Newspaper Economics: From Politics to Profit to Power
JOUR 350 – Week 4

From Politics to Profit
•	18th Century press party-funded
•	functioned as party newsletters
•	edited by party members
•	highly political, eg. Revolutionary press
•	survived on contributions, patronage
•	ie. government printing contracts
•	postal subsidies for mail delivery
•	system guaranteed competition

Evolution of party press
•	began in mid-19th Century
•	first costs began to escalate
•	eg. New York Herald est. 1835 for $500
•	steam presses, linotypes invented
•	telegraph expenses, large staffs
•	est. cost to start daily $5-10,000 in 1840
•	by 1850 more like $100,000
•	newsgathering costs soared during Civil War
•	By 1870 cost to start daily close to $1 m

Concentration of press ownership
•	resulted from economic, legal, social and technological factors
			       U.S. Cities	Dailies
•	1900		1,737		2,226 
•	1920		2,722		2,400
•	1950		4,700		1,900
•	1980		8,765		1,745

Natural Monopoly Theory
•	was explanation for concentration
•	a theory usually applied to utilities
•	eg. railroads, telephones
•	large “economies of scale”
•	low cost of production after start-up
•	“circulation spiral” hypothesized
•	as destroying newspaper competition
•	ads go to big dailies, readers follow

Joint operating agreements
•	started in 1930s 
•	competing dailies shared presses
•	by late 1950s about 20 in U.S.
•	challenged under anti-trust laws
•	found illegal in 1965
•	but granted exemption under Newspaper Preservation Act (1970)
•	but may instead reduce competition

Canadian JOAs
•	pioneered by Max Bell in Victoria ‘50
•	merged production of Times, Colonist
•	Southam, Vancouver Sun deal 1957
•	paid $4 million for equal partnership
•	pooled profits, set ad rates jointly
•	ruled illegal by Restrictive Trade Practices Commission, held hearings
•	Southam pleaded “economic necessity”
•	allowed to continue, court order urged

Rise of newspaper chains
•	started in late 19th Century
•	Hearst, Pulitzer, Scripps in U.S.
•	Southam, Thomson, F.P. in Canada
•	grew as a result of several factors
•	pressure on independents to sell 
•	2nd-gen owners, high estate taxes
•	pressure on chains to buy
•	tax saved on reinvested income

Chain ownership of U.S. dailies
			1920		7.5%
			1940		17%
			1960		32%
			1980		70%

14 controlled half of papers in 1986
•	largest six controlled a third of industry
•	Gannett 9.4%, Knight-Ridder 6.2%

Canadian chains
•	Southam chain started late 1800s
•	Hamilton Spectator owner William Southam bought: 
•	Ottawa Citizen
•	Montreal Gazette
•	Winnipeg Tribune
•	Calgary Herald
•	Edmonton Journal
•	Vancouver Province

F.P. Publications
•	Calgary Albertan publisher Max Bell
•	bought Edmonton Bulletin in 1948
•	added Lethbridge Herald, Victoria Times and Colonist
•	Sifton newspaper empire on Prairies
•	founded by Sir Clifford Sifton, sons split 
•	Clifford Jr. took Saskatchewan papers
•	Victor took Winnipeg Free Press
•	merged with Bell group in 1958
•	as Federated Papers (F.P.) Publications

Rise and fall of F.P.
•	became largest chain in Canada
•	bought Ottawa Journal 1959, Vancouver Sun 1963
•	merged with Toronto Globe and Mail 1965, later added Montreal Star 
•	became a takeover target after partners died in 1970s
•	Lord Thomson outbid Conrad Black
Concentration concerns
•	first became an issue late 1960s
•	Sen. Keith Davey raised alarm
•	formed Special Subcommittee on Mass Media
•	held hearings in Ottawa 1969-70
•	forced media companies to open their books
•	found profits “astonishing” – 17-25%
•	double other industries – 9-10% 

Davey’s recommendations
•	three chains – Southam, Thomson, F.P. – owned 45% of newspapers
•	up from 25% in 1958
•	called for Press Ownership Review Board to stem concentration
•	also a Publications Development Loan Fund 
•	to assist community newspapers and alternative magazines 

Black Wednesday
•	industry upheaval of Aug. 27, 1980
•	Southam closed Winnipeg Tribune
•	Thomson closed Ottawa Journal
•	Sold Vancouver Sun to Southam
•	Trudeau called Royal Commission on Newspapers to investigate
•	chaired by Tom Kent
•	reported within a year

Kent’s recommendations
•	found two chains controlled 58% of newspapers
•	almost complete monopolies in several provinces:
•	New Brunswick (Irving)
•	Saskatchewan (Armadale)
•	B.C. (Southam)
•	proposed limits on ownership

Social factors
•	also contributed to concentration
•	with changes in population patterns
•	urban flight to suburbs after WWII
•	began “demassification” of audience
•	intensified in 1960s due to crime
•	led to rise of satellite city papers
•	large metropolitan dailies died off
•	“umbrella” model emerged
•	several levels: national, metro, local

Average newspaper editions
		1800		4 pages typical
		1900		8-12 pages
		1940		31 pages average
		1980		66 pages average

•	TV killed off afternoon dailies
•	Called “Death in the Afternoon”

Declining newspaper readership 
Newspapers read per U.S. household
		
			1930		1.32
			1940		1.18
			1950		1.24
			1960		1.11
			1965		1.05
			1970		0.90
			1980		0.79
			1986		0.72

The Media Monopoly (1983)
•	Ben Bagdikian first raised the alarm of U.S. media control
•	pointed to Canadian studies
•	pointed out that 50 corporations then controlled media there
•	and would be reduced to one by 1990s if economic trends continued
•	not quite true (now maybe six)

Case study: New York City
•	once had 10-12 daily newspapers
•	by 1967 it had only three
•	Herald-Tribune was largest paper
•	Times important decision in WWII
•	emphasized news despite rationing
•	H-T lost credibility, circulation 
•	killed by long newspaper strike in 1966
•	now only Times, Post, Daily News 

Case study: Washington, D.C.
•	7 dailies when Post established in 1877
•	population then 130,000
•	1970 pop. 2.8 million, but only 3 dailies
•	Post 500,000 circ., Star 300,000, Daily News 200,000
•	Daily News folded in 1972
•	Star folded in 1981, was 140 years old
•	despite having 300,000+ circulation
•	CPM was $48.40 to $33.40 for Post
•	Post circulation climbed to 700,000 
•	ad rates increased 58% in two years 

Case study: Vancouver
•	Had three competing dailies 1957
•	Sun (Cromie), Province (Southam) P.M. 
•	News-Herald (Thomson) A.M.
•	Pacific Press JOA formed
•	Sun, Province merged
•	Southam bought, folded News-Herald
•	Moved Province to morning publication
•	bought Vancouver Sun in 1980
•	converted Province to tabloid 1983

Case study: Toronto
•	Star (Torstar), G&M dominate market
•	Telegram folded in 1971
•	during labor negotiations
•	re-emerged as colorful, non-union tabloid Sun modeled on UK tabs
•	owned by its employees
•	expanded as chain across Canada
•	National Post started 1998

Natural Monopoly no longer
•	Canada Newspaper Act proposed limits
•	publishers objected, bill never enacted
•	had highest concentration in world in 1980s
•	now 90% by three, with major convergence
•	but 2nd papers returned in monopoly cities
•	emerged as colorful tabloids
•	ie. different product targeted at different market
•	Monopoly Theory of Newspapers now revised 
•	niche marketing now recognized as alternative