What's next for Philly papers after owner's death?
Numerous questions remain about what caused the commuter jet crash outside of Boston that killed Philadelphia newspaper owner Lewis Katz and seven other people last weekend. The tragic accident has also raised many questions about the future of the newspapers Katz co-owned -- the Philadelphia Inquirer, its sister publication the Philadelphia Daily News and their related websites.
Katz, who made his fortune in the parking lot business, and his partner and fellow philanthropist H.G. "Gerry" Lenfest had won an auction for the media properties with a winning bid of $88 million on May 27. Their offer beat out fellow bidders including George Norcross, a political powerbroker in the suburbs in Southern New Jersey outside of Philadelphia.
According to media reports, Katz's son Drew will assume his father's position on the board of directors of Interstate General Media, the corporate owner of the newspapers and related websites.
Lewis Katz, Lenfest and Norcross had been partners in Interstate General until they began feuding after Norcross and his allies tried to fire Inquirer editor William Marimow. Katz and Lenfest successfully challenged the firing in court, and many of the papers' journalists were happy to see Marimow restored as editor and Katz and Lenfest back as owners
"We were all thrilled that the fighting is over, and can get on with the business of journalism, build strong websites and develop an integrated internet strategy," said Inquirer columnist Karen Heller in an email. She described Katz's death as a "tragedy," but said the newsroom is committed to the paper's success. "The staff is motivated, and unified, in serving our region. If anything, this tragedy strengthens our resolve and mission to do great work, and realize Lew's vision."
Amid the chaos following the shocking crash, questions loom large about just how the newspapers will get on a path to profitability.
Like other metropolitan dailies, the Inquirer has struggled for years to attract advertisers and readers amid fierce competition from a plethora of competitors ranging from websites to alternative newspapers to chains of suburban dailies. The Newspaper Guild, which represents 450 IGM employees, including those in the newsroom, agreed to $6 million in concessions in 2013.
"It is generally understood that the papers are losing money," wrote Alan Mutter, who produces the "Reflections of a Newsosaur" blog that analyzes the economics of the news business. "Since most metros do not lose money, the Philly papers may be somewhat worse off than other properties."
Bill Ross, the executive director of the Newspaper Guild of Greater Philadelphia, is worried that Katz and Lenfest may have overpaid for IGM and will have difficulty balancing the books without pushing for more layoffs, which the union would oppose. Though Lewis Katz and Lenfest have spoken about their desire to maintain the papers' quality, their patience wouldn't be bottomless.
During contract negotiations in 2013, Lenfest "made it clear to us that he didn't buy this company to be a charity. He bought it to earn a profit," Ross said.
Lenfest didn't respond to a request for comment made through the Lenfest Foundation. Efforts to reach Drew Katz through Interstate Outdoor Advertising, where is chief executive, were unsuccessful. Drew Katz is quoted in the Inquirer as saying the area where he could provide the most assistance to the company was "probably" advertising.
"It should be noted that Sidney Harmon bought Newsweek and James Tyree bought the Chicago Sun-Times for similar altruistic motivations," Mutter said. "When they died suddenly, their heirs did not share the same passion and patience that they did, and the properties changed hands. Although Lewis Katz has perished, his business partner and son seem to have similar motives, so perhaps they will stay the course."
Data from the Alliance for Audited Media from March showed the Inquirer's daily circulation at 330,485 versus 306,832 a year earlier. Sunday circulation rose to 501,186 from 477,432 a year ago. The circulation figures count both print and digital sales.
Although newspaper are among the most beaten-down sectors on Wall Street, they do have fans. Warren Buffett, perhaps history's greatest investor, has snapped up dozens of titles in recent years, including the Richmond Times-Dispatch, Greensboro News & Record and his hometown paper the Omaha World-Herald. Amazon (AMZN) founder Jeff Bezos acquired the Washington Post last year for $250 million. That price is about 17 times adjusted profit, roughly four times the price that similar properties have fetched, according to Bloomberg Businessweek.
IGM partners, which acquired the newspapers and websites for $55 million in 2012, vowed not to interfere with editorial coverage, but plenty of griping said it was occurring. A New York Times report noted that Norcross "quickly became involved in every aspect of the operation, down to choosing vendors for coffee and copy machines" and tried to reduce the size of the Inquirer's opinion section.
Marimow, a Pulitzer Prize winner, hasn't gone anywhere. A judge ruled that the Norcross had violated Katz and Lenfest's contract rights when Marimow was fired and ordered him to be reinstated. When reached for comment yesterday, Marimow demurred, writing in an email, "For the present, I am going to say no thank you to your request so that I can concentrate solely on editing The Inquirer and Inquirer.com."