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| Feature |
New Money Rediscovers Old Media
Michelle Leder
05/01/2007
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During the course of a typical weekday, Mark Cuban reads four newspapers. As a
member of the general public, that makes him atypical. As a new-media
entrepreneur and investor, it might make him one of a kind. Newspapers across
the country are losing favor with consumers and investors alike, as readership,
revenues and share prices fall. But Cuban and a handful of contrarians believe
untapped opportunities remain hidden in old media. "The education I get from a
$1 copy of the Dallas
Morning News is an incredible value," Cuban
says. "But there aren’t a lot of other people who perceive it that way."
Cuban—who with partner Todd Wagner sold Internet startup
Broadcast.com to Yahoo for $5.7 billion in 1999—admits he is never truly unwired
from technology, except perhaps when he is playing basketball. It’s easy to
assume he would prefer to obtain his news online. But each day, Cuban, who also
owns the NBA’s Dallas Mavericks and HD.net, a high-definition television network
perhaps best known for resurrecting the career of news anchor Dan Rather, reads
his hometown papers, the Morning News
and Fort Worth Star-Telegram, as well as
The New York Times and the Wall Street
Journal.
Cuban is rumored to be eyeing several media properties, and admits that he
would consider buying a newspaper if the right property- perhaps one of his hometown papers—presented itself. Even during an era of crisis for the newspaper
industry, he says he understands the lure of owning a civic landmark and a
mass-communications platform. "In some respects, it’s probably about vanity,"
Cuban says. "There’s a certain cachet and wow factor to owning a newspaper
that’s not unlike owning a basketball team."
Profit margins, too, remain attractive at some newspaper
properties, ranging as high as 20 to 30 percent. Cuban explains that many
investors in his demographic would be thrilled with that kind of return, but, in
recent years, Wall Street analysts and institutional investors have fled. Share
prices of publicly traded publishers such as Gannett, the Tribune Company and
McClatchy are down at least 25 percent in the past three and half years.
| “Newspapers aren’t dying as much as they have to reinvent themselves.” |
Cuban believes that many of today’s newspaper companies and the
families behind them are misguided managers focused too narrowly on the
intangibles of running a public trust. (Even public publishing enterprises such
as Tribune, McClatchy and The New York Times Company count founding family
members as controlling shareholders or their largest shareholders.) They desire,
Cuban says, to be perceived as the saviors of what Wall Street believes is a
moribund industry. Cuban compares the newspaper business to the American
automobile industry. With few exceptions, publishers are trying desperately to
tap-dance their way back to the halcyon days when newspapers ruled mass media.
"The level of arrogance among newspaper executives has amazed me," Cuban adds.
"Most of them have said, ‘Well, we’ve seen ups and downs before, but it will all
work out in the end.’"
For decades, he notes, outsized characters like William
Randolph Hearst and Arthur "Punch" Sulzberger dominated the newspaper industry,
and most of the large daily papers (and many of the smaller ones) were
controlled solely by wealthy families. But over the past 30 years, as many of
these families either took their companies public or sold them to large
conglomerates, the patriarchs were supplanted by bean-counters and business
school graduates better equipped to cut costs than build brands. Maybe, Cuban
muses, the time is ripe for new moguls—people like Warren Buffett, Ron Burkle,
David Geffen, Jack Welch and Sam Zell—to seize the opportunity to run the
newspaper sector (see "The Next Sulzberger?" at the end).
With the exception of Buffett, whose Berkshire Hathaway owns
the Buffalo News in New York and a 20 percent stake in the Washington Post
Company, none of these men have any experience in the newspaper industry.
(Through their spokespeople, all of them refused requests to be interviewed for
this article.) In early February, Welch told New York Magazine that he thought he
could return the Globe to profitability, although he
did not explain how he would do it.
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