investor

MA_CCTRupert Murdoch is selling The Middleboro Gazette, the weekly that covers the Southeastern Massachusetts town where I grew up. I’m not sure Murdoch ever knew he owned it in the first place. It’s just something that was thrown in when his News Corporation bought The Wall Street Journal and Dow Jones in 2007.

Earlier today, Dow Jones’ chain of local newspapers — formerly the Ottaway group — was acquired by an affiliate of Fortress Investments, the majority owner of GateHouse Media, which will manage the papers. I’m not sure why GateHouse itself isn’t buying the papers, but perhaps we’ll learn more in the days ahead. Jim Romenesko has more.

Dow Jones’ regional properties include some high-quality, well-known dailies such as The Standard-Times of New Bedford, the Cape Cod Times and the Portsmouth Herald of New Hampshire.

Two questions spring to mind:

  • In general, the Ottaway papers have been spared some of the cuts that the financially struggling GateHouse chain has implemented. Will downsizing now commence? Or will the Ottaway papers’ odd status as non-GateHouse papers spare them?
  • What happens to Boston Herald owner Pat Purcell, who’s been running the Ottaway papers for Murdoch since 2008? Will he content himself with running the Herald? Or will Murdoch come up with a new assignment for him?

The deal includes 33 publications, eight of them daily papers. Romenesko reports that financial terms were not disclosed. But given that The Boston Globe recently went for $70 million — not much more than the value of its land — I can’t imagine that a significant amount of money is changing hands.

Update: From Wednesday’s New York Times:

The details of the transaction were not released, but the money involved was evidently relatively small, because if it had been bigger (or, in financial terms, material to the company) News Corporation would have had to disclose more financial information.

Ouch.

Update II: Shows you what I know. Fortress paid $87 million for the Dow Jones papers, which may be a fraction of what they were worth a few years ago, but is more than I had imagined.

According to Tiffany Kary of Bloomberg BusinessWeek, an enormously complicated reorganization is now under way. The long-in-the-making bankruptcy of GateHouse Media is now a reality, and the company will be absorbed into a new company to be created by Fortress called New Media.

Update III: Jon Chesto of the Boston Business Journal has posted a must-read analysis of what’s going on. Talk about failing up. GateHouse is going bankrupt and will become part of something bigger. And it looks like GateHouse chief executive Mike Reed isn’t going anywhere.

The Herald-Ottaway connection

Rupert Murdoch’s decision to put Boston Herald publisher Pat Purcell in charge of his Ottaway community-newspaper division is paying some dividends for the Herald.

Today the Herald collaborates with Ottaway’s Cape Cod Times on a story about six Falmouth students who face child-pornography charges for allegedly text-messaging a nude photograph of a 13-year-old girl.

Interestingly, the Cape Cod Times version appears to have no Herald involvement. But the Times is running some Herald content, including the “Inside Track.”

For the Herald, this isn’t nearly as good as it was back when Purcell owned Community Newspaper Co., which is now part of GateHouse Media. For a few years, the Herald could draw on more than 100 papers in Eastern Massachusetts covering nearly all of Boston’s suburbs.

The only Massachusetts papers Ottaway owns, by contrast, are well south of Boston: the Cape Cod Times, the New Bedford Standard-Times and a handful of weeklies that cover the same territory.

Still, the Ottaway connection gives the understaffed Herald a bit more reach than it had before.

Monday morning odds and ends

I don’t plan to do much blogging this week, but I do want to call your attention to a few items:

  • Chuck Tanowitz and Adam Reilly have both written sharp analyses of GateHouse Media’s lawsuit against the New York Times Co. I think Reilly is on the mark with his observation that the Globe, through its Boston.com Your Town sites, is going beyond mere linking and is trying to establish itself as a substitute for GateHouse’s Wicked Local sites, while using GateHouse’s content.
  • Joe Dwinell of the Boston Herald has also weighed in with a good item [link now fixed] on the suit. I do disagree with his characterization of this as “David vs. Goliath.” Both GateHouse and the Times Co. are large, publicly traded media companies that are fighting for their financial lives. Call this Wounded Goliath I vs. Wounded Goliath II.
  • Sean Polay, a top Internet guy for Rupert Murdoch’s Ottaway Newspapers (including the Cape Cod Times and the Standard-Times of New Bedford), says he wouldn’t mind at all if Boston.com linked to Ottaway content. Interesting, given that Herald publisher Pat Purcell recently accepted Murdoch’s offer to run the Ottaway papers.

Finally, a source has provided me with a copy of Barclays’ most recent report on the New York Times Co., the one that placed the value of the Globe at a mind-bogglingly low $20 million. I have posted it (PDF), so you can have a look for yourself. Perhaps a few gimlet-eyed Media Nation readers can find some gold.

I’m dubious. As you will see, Barclays values the Globe at somewhere between $12 million and $20 million — lower than the value of the “Worchester Papers,” which it places at somewhere between $15 million and $25 million. That can’t be right.

And, come on — the “Worchester Papers”? Does someone at Barclays think the Worcester Telegram & Gazette are two different papers?

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