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BUSINESS Newspaper War: Dealeys vs. Basses?

In business money is sometimes secondary. Civic rivalry, family ties and plain old ego matter more.
By Robert Deitz |

IT’S TEMPTING TO SUGGEST THAT THE confrontation brewing between Tht Dallas Morning News and the Fan Worth Star-Telegram over who owns Arlington is another newspaper wan like The News vs. Dallas Times Herala contest.

To do so would be misleading, though. Too many differences exist to equate the two battles. Even so, it’s almost certain that someday, perhaps soon, the battle over Arlington will find itself used as a Harvard Business School case study in competitive marketing: Two wealthy, powerful companies, each producing a strong product, fight over a niche market that is not absolutely essential to the immediate survival of either organization.

But the real story unfolding in Arlington is that the warring newspapers represent communities with a long history of rivalry. And that behind each paper stands an influential, wealthy, oldline Texas family: the Dealeys, who own 23 percent of the A.H. Belo Corp., parent company of The News, and the Basses, large shareholders in Disney, which this year bought Capital Cities/ABC, owner of the Star-Telegram.

Even more, The News and theStar-Telegram each possess unique strengths that afford them distinctive advantages. This situation could create a standoff lasting for years before one paper, or maybe both, finally throws in the towel and concedes at least partial defeat by cutting back on resources committed to the Arlington market. Or one could emerge as a clear winner, since it’s unlikely that Arlington can support two newspapers while Dallas and Fort Worth, each significantly larger than Arlington, can support only one each.

Dominating Arlington may not be essential to the core operations of either newspaper, but that doesn’t mean the market is inconsequential to either The News or the Star-Telegram. Arlington is one of the nation’s fastest-growing and wealthiest cities. The market is an advertiser’s dream, with median household income at $45,000 annually, 30 percent above the state average. Between 1980 and 1992, the population grew a robust 73 percent, to 276,000 from 160,000.

Arlington is important to both newspapers, but for different reasons. For The News, Arlington represents the last geographic direction open for expansion in a metropolitan newspaper market A.H. Belo Corp, already dominates with The Dallas Morning News and a string of suburban papers. To the Star-Telegram, on the other hand, Arlington is home turf and, when combined with northeastern Tarrant County, represents more than half the newspaper’s total revenue base. The stakes are high. For Belo and The Dallas Morning News, mostly ego is on the line. Star-Telegram executives, on the other hand, believe the mothership newspaper in Fort Worth could ultimately be threatened if The News makes serious inroads into Arlington.

Several other reasons make this newspaper war very different from the one fought between The News and The Dallas Times Herald, which ended with the Times Herald’s death in December 1991. By 1986, when it was purchased by Texas William Dean Singleton, die Times Herald had been in a heated battle with The News for more than five years and was in a weakened financial condition. But since its parent company Capital Cities/ABC was acquired by the Walt Disney Co. earlier this year, the Star-Telegram has even more resources behind it-on paper, at least-than A.H. Belo Co.

At year-end 1995, for example, Belo’s immediate liquidity in cash and receivables totaled an impressive $133 million. But that number pales beside Disney’s $2.9 billion in cash and receivables, not counting another $866 million in marketable securities readily convertible into cash.

Further, this time it’s the Belo paper that’s going in from a position of circulation weakness. Neither the Arlington Morning News nor the Arlington Star-Telegram has been in its current form long enough to be the subject of a circulation audit. But the numbers released by each newspaper show that so far, at least, the Star-Telegram holds a commanding lead. Arlington Morning News officials say the newspaper has a daily circulation of about 20,000 and Sunday paid distribution of about 25,000. That’s substantially less than the 40,000 daily and 70,000 Sunday circulation claimed by Star-Telegram officials.

Perhaps because the circulation numbers are minor compared with the overall operation of each parent organization. New York City financial analysts dismiss the struggle over Arlington as an inconsequential matter. John Reidy, media analyst with Smith Barney, says Arlington readers represent an audience “that is marginal to both newspapers.” Reidy insists that ” these papers aren’t going to go out of business either way the Arlington battle goes.” Regarding Belo, he says, “they see some small piece of turf they could capture, ” but in the long run, they “have no intention of trying to take Fort Worth-they don’t have the resources to do that.”

Reidy’s observations are echoed by Dennis McAlpine, media analyst with Josephthal, Lyon & Ross, also based in New York City. Arlington, McAlpine says, “is not particularly important to either newspaper in the long run.” But he concedes the existence of “some ego gratification, which can have profound economic implications.”

And therein lies what appears to be the heart of the matter. Ego, pride-at least on Belo’s part-is almost as important as getting a foothold in the only remaining suburb where it does not have dominance. For the Star-Telegram, the issue discussed by executives is more basic: long-term survival.

The ego factor cannot be casually dismissed. Belo and The News are on a roll, In the inner circles of journalism. The Dallas Morning News is probably in the top six or seven newspapers published in this country, in a category with such luminaries as the Wall Street Journal, The New York Times, The Washington Post, and the Los Angeles Times. If The News was a good paper while drubbing the Times Herald five years ago, it has become even better in its monopoly setting, Since December 1991, the newspaper has expanded several sections and added substantially to its staff. Moreover, the organization is broadening its geographic reach; just before moving in force into Arlington, Belo acquired the Bryan-College Station Eagle and the Messenger-Inquirer in Owensboro, Ky.

The News fired its opening Arlington salvo in March 1996 when it announced it would produce a five-day-a-week newspaper called the Arlington Morning News and was sending veteran newsman Gary Jacobson to Arlington as editor and publisher. (The News had, several months earlier, already fired a Tarrant County shot over the bow of the Star- Telegram by adding pages zoned for Northeast Tarrant County, in direct competition with the Star-Telegram edition published there.)

In a not-so-subtle pronouncement, Jacob-son said he was moving to Arlington from Dallas and would become fully involved in the community. That was an important point; Arlington residents historically have resented the Dallas and Fort Worth views of their community as a suburb of the two larger cities. By moving its top Arlington executive to the community, the newspaper was sending a message that it intended to be an Arlington product, by and for Arlingtonians.

The Star-Telegram’s response was swift and furious. Scores of reporters, editors, advertising sales people and circulation troops poured into Arlington. Gary Hardee, a battle-scarred veteran of the newspaper war in Dallas, where he had been a senior editor at the Times Herald when it expired, was appointed editor. The price of the Sunday newspaper was dropped by 50 cents to $1, and the daily newspaper’s street-sale price was halved to 25 cents.

By early summer the Star-Telegram began hinting in not-so-subtle billboards and paper racks all over town that “Arlington’s Independence Day is coming July 4th”- meaning the Tort Worth Star-Telegram’s Arlington edition was about to become the Arlington Star-Telegram,

Just days before the Star-Telegram’s name change became reality, Belo sent its own message of commitment to Arlington by announcing that starting July 1, the Arlington Morning News would add Saturday and Sunday editions after only three months of publishing five days a week.

Gary Jacobson is coy about the human resources Belo has committed to the Arlington fight. “I won’t tell you that,” he said, when asked the size of the editorial staff. “You can count bylines and come up with a pretty good figure.”

That’s not altogether true, of course; byline counts only tell about how many reporters are on the job, and such an enumeration reveals nothing about staffing levels in circulation and advertismg^iswellas copy editors, computer wizards, clerks and other essential but largely anonymous news personnel required to produce a daily paper.

Of course, concealing information from the other side is a legitimate intelligence technique in warfare, but so is leaking information you want the enemy to know, especially if it’s the sort of intelligence that might be intimidating. Hence the Star-Telegram isn’t at all secretive about its commitment of resources to the struggle. Publisher Mac Tully says about 120 people have been assigned to the Arlington operation, and more than half of these-62 to 65-are editorial personnel. Editor Hardee says his main mission is “to protect the moth-ership”-the Fort Worth Star-Telegram. “If The Morning News is emboldened by success (in Arlington) they’ll pour resources into it (building a stronger Tarrant County base),” Hardee continues. “The last spot for them to conquer is Tarrant County. This is a very serious battle. When you add Arlington to northeastern Tarrant County, you come up with 54 percent of the Star-Telegrams resource base.”

Publisher Tully pays grudging respect to Belo. “I wouldn’t underestimate them- they’re smart people,” he says. He doesn’t have to add that the Belo-ites are also experienced in fighting a newspaper war and know all of the strategies and tactics a fiercely competitive newspaper has to deploy to win. He continues, echoing Hardee’s analysis of the situation: “We would put everything into Arlington before we’d pull out. We’re not going to concede anything. We consider Tarrant County our home. And Arlington is such an important part of our franchise.”

How far the Star-Telegram might go was suggested in a late- August story in the Dallas Business journal in which several advertisers accused the paper of raising ad rates for advertisers who also buy space in other Tarrant County publications-such as the Arlington Morning News and FW Weekly.

An element of mystery is added to the situation when you consider that Fort Worth’s Bass brothers own a substantial block of stock in Walt Disney Co., which is now owner of the Star-Telegram through its acquisition of Capital Cities/ABC earlier this year. Disney Co. investor relations officials say that as of the most recent filing with the Securities and Exchange Commission, the Bass investment group held a 5.95 percent stake in the company. That translates to about 31 million shares, worth almost $1.8 billion at a trading price in the $58 range in mid-August.

Of course, the foundation of the Bass broth ers’ immense fortune-Disney stock is jus one of its holdings-was an inheritance fron an uncle, the late Sid Richardson. Ant Richardson was a close friend of legcndar Star-Telegram publisher and longtime Dallas hater Amon G. Carter, even sharing his home with Carter at times and, according to popu lar legend, serving as his nightly dinner com panion for some 20-plus years.

Old-line Star-Telegram officials wistful!; muse that if the newspaper’s very existence was seriously threatened by Dallas-based Belo the Bass brothers would use their influence with Disney chairman Michael Eisner to rust whatever Disney resources were available to the rescue. But almost everybody agrees this is nothing more than wishful yearning foi something that probably could not happen For one thing, the Bass brothers do not have a representative on the Disney Co. board of directors. And even if they did, it’s likely thai the majority of board members, not being from Dallas or Fort Worth and largely uninterested in a parochial struggle, would be pretty reluctant to shovel cash toward Fort Worth. After all, Arlington is basically a zoned edition of a newspaper that is part of a group that is part of a division that is a subsidiary of the Disney Co. It would be a long reach to suggest that the board of directors of a $16 billion (1995 revenues) corporation would micromanage marketing to that degree.

Moreover, the influence of the Bass brothers over operations of the Star-Telegram has been overstressed, according to one source close to the Bass family. And “if nothing else, the Bass brothers are bottom-line oriented,” says another long-time Fort Worth Bass-watcher. “They pull the plug on losing operations. “

This is not to suggest that the Star-Telegram is in any immediate or even long-range danger. At this point, they’re the stronger of the two competitors, certainly in circulation and probably in editorial, advertising and circulation staffing levels.

But Belo is a menacing competitor, and Star-Telegram officials are taking the threat seriously. Phil Meek, a former publisher of the Fort Worth Star-Telegram and now president of Capital Cities/ABC’s publishing group in New York City, says simply: “Anything other than overreaction on our part would be very dangerous.”

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