[A] Separation of Hollinger
[B] Profits of newspaper
[C] The ideal business model
[D] Hollinger denies the rumor
[E] Difficult to share in the international market
[F] Lord Black sells his remaining local newspapers in Canada
HE HAS been selling newspaper titles in Canada. backing a new one in New York and trying to quash rumours that he is selling them in Britain. What exactly is Conrad Black, chairman of Hollingar, ex-Canadian, newly ennobled Briton, up to?
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Last month, Lord Black of Crossharbour. as he is now known, sold his remaining local newspapers in Canada. This came shortly after he had offloaded his residual 50% stake in the National Post, the Canadian daily paper he founded only in 1998, to Can West Global Communications. This Canadian media group had already picked up the other half last year, along with most of Lord Black's other local newspapers in the country, for $1.8 billion.
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Shorn of its Canadian operations, and apart from the tiny Jerusalem Post, Hollinger has now been pared down to two chief assets: the Chicago Sun-Times, plus a bagful of local papers in that area, and the Daily Telegraph, Britain's most popular broadsheet paper. After the group recently reported a net loss of $9 million for the nine months to September. excluding exceptional items, rumours swirled that even the Telegraph might be for sale.
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Not so, says Hollinger. Although earnings at the Telegraph and its Sunday sister are well down on last year, and the papers plan to sack up to 40 editorial staff, they still provide most of the group's profits. "There is no substance at all to the story that the Telegraph is for sale," says Daniel Colson, Hollinger's vice-chairman. Indeed, having stemmed the National Post's losses and booked a good price for the sale of most of its Canadian assets last year, the group has cut its heavy debt burden and is wall-placed to look for new projects.
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But what? Economies of scale in the newspaper market are best achieved with the local and regional press. The ideal business model, says Peter Kreisky of Mercer Management Consulting, is a geographical cluster of regional titles. With local monopoly power, this can bring down the cost of paper and ink, of printing and distribution, and of marketing. Hollinger enjoys many of these benefits in the Chicago area, where it has 97 papers.
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But it is far harder to achieve cost-sharing across international borders. Most national papers are still mn from and owned in their home country. Those that belong to an international owner, such as Hollinger, Tony O'Reilly's Independent News and Media and Rupert Murdoch's NewsCorp, concentrate on English-speaking markets.
Yet owning newspapers is as much to do with kudos and influence as it is about profits. Although he would not rule out opportunities even in non-English-speaking parts of Europe, Lord Black's sights now seem to be set on the United States. He has just made a small bet on a new quality paper, The New York Sun, by putting in $2 million, or about 13% of the total investment. Although Hollinger stresses that it is only loosely involved, the project is nevertheless intriguing. There has long been a view that New York. a city of 8 million people, ought m be able to support more than one all-round quality newspaper; yet the New York Times, with a circulation of 1.1 million, has no direct cross-town rival. Lord Black's experience of launching a new title, The National Post, in Canada may be salutary. He managed to create a franchise from nothing in a competitive market, and in doing so stirred up political controversy in consensus-minded Canada. But it never made him any money, which may be why his bet on The New York Sun is so modest. Buying established but faltering papers would make more sense. "There will be investment opportunities arising from this economic downturn that H. advantage of," says Mr Colson, "not only in New York, but elsewhere in the US."