The rich still want to own newspapers

By Andrew Edgecliffe-Johnson

By any standards, this was a banner week for newspapers. A rare clamour for their product left newsstands around the world sold out of the special editions publishers had laid on for Barack Obama’s inauguration.

The Washington Times tripled its usual print run, The Wall Street Journal carried its largest front page headline ever and the Los Angeles Times offered a $180 (€140, £130) package including mugs, T-shirts and copies of its post-inauguration and post-election night editions. Readers filing copies away for posterity might, however, have paused to wonder if their descendants would one day find the medium as much of an historical curiosity as the news it conveyed.

Anyone making it past the coverage of the new first family, whose appearance on a cover can do more for sales than anyone since Princess Diana, would have found plenty of evidence to support the theory that newsprint will be finished in a generation. The cash-strapped Boston Globe (inauguration headline: “The time has come”) succumbed on Wednesday to the indignity of carrying front page advertising, while the Seattle Post-Intelligencer (“Hope over fear”) edged closer to the closure its owner has threatened unless a buyer emerges. Attempted coups rattled boardrooms from the Chicago Sun-Times (“So help me God”) to Mecom, David Montgomery’s indebted European print empire. As the publisher of the Chicago Tribune and Los Angeles Times slogged through the bankruptcy courts, even Google gave up a two-year attempt to make money from newspaper advertising, which one analyst estimated would shrink by another $10bn by 2012.

Yet news from both sides of the Atlantic told a different story. Alexander Lebedev, the KGB spy-turned-tycoon, bought control of London’s Evening Standard a day after Carlos Slim, the Mexican telecommunications magnate, had thrown a $250m lifeline to The New York Times. Alexander Pugachev, the son of a Russian oligarch, stepped in with a bid for France-Soir, a struggling French evening title.

Were these investors calling the bottom of the newspaper market? Or were they after the social cachet and political influence that so many other wealthy men have sought in the news business, at any cost?

Mr Slim seems the most likely to have found a money-making opportunity. The man behind Telefonos de Mexico was not giving interviews, but a spokesman described the loan as a purely financial move.

In helping the Times through the looming expiration of a $400m credit line, buying it time to raise funds from asset sales before other debts come due, Mr Slim secured a return few newspaper investors have enjoyed in recent memory. The Times will pay a 14 per cent coupon on the loans.

Mr Lebedev was more forthcoming about his motives, saying he was keen to own a London title with which to expose corruption in Moscow. One day, the Standard might break even, he reckoned, but he was willing to take on its £10m-£20m annual losses, primarily because he felt “a civic duty” to preserve London’s last paid-for evening paper. Mr Lebedev, who read a lot of British newspapers as a Soviet “economic attaché”, has generated thousands of words of largely positive coverage for the £1 he is paying for the Standard.

Even if bolstering reputations turns out to have been the motive for this week’s investments, people with an interest in the expensive business of journalism should be relieved. For a moment it had seemed newspapers might no longer even have a future as the playthings of the rich, given the grief they have caused recent buyers.

The Barclay Brothers, who acquired Britain’s Telegraph titles in 2004, have endured heavy criticism for waves of job cuts. Rupert Murdoch, who paid $5.6bn for the Journal’s publisher, and Bernard Arnault, who bought Les Echos from the Financial Times Group for €40m, have expressed no regrets about the 2007 deals but paid painful premiums to today’s valuations. Other newspaper suitors have taken fright after seeing Tribune collapse under the debt Sam Zell loaded on the cyclical business.

That Viscount Rothermere, heir to a great Fleet Street empire, felt it necessary to say on selling the Standard that Daily Mail & General Trust remained committed to newspaper ownership illustrates the uncertainty around the industry.

His family should be familiar with newspapers’ precarious business models: a century ago, his great-great uncle was asked to rescue The Times after what one 1945 account described as a period of “unbusinesslike methods [and] loss of advertisement revenue”. Advertising recessions in Europe and the US are forcing owners to focus on what they can do best. The Washington Post has offered to take over national and foreign news for the Tribune, while Independent News & Media is eyeing the “legacy costs” of the half of its journalists that work in production.

The crisis in newspapers has thrown up a novel opportunity for any would-be Citizen Kane: to burnish his reputation not by using his titles to sing his praises or settle scores but by being the non-interfering benefactor credited with saving a beloved news franchise from disaster.

The rise of the moral media mogul? That would be big news. And ownership still confers certain privileges. One of the last things Mr Obama did before being sworn in was tour a star-struck Washington Post newsroom.