News America Publishing Inc. History

Company History:

News America Publishing Inc. was established in 1973 as the American arm of The News Corp. Ltd., Rupert Murdoch's multinational network of newspapers. At one time Murdoch's News America Publishing holdings included tabloid newspapers in New York, Chicago, and Boston, a weekly national tabloid newspaper, and a stable of magazines and other periodicals. During the 1980s Murdoch's attention turned from print journalism towards the establishment of a global communications and entertainment empire. He sold almost all of his American publications to finance television and film enterprises and to reduce the News Corp.'s burdensome debt. By the spring of 1994 there were only two publications left in News America Publishing: the New York Post, a daily newspaper, and Mirabella, a women's magazine. (TV Guide was being held in another Murdoch subsidiary, News America Publications Inc.) And, in early 1995, the Mirabella magazine was sold off.

By the time Murdoch turned his attention to the United States, he owned 80 newspapers and 11 magazines, television and radio stations, and printing, paper, and shipping companies in Great Britain, Australia, and New Zealand. Most of his newspapers fed the public a steady diet of sensationalism, heavily loaded with sex and crime stories.

One of Murdoch's first American purchases took place in 1973, when he bought the morning San Antonio Express and afternoon San Antonio News for $19.7 million. The Express had no direct competition, but the News had a bigger, more popular afternoon rival in the San Antonio Light, a Hearst Corp. paper. Using the formula he had employed in the past, Murdoch crammed the News with lurid stories and heavily promoted puzzles and contests. One headline, "Killer Bees Move North," came to be considered a classic example of the Murdoch brand of journalism. He also introduced Wingo, a form of bingo that distributed prizes and demanded daily readership; it also became a feature of Murdoch newspapers in New York, Boston, and Chicago.

In two years Murdoch lifted News daily circulation from 61,000 to 76,000. However, he learned that in the United States circulation did not necessarily translate into profit, because advertising accounted for an average of 75 percent of gross revenues, and analysts contended that most advertisers were looking for customers more affluent than the typical Murdoch reader. Murdoch then redirected the News toward the higher end of the market and eventually outstripped the Light in circulation as well. The San Antonio papers were profitable by 1983. In 1992 Murdoch sold them to the Hearst Corp., which then closed the Light, for $185 million.

Murdoch invested $9 million to launch the National Star (later abbreviated to the Star) in 1974 as a rival to the established weekly tabloid the National Enquirer. Bringing in seasoned Australian and British associates, Murdoch filled the Star with the kind of raunchy stories that were a feature of his Sunday London paper News of the World. The Enquirer, though, once a specialist in articles that prominently featured elements of sex and gore, had toned down its stories to find a lucrative niche in supermarkets. The Star, too, shifted its emphasis to features about Hollywood personalities and dieting, and columns by psychics and astrologers, in order to challenge the Enquirer's market. By the early 1980s the Star had a weekly circulation of four million--almost as high as that of the Enquirer--and was recording a profit of about $12 million a year. It was sold to G.P. Group, publisher of the Enquirer, in 1990 for $200 million and an 80 percent stake in the newly formed Enquirer/Star Group, which brought about $400 million in a 1991 public offering of stock.

Murdoch bought the New York Post in 1976 in order to establish a presence in a city that was not only the nation's media capital but also the principal residence for himself and his wife and children. Founded in 1801 by Alexander Hamilton, the Post (originally the Evening Post) is the oldest continuously operating daily newspaper in the United States. Although its editors in chief included the poet William Cullen Bryant (1829-78) and the German-American political leader Carl Schurz (1881-83), the Evening Post was overshadowed by other newspapers and never achieved circulation of more than 20,000 in the nineteenth century. It later became a supporter of the Democratic Party and had Franklin D. Roosevelt among its stockholders. Dorothy Schiff, heiress to a banking fortune, bought the Post in 1939, when its daily circulation was 250,000. She turned the Post into a tabloid and kept it the voice in New York City for liberal politics, but was unable to make it profitable.

Murdoch bought the Post from her for about $30 million and began emphasizing stories like the notorious "Son of Sam" murder case. Another Murdoch-inspired front-page headline, "Headless Boy in Topless Bar," found its way into journalistic legend. Murdoch also began dabbling in politics, with immediate success. He endorsed Jimmy Carter in 1976 and backed him against Ted Kennedy's 1980 attempt to deny him renomination. An Australian airline partly owned by Murdoch received a $290-million loan from the U.S. Export-Import Bank four days after the Post endorsed Carter in the New York Democratic Party primary. Murdoch, however, swung his support to Ronald Reagan in the general election that year. Murdoch also endorsed Edward Koch's campaign to become mayor of New York in 1977 and consequently had a friend in city hall for 12 years.

A political writer said in 1984 that "Murdoch doesn't just endorse you, he campaigns for you." According to a Wall Street Journal article, the Post "was blatantly supportive" of New York governor Hugh Carey's successful 1978 bid for reelection, after which Carey's administration granted a multimillion-dollar contract to run the state's keno and lottery operations to Leisure System Inc., whose chairman was Murdoch. After Mario Cuomo was elected governor in 1982 despite the Post's opposition, the contract was withdrawn.

Soon after he bought the Post Murdoch also acquired the weekly newspaper Village Voice and his first two American magazines, New York and New West, for about $10 million. Murdoch did not interfere with the political viewpoint of the profitable Village Voice; sold in 1985, it brought $55 million. New West, a California regional magazine, was sold for $3.5 million in 1980. New York remained in the Murdoch stable until 1991, when it was sold in a package with other magazines.

In 1977 Murdoch's Australian-based holding company, then called News Ltd., held 48 percent of his British combine News International Ltd. The News Ltd. and News International Ltd. companies each held half of News America Publishing and The City Post Publishing Corp., publisher of the Post. Ownership of New York Magazine Co. was split between City Post Publishing and News America Publishing. In a New York Times interview, Murdoch explained, "It's like a partnership. In this way, a central bank in London or in Australia can't order you to pay dividends, since you don't have control stock [i.e., majority control]. It means you can plow back profits."

Donald Kummerfeld became president and chief operating officer of News America Publishing in 1978. He mandated stricter budgets, quarterly budget reviews, and a computerized system for dealing with all the currencies in which the company traded. Although it lost money until 1983, largely because of the Post, the worth of News America Publishing grew from about $300 million when he became president to nearly $2 billion when he left in 1985. Much of this sum was due to the success of the Star, whose annual profits exceeded those of any other Murdoch publication in the United States.

News America Publishing's success did not extend to reviving the Post, which lost about $150 million in its first decade of operation under Murdoch. In the first two years its circulation rose from 485,000 to 960,000, but it could not displace the Daily News as the city's chief tabloid. It had difficulty attracting advertisers as well. In 1983 the Post's share of advertising in New York newspapers fell to 7.6 percent from 11.3 percent in 1977.

According to Murdoch biographer William Shawcross, the press baron finally decided that the kind of journalism he practiced in Australia and Britain would not work in New York because there was no "cheeky working class" to buy papers. He concluded, "This is a middle-class city. Everybody in this country wants to get ahead, get a piece of the action. That's the fundamental difference between the Old World and the New World." Nevertheless, the Post remained his pet project. He ran his global operations from an office at the newspaper and, according to an editor, often would "critique the paper the next morning picture by picture, headline by headline."

In 1982 News America Publishing bought the barely breathing Boston Herald-American from the Hearst Corp. for $1 million plus an additional $7 million out of future profits, if any. Shortening the name of the newspaper to the Herald, Murdoch took dead aim at the city's dominant paper, the Globe. The Herald became known for its aggressive local reporting of politics and crime and its relentless criticism of Senator Ted Kennedy, a target of Murdoch's increasingly right-wing political views. Circulation rose by 150,000 in two years and reached a peak of 365,000 in 1988. The Herald became profitable in 1986 but was unable to remain so.

News America Publishing bought the Chicago Sun-Times for about $90 million in 1983. It was the kind of acquisition Murdoch relished, a tabloid pitted against the established local newspaper, the Chicago Tribune. Sent to oversee the paper, Charles Wilson, deputy editor of the Times of London, was met by fierce hostility from the editorial staff. "It was a classic Murdoch-monster-myth situation," he later told Shawcross. "I spent my time trying to convince the staff that Murdoch was not Satan, that we were not going to make the Sun-Times into the National Enquirer." A later study found that under Murdoch management news about government affairs was cut, while space given to local stories and coverage of celebrities, entertainment, accidents, disasters, and "Sun-Times self-promotion" increased. Annual profits rose from $3 million to $9 million before the Sun-Times was sold in 1986 for $145 million.

In 1984 News America Publishing acquired a group of 13 business publications related to travel and aviation from the Ziff-Davis Publishing Co. for $350 million. The aviation group was sold to McGraw-Hill Inc. in 1987 for more than $50 million. The travel and hotel publications were sold in 1989 for $825 million to Reed International P.L.C.

Other Murdoch magazine acquisitions included New Woman, purchased in 1984 for $23 million. News America also joined with the French publisher Hachette S.A. to launch Elle, a women's magazine, in 1985. It became a hit, reaching a circulation of 825,000; Murdoch's sold his half-interest in the magazine for $160 million in 1988. Other start-ups included Premiere, European Travel & Life, Automobile, and Mirabella, a women's magazine. In Fashion and Sportswear International were acquired for an undisclosed sum in 1988, while Soap Opera Digest was purchased for about $70 million in 1989. Shortly thereafter, News America commenced publication of Soap Opera Weekly. In October 1988 News Corp. bought Triangle Publications, Inc. from Walter Annenberg for a whopping $2.83 billion. This acquisition brought with it TV Guide, The Daily Racing Form, and Seventeen.

A 1986 News Corp. disclosure document listed not only various publishing properties as subsidiaries of News America Publishing but also Skyband, Inc., Murdoch's satellite-television venture and Fox, Inc., a media giant that included the recently-acquired Twentieth Century Fox and the Fox television network. This subordination of Fox to News America Publishing--also listed in a 1992 company prospectus&mdash⟩pears to have been made for accounting convenience, for it is unlikely that a Hollywood mogul as powerful as Barry Diller (Fox chairman and chief executive officer, 1985-92) reported to the president of News America Publishing. These corporate relationships created some interesting conflicts; Diller was said to have complained that movie stars were not prepared to work for Fox while simultaneously being abused by the tabloid mentality that dominated some of News America Publishing's properties.

In News Corp.'s annual reports, these enterprises were listed separately in a breakdown of profit-and-loss figures. News America Publishing (excluding the Boston and Chicago papers and New York) made a profit of $72.2 million in 1986 and $70.2 million in 1987 in Australian dollars ($48.5 million and $49.1 million in U.S. dollars). The 1988 profit was given as A$45 million (U.S. $35.2 million), but in the 1989 annual report the 1988 profit was retrospectively converted into a loss of A$50.4 million (U.S. $39.4 million). The 1989 News America Publishing figure, which did not include recently acquired Triangle Publications, indicated a loss of A$240.8 million (U.S. $191.1 million). With the Triangle publications included in News America Publishing, however, there was a 1990 profit of A$299.5 million (U.S. $234 million). In the 1991 annual report, Triangle's profits were again listed separately, and News America Publishing incurred a loss of A$238.7 million (U.S. $186.5 million). This loss was increased in the 1992 annual report to a retrospective A$423.4 million (U.S. $330.8 million).

Meanwhile pressure in Congress--much of it from Senator Ted Kennedy--forced Murdoch to comply with a Federal Communications Commission rule that made him choose between his Boston and New York newspapers and his Boston and New York television stations. Murdoch eventually was allowed to place his Boston station in an independent trust but sold the Post to Peter Kalikow, a real-estate developer, in 1988 for $37 million. Later Murdoch decided to buy back the Boston station. To do so, he sold the Herald in 1994 for an undisclosed sum to Patrick J. Purcell, publisher of the Post and chief of News America Publishing's newspaper division.

During 1990 News Corp. approached meltdown as a sizable part of the company's debt of $7.6 billion came due. The Daily Racing Form and nine Murdoch magazines, including New York, Premiere, New Woman, European Travel and Life, Seventeen, Soap Opera Digest, and Soap Opera Weekly, were purchased by K-III Holdings for $650 million in a 1991 fire sale. Murdoch refused to include TV Guide, and K-III rejected Mirabella. Two start-ups, Men's Life and Married Woman, were discontinued in 1990 and 1994, respectively, after only a single issue.

By 1993 News Corp. had recovered its financial health, although the Post was still experiencing severe problems. Murdoch was given a waiver to the FCC rule in order to enable him to take possession again. In October he paid $25 million to acquire the Post in bankruptcy court, but only after extracting labor concessions intended to save $6.2 million a year. In 1994 the newspaper's publisher said Murdoch would invest millions of dollars in new press equipment to produce a full-color newspaper. Post daily circulation was 405,300 in October 1994.

Aimed at sophisticated, affluent, and mature women interested in fashion, Mirabella, the only remaining unit of the Murdoch magazine stable, was still operating at a loss in 1994. Circulation had risen to 613,000 in 1994, but advertising pages fell from 1,088 in 1990 to only 516 in 1993. And, in early 1995, the company sold its Mirabella magazine to Hachette Filipacchi Magazines for an undisclosed price.

News America Publishing registered losses of $184.8 million in 1992, $110.4 million in 1993, and $19.7 million in 1994. It was listed as a unit of News America Holdings, Inc., a subsidiary of News Publishing Australia Ltd. The latter company was a subsidiary of News Corp. and was, despite its name, incorporated in the United States. N.Y.P. Holdings Inc., publisher of the Post, was a subsidiary of News America Publishing.

Further Reading:

• Cox, Meg, "'How Do You Tame a Global Company?' Murdoch Does It Alone," Wall Street Journal, February 14, 1994, pp. A1, A6.
• Garneau, George, "It's Baack," Editor & Publisher, October 9, 1993, pp. 12, 35.
• Mayer, Jane, "Australia's Murdoch Is Getting His Kicks in U.S. Political Parties," Wall Street Journal, November 2, 1984, pp. 1, 18.
• Mirabella, Alan, "Mirabella's New Chief Embodies Magazine," Crain's New York Business, May 2, 1994, p. 16.
• Nevins, Allen. The Evening Post: A Century of Journalism, New York: Russell & Russell, 1968.
• Potter, Jeffrey, Men, Money and Magic: The Story of Dorothy Schiff, New York: Coward, McCann & Geohagen, 1968.
• "Sale Is Set for Boston Newspaper," New York Times, February 5, 1994, p. 39.
• Shawcross, William, Murdoch, New York: Simon & Schuster, 1992.
• Tuccille, Jerome, Rupert Murdoch, New York: Donald I. Fine, Inc., 1989.
• Vartan, Vartanig G., "How Murdoch Mobilized His Money," New York Times, January 7, 1977, pp. D1, D5.

Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.

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