Financial Markets and the Demise of Canada's Southam Newspapers
Total Page:16
File Type:pdf, Size:1020Kb
independence for local publishers. The Asper family that owns CanWest ac- The Good, the Bad, and the Ugly: tively supports the federal Liberal Party and attempts to influence political cov- Financial Markets and the Demise of Canada’s erage of their acquired newspaper Southam Newspapers chain have also come to light, in part prompting the Canadian Senate to com- mence hearings into the Canadian me- dia in mid-2003. by Marc Edge, Nanyang Technological University, Singapore This paper presents the Southam experi- ence as a case study of the effect of finan- cial markets on newspaper ownership and consequently on management prac- tices. It examines the factors that contrib- Introduction creased cost-cutting not only to offset uted to the demise of family ownership National Post losses, but also to service of the Southam newspaper chain and In January 2003, the Southam name its high debt load incurred in acquiring resulted in radical changes in its opera- disappeared from newspapers of the newspapers at the top of an eco- tions. In so doing, it chronicles a change Canada’s oldest and largest chain, nomic boom. It has also brought politi- from publishing quality newspapers officially ending what one former cal controversy, as many journalists pro- under Southam ownership (the good), Southam News correspondent called “a tested the centralizing of operational to cost- and quality-cutting under the long-lived experiment in quality daily control at CanWest headquarters in management of Hollinger (the bad), to newspapering.” (Nagle 2003, p. B11) The Winnipeg in a reversal of the long- the centralization and political parti- former family-owned newspaper group standing Southam policy of allowing sanship seen under CanWest (the ugly). was renamed CanWest Publications, af- ter latest owner CanWest Global Com- munications, a Canadian television Abstract network with worldwide holdings. CanWest had in mid-2000 acquired the The impact of financial markets on media management practices is apparent in bulk of the Southam chain, which had Canada, where public trading in newspaper company shares has contributed signifi- been founded in 1897 by William cantly to concentrated press ownership. Fluctuations in newspaper share values have Southam, from Hollinger Inc., which in often shaped firm strategies as a result. This paper presents the Southam newspaper 1996 had completed a gradual takeover chain as a case study of the impact of financial markets on newspaper management of the company. Under Hollinger, origi- practices. Historical analysis is used to show how Canada’s oldest and largest news- nally a Canadian newspaper group that paper chain, which was known for its commitment to quality journalism and for now includes the London Daily Tele- allowing its local publishers editorial independence, made a fateful decision when it graph, Chicago Sun-Times, and Jerusa- went “public” with a share issue in 1945. The increasingly widespread ownership of lem Post, the Southam dailies under- its stock led to Southam’s gradual takeover in 1996 by Hollinger Inc., which cut costs went a rigorous cost-cutting program. and reduced staff chain-wide. Sale of the Southam newspapers in 2000 to CanWest The belt-tightening accelerated in 1998, Global Communications has seen editorial control centralized at company headquar- when Hollinger chairman and majority ters and partisan support shown for the ruling federal Liberal party, contrary to shareholder Conrad Black founded the Southam’s founding principles. As a result, the Canadian Senate began hearings into upmarket National Post as a daily news- the media in 2003, bringing the possibility of government regulation to reverse the paper distributed across Canada in com- impact of financial markets on the management of media firms there. petition with Thomson’s Globe and www.mediajournal.org Mail. The expensive start-up drained Marc Edge Southam resources chain-wide, and ([email protected]) Hollinger’s stewardship of the Southam is an Assistant Professor in the School of Communication and Information at Nanyang dailies ended abruptly in mid-2000 Technological University in Singapore. His research focuses on the newspaper indus- with the surprise sale to CanWest. The try in Canada. television network’s ownership of the former Southam titles has seen in- 228 © 2003 – JMM – The International Journal on Media Management – Vol. 5 – No. III : (180 – 189) The Impact of Financial the effect of stock market trading in The Newspaper Market Markets newspaper shares as an “uncoupling of in Canada newspaper ownership from account- The impact of financial markets on ability for community service.” The fi- When Bagdikian raised the alarm in media management practices was first duciary responsibility of corporate di- the U.S. in the early 1980s about the brought to the attention of many by rectors, he pointed out, makes them high level of concentration of owner- Bagdikian (1980, p. 64), who identified legally responsible for focusing on ship of the press, half that nation’s it as a factor that had been overlooked profit, which can create a short-term, press was owned by fourteen newspa- in understanding the impact of in- bottom-line orientation. per chains. (Bagdikian 1983, p. 18) But creased concentration of press owner- by then, events in Canada had resulted ship. He identified the stock bourses as There is accountability for profit, not for jour- in 58.7 percent of that country’s daily a “third market” whose forces newspa- nalism, except as it affects the business plan. newspapers being owned by just two per managers must account for, in ad- It isn’t coincidental that two of the nation’s chains, Southam and Thomson. dition to their acknowledged markets leading newspapers, The New York Times Dunnett (1988, p. 199) singled out for readers and advertising. and The Washington Post, have structured Canada as the most noteworthy ex- their stock so that family members retain ample of ownership concentration. “No The impact of trading newspaper corporate control. These families have maintained an developed country has so concentrated stock on the stock market has meant that interest in their companies that goes beyond a newspaper industry ... In Canada the news companies must constantly expand in making money. newspaper market is unusual in that it size and rate of profits in order to maintain is still growing and could accommodate their position on stock exchanges ... Instead By 2001, many of the ills of journalism new entrants.” The high level of Cana- of the single master so celebrated in the rheto- were being laid at the feet of chain dian newspaper ownership concentra- ric of the industry – the reader – there are in newspapers owned by publicly-traded tion was a result of several factors, in- fact three masters. corporations. Concluded one investiga- cluding the effective prohibition of tion (Kunkel & Roberts 2001, p. 6) of the foreign ownership, a lack of enforce- Bagdikian expanded on this hypothesis state of the American newspaper: “The ment of competition laws, and wide- in his book, The Media Monopoly chains’ desperation to maintain unre- spread share ownership. (Edge 2002) (Bagdikian 1983). The expansion of alistic profit levels (most of these big newspaper chains in the United States companies now being publicly traded) A major historical factor in shaping the during the 1960s and 1970s had come is actually reducing the amount of real newspaper industry in Canada was the largely at the expense of family-owned news being gathered and dissemi- trading shares of publicly-owned dai- enterprises whose third-generation nated, most conspicuously at the local lies and then chains of dailies. Buying owners could only escape heavy inher- and state levels, where consumers need up widely-held stock from second-gen- itance taxes by selling shares publicly. it most.” A survey of editors at publicly- eration owners of family newspaper Increasingly these family newspapers traded newspaper chains in the U.S. companies was the main growth strat- became acquired by chains, which published the same year (Cranberg, egy of F.P. Publications, which in the avoided paying tax on earned income Bezanson & Soloski 2001) concluded mid-1960s was briefly Canada’s largest by re-investing it in acquisitions. Ac- that stock market influence has had newspaper chain, even ahead of cording to Underwood (1993, p. 41), in- such a negative effect on newspaper Southam. (Edge 2001) The Canadian- creased corporate ownership of dailies quality that federal regulations should based international Thomson con- resulted in two trends during the 1970s be enacted to reverse the trend, despite glomerate in turn won a bidding war and 1980s: professional management First Amendment guarantees against in early 1980 for F.P. Publications, of newspapers, often by executives government interference in the opera- whose stock had similarly become with little or no background in jour- tions of the press. The move toward widely-held following the deaths of its nalism; and an increasingly bottom- “market-driven” journalism seen in the founders. On August 27 of that year, a line, market-driven orientation. He ar- 1980s and ’90s, however, was taking date which lives in newspaper indus- g gued that both trends were largely the place not just at publicly-owned news- try infamy as “Black Wednesday,” the nal.or result of stock market influences. papers, but also at many that were already-high level of concentration of “Wall Street, as publishers have privately owned as well but similarly Canadian newspaper ownership be- learned, can be insatiable in the de- fighting for market share, as television came increased with the simultaneous .mediajour mand for earnings growth and unmer- had taken both readers and advertisers closure of Thomson’s Ottawa Journal www ciful in hammering a stock if earnings away from newspapers worldwide. and Southam’s Winnipeg Tribune. The drop.” Ureneck (1999, p. 11) described (Underwood 1993, p.