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Media Watch

Stalking a Giant?

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In a move that exposes the great economic danger of media consolidation, the U.S. Justice Department's antitrust division is investigating bids by Gannett and The New York Times Co. to buy smaller newspapers in or near markets where they own big papers.

The investigation could be a major impediment to any hopes that Gannett, which owns the Tucson Citizen, has of bidding on Pulitzer, Inc., which owns the Arizona Daily Star. Any purchase that involves the Star, the St. Louis Post-Dispatch and likely the Arizona Daily Sun in Flagstaff would have similar antitrust implications.

The Times, which owns The Boston Globe, wants to buy a 49 percent share in Metro Boston, a free distribution daily tabloid. The Globe's competitor, the Boston Herald, has filed a beef about the situation.

In November, Gannett announced that it was buying Home Town Communications Network. Home Town, based in Livonia, Mich., owns one daily newspaper and 62 weekly and twice-weekly newspapers near Detroit and Lansing, Mich., and Cincinnati, Ohio. Antitrust officials are looking hard at the competitive impacts, because Gannett also owns The Detroit News, the Lansing State Journal and The Cincinnati Enquirer.

What makes it an issue in St. Louis and Arizona is that an all-out takeover of Pulitzer--and Gannett has the money to handle the estimated $1.5 billion deal--would create similar circumstances. In St. Louis, Gannett owns KDSK-TV, the city's NBC affiliate. Imagine how much bigger Gannett's slice of the advertising pie would be if it also had the Post-Dispatch and the Suburban Newspapers of St. Louis--a string of 37 weekly newspapers in Missouri and Illinois surrounding the city.

For journalism trivia buffs, it was in St. Louis in the 1980s that a group of weeklies managed to get all the grocery-chain ads away from the Post-Dispatch and its joint agency partner, the Newhouse-owned Globe-Democrat. The revenue losses mortally wounded the Globe-Democrat, which closed in 1986, and for a time had Pulitzer execs thinking about selling the family flagship. The P-D stayed afloat on cash infusions from other Pulitzer newspapers, including the Star.

Buying the Star and Pulitzer's Arizona Daily Sun in Flagstaff would put Gannett in the position of "owning Arizona" because of its statewide reach through The Arizona Republic and television stations in Phoenix, Flagstaff and Kingman.


PULITZER RESULTS

It depends on how you look at it. Financial writers did some crepe-hanging Monday over Pulitzer Inc's fourth-quarter financial results. The company reported net income of $13.7 million, or 62 cents a share, compared with net income of $14.3 million for the fourth quarter of 2003.

That, however, comes after the inclusion of "special items," which are unusual situations that don't reflect on a company's day-to-day performance.

Before special items, the company's earnings were 73 cents a share, beating analysts' expectations by a penny.

The special items that lowered Pulitzer's net were $2.6 million for review of the company's strategic options; $2.7 million to settle two lawsuits over circulation and home delivery issues in St. Louis, and expenses related to an expected settlement with the Internal Revenue Service.

For the full year, net income was $44.1 million, or $2.02 per share, compared with $42.2 million, or $1.98 a share.

On Monday, Pulitzer stock closed at $64.95 a share, nearly a dollar below the record $65.89 that was set Friday on unconfirmed reports that Monday was Pulitzer's deadline for accepting potential acquisition bids.

News of the Gannett investigation also was a factor in the price drop, because the Citizen's owner has been considered a strong favorite to get a goodly chunk of the company.

When asked if the Gannett investigation news would have any effect on Pulitzer's timetable for reviewing its options, Jim Maloney, Pulitzer's investor relations spokesman, said in an e-mail Monday, "I am very sorry but I am unable to comment today. Thank you for your understanding."


CAREER MOVES

The possibility that Pulitzer Inc. will put itself--including the Arizona Daily Star--up for sale has more than a few folks in the Star and Tucson Citizen newsrooms worrying about their futures.

One who isn't is Joe Garcia, senior editor at the Citizen, who has been named editor of The Daily Times, Gannett's outpost in Farmington, N.M. He's leaving at the end of this week.

I'll miss Joe's column; he seemed to have a little something for everyone. In his 18 years there, he went from schools writer to political writer and then on to the management track--assistant city editor, city editor, assistant managing editor and senior editor.

All the Pulitzer merger talk has to be wearing on folks at the Citizen, who should be making all sorts of entreaties to their deities of choice that someone outbids Gannett. One of the nasty uncertainties of a merger with antitrust implications--as would happen if Gannett buys the Star--is figuring out who keeps their jobs.

If Gannett buys the Star, it can't immediately merge the two staffs and rewrite a starting lineup for whatever newspaper nameplate survives. Instead, it would have to make a good-faith effort to find a buyer for the newspaper it's decided not to keep. While that search is on, the other paper needs to keep running--it's called "preserving the value of the asset." And that operation would involve trying to keep the second newsroom intact. That's because a newspaper's assets are more than the equipment and the subscriber lists. The big asset, at least in theory, is the reputation a newspaper creates through the work of its reporters, photographers and editors.

If a buyer doesn't show, the paper would fold; the staffs could be merged, with severance packages announced.

The merger talk hasn't slowed things down in terms of hiring folks. According to Gannett's corporate Web site, the Citizen is looking for a page designer, and the ad describes the Citizen as being "on the cusp of a major redesign that includes new niche products."

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