Black’s Magic

Rocki, by all accounts, was a good dog. A boxer with a winning personality, he was a fixture for 11 years in the Oak Bay Barber Shop. Oak Bay is a well-heeled suburb on the eastern edge of Victoria, B.C., and the location of Riffington, the oceanfront estate of a newspaper mogul named Black. David Black. Well, Rocki up and died last month and Black, being a regular customer of the barbershop, so informed the editor of the Oak Bay News—one of the 150 newspapers in Black’s growing empire. That’s right, a growing newspaper empire.

The editor wisely took the hint. That old newspaper adage about it only being news when “Man Bites Dog” may be true if you run a big city daily, but it doesn’t apply in Black’s world, and certainly not in the twice-weekly Oak Bay News. Rocki was accorded a sweetly eccentric send-off to dog heaven in the next issue of the News, complete with a picture of barber Glen Coxsford looking bereft. The headline read “Rocki goes down without a fight,” and you can bet it was the best-read story in the paper.

If you track depressed media stock prices and heed the words of financial analysts, that story is a case of one dying breed (newspapers) saluting another (Rocki the boxer). But Black—a trim, energetic 63—is betting his considerable fortune that the skeptics are wrong. The future of newspapers—and Black lays out the case that it is a bright one—is not that dissimilar to its past. His advice: return to the local roots from which most great papers grew. Cater to the community, reader and advertiser alike. Keep your costs down, your debt manageable, and your presses running 24 hours a day, printing any job your sales team can find. Resist feeding your ego by buying prestige newspaper properties or by expanding outside your comfort zone into television or radio stations. Don’t chase ridiculous profit margins to appease shareholders. In fact, it’s best not to have any shareholders at all.

“I think it’s going to be a good business for a long time,” says Black, ignoring the constantly ringing phone in his paper-strewn Victoria office. “There have been a lot of analysts knocking newspapers, saying things like 30-year-olds don’t read newspapers. Well, true, 30-year-olds never watch TV news either. And they’re not listening to radio so much.” Newspapers come with marriage and the first house, and while that now happens later in life, it still happens. “They’ve got some kids, they want to know about the schools, the churches, what’s happening down at the municipal hall.” And, he says with an ad salesman’s smile, “What are the local sales? I’ve got stuff to buy for the house.” In Black’s view it is a cycle as inevitable as the tides.

While others are fleeing the industry, Black is adding clusters of small papers up and down the U.S. and B.C. West Coast. More notably, he bought the Honolulu Star-Bulletin—Hawaii’s second daily—in 2000, and Ohio’s Akron Beacon Journal in 2006. Neither is yet a stellar investment, Black concedes. Both have since endured severe staff cuts. But both, without his intervention, would likely have joined the growing ranks of dead American dailies.

His most recent play is a minority role with U.S. Platinum Equity—a specialist in acquiring ailing companies—in the purchase this March of the San Diego Union-Tribune. As the city’s only daily, with roots stretching back some 150 years, it is an uncharacteristically large property for Black, even if he is the small fish in the deal. There is much to like, he says, of the paper and the city, starting with its perfect climate. San Diego is geographically isolated from competing papers by ocean, mountains and the Mexican border. And the paper’s price, while undisclosed, was deeply discounted. “The average public stock in publishing in the States is down over 95 per cent in the past four years—staggering. Too much, I think,” Black says.

A Canadian industry analyst, who requested anonymity, is puzzled by Black’s enthusiasm for an industry he has all but written off. “Let’s just say David has a few people out there scratching their heads on what he sees in some of these assets that others don’t.” Black smiles at this. “Yeah, which is the reason there is no one out there buying, which is good for me right now,” he says. “I’m confident that what we’re doing is smart. We won’t really know until the recession is over.” It’s the bigger titles that leave the analyst skeptical. He is indifferent about small-town weeklies—“some rag in a wide spot on the road.” But gather enough rags, as Black has, and you make a bundle. Annual revenues for Black Press and its American arm, Sound Publishing Inc., even in today’s “awful” market, are in the $500-million range, Black says.

Such numbers put Black in a league to snatch papers from the faltering Asper family-controlled Canwest Global Communications. Canwest is shopping some of its assets in a bid to restructure its $3.9 billion in debt. Some of that debt was incurred in 2000, when the Aspers bought—at the peak of the market— most of the Canadian newspapers owned by the other Black in the equation, Conrad Black. True, Canwest’s B.C. papers, including the Vancouver Sun, the Province and the Victoria Times-Colonist, would fit nicely into his regional mix, David Black concedes. But he has no intention of tipping his hand. “When we’re getting into a specific example of what might happen or what might not,” he says, “I don’t comment on that kind of thing.” Besides, he’s wary of their rich union contracts, far beyond the modest wages at Black’s papers.

If David Black is tempted to bag the one-time assets of Conrad, his more flamboyant namesake, he hides it well. The two aren’t related, but both launched their careers in similar fashion, buying small papers and squeezing the margins until they bled black ink. In 1975, David Black left a career as a business analyst for the Toronto Star to buy into his father’s Williams Lake Tribune, in the heart of the B.C. Interior cowboy country. For Conrad, it started in 1969 with the purchase of Quebec’s Sherbrooke Record. He was abetted in this, and most subsequent dealings, by David Radler, his penny-pinching partner and lieutenant. Together, the now famously estranged tag team built Hollinger into an international media empire—and then rode its collapse into a Chicago courtroom and subsequent prison terms.

David Black—his name, curiously, an amalgam of his two rivals—shares more than a few characteristics of both. Like Radler, who still owns small newspaper properties in Canada and the U.S., he has an eye for costs and efficiencies. Like Conrad, David Black revels in the role of old-school newspaper proprietor. The difference is Conrad, to his detriment, ignored the need to appease shareholders. David Black is the owner, apart from a 20 per cent stake held by Torstar Corp., owners of the Toronto Star.

Private ownership is key to Black’s success—allowing him the flexibility that most of Canada’s major dailies can only dream about. While the stock value of public companies depends on profits, Black keeps his company just slightly above break-even to minimize his tax bill. He pays himself a salary but has always avoided skimming off the cream. “For every two papers we’ve got that are making money, we want to have one in the incubator that’s losing money so, effectively, that reduces the taxes we pay. And you build value.”

The path out of recession is easier for small papers, he says. Hard times have chopped essential local retail advertising, but retail is also the first to rebound after a recession, he says from experience. “You have to keep people coming into your shop.”

Metro dailies are a more complex problem. They lost much of their national retail advertising decades ago, as chains went to cheaper and more effective flyers. Classified ads—auto, real estate and help wanted—have always fluctuated with economic fortunes, and will bounce back, he predicts, though with fewer car dealerships and with the Internet taking some of the help-wanted ads. Craigslist, and his own free classified sites, like usedvictoria.com, are effective “if you want to sell a $50 thingamajig out of the garage,” he says. As for cars or other big-ticket items, “you’re also going to take out an ad or two. You’re going to do some work to sell it because it’s worth it.” A larger concern for big papers is wooing back small retailers. And to do that, he envisions targeted editions of city dailies, so that the local dress shop pays only for the circulation in its immediate community. “No one is talking about it, and I don’t understand it,” he says. “To me it’s pretty obvious.” He’s also a proponent of paid content on newspaper websites. Advertising, which Internet users tend to see as an annoyance, has limits. He prefers the equivalent of a telephone card. “Say you have 10 or 20 bucks in your account and you see an article you might want to buy after you read the headline and it costs you, say, five cents, it’s easy to say yes,” he says. “I don’t think there’s a good system for it yet, but people are trying to invent one, I guarantee you.”

Black counts himself lucky he wasn’t lured in by convergence. He is free of the debt that Global and CTV have visited on Canwest papers and the Globe and Mail. “I never did it,” he says of convergence, “because I never had the money and I never had the smarts.” Had others realized their limitations, newspapers might be in far better shape.

“TV and radio guys have been fragmented all to rat s–t,” Black says. “There are so many signals coming in, so many specialty channels.” Computer use also eats into network viewership. As for papers, between print and Internet editions, they have more readers than ever. “Newspapers,” says Black, “are in a better position than ever to compete with other media that carry retail advertising.”

Perhaps that’s a newspaperman’s rationalization to get through the dog days of the recession. But as the owner of the Oak Bay News learned long ago, there ain’t nothing wrong with dogs.