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The Honolulu Advertiser
Posted on: Friday, February 26, 2010

Bulletin owner buys Advertiser

 •  Businesses worry ad rates could rise
 •  Union council meets today
 •  Black undeterred by challenging Isle market
 •  Rivals' stories intertwined
 •  Layoffs likely if Advertiser, Star-Bulletin merge
 •  News left workers shocked, confused
 •  Sale yet another sign of changing media landscape


By Derrick DePledge
Advertiser Staff Writers

Hawaii news photo - The Honolulu Advertiser

Honolulu Advertiser employees listen as Evan Ray, a senior vice president for the Gannett Co. Inc., announces that Oahu Publications, publisher of the rival Honolulu-Star Bulletin, has agreed to buy the assets of The Advertiser.

DEBORAH BOOKER | The Honolulu Advertiser

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Oahu Publications Inc. has agreed to purchase The Honolulu Advertiser, the state's dominant newspaper, and sell or merge the rival Honolulu Star-Bulletin in a deal that will likely consolidate media voices in Hawai'i.

The acquisition is to be completed over the next six to eight weeks and, if no buyer for the Star-Bulletin is found, could leave Hawai'i with a single daily newspaper.

The financial terms of the agreement between Oahu Publications and Gannett Co., which owns The Advertiser, were not disclosed.

Oahu Publications, controlled by Black Press of Victoria, British Columbia, acknowledged that the Star-Bulletin has lost money for the nine years since Black Press bought it.

Gannett, the nation's largest newspaper publisher, based in McLean, Va., said The Advertiser is profitable.

"We are pleased to be able to purchase The Advertiser, a strong and excellent newspaper," said David Black, the chairman of Oahu Publishing, who has expanded his investments in newspapers on the Mainland and Canada even as the newspaper industry is shrinking.

"We will endeavor to continue the tradition of good Hawaiian newspaper stewardship as exemplified in modern times by (former Advertiser publisher Thurston) Twigg-Smith and Gannett."

Honolulu is among the nation's last major cities with two daily newspapers, as readers increasingly turn to the Internet for information. In the past year, daily newspapers in Denver, Seattle and Tucson have closed, and the newspaper industry continues to struggle to find a financial model that will support original news reporting during the transition from print to online.

The Advertiser, with a weekday circulation of about 130,000 and a Sunday circulation of about 139,000, has been on firmer financial footing than the Star-Bulletin but has significantly reduced staff through layoffs and buyouts, and ordered staff pay cuts during the recession. Gannett has also shrunk the size of its broadsheet newspaper to save on newsprint costs.

The Star-Bulletin has also reduced staff through layoffs, and has frozen wages and converted to a tabloid format to help get through the economic downturn.

The result is that both newspapers have fewer staff and fewer resources at a time when consumer demand for news including real-time reporting and updates online has increased.

The Star-Bulletin, founded in 1882, and The Advertiser, founded in 1856, have expanded online operations to compete in the evolving digital age, while relying on print for the advertising and circulation revenue to keep their businesses afloat.

REGULATORY REVIEW

The terms of the sale are being reviewed by the U.S. Department of Justice to ensure there are no antitrust issues from the potential consolidation of two competing newspapers. The state attorney general's office has also been notified about the terms.

According to Oahu Publications, the Justice Department will determine by early April if there is a buyer for the Star-Bulletin. If there is a buyer, many of the existing Star-Bulletin employees would likely work for the new owner.

If there is no buyer, the operations of the Star-Bulletin and Advertiser will be consolidated into a single daily newspaper. Advertiser employees would be offered jobs by what Oahu Publications described as an "arms-length" management services company on contract to Oahu Publications.

Oahu Publications would then choose from Star-Bulletin and Advertiser employees to staff a combined newspaper, which would lead to layoffs. Gannett told Advertiser employees yesterday that union contracts would end with the sale, while it is unclear how the deal would affect union contracts at the Star-Bulletin.

Dennis Francis, the president and publisher of the Star-Bulletin, will be the president of Oahu Publications and the publisher of the combined newspaper.

Oahu Publications will continue to have MidWeek, the free weekly distributed on O'ahu, along with military papers and a commercial printing business. In addition to The Advertiser, Oahu Publications would also acquire Gannett's non-daily publications and its printing plant in Kapolei.

Gannett will retain the historic Advertiser building on Kapi'olani Boulevard, a potentially valuable commercial property Gannett has sought to sell.

Wayne Cahill, spokesman for the Hawai'i Newspaper and Printing Trades Council and the administrative officer of the Hawai'i Newspaper Guild, said the union objective is to have a collective bargaining agreement if only a single newspaper remains.

Cahill believes Black may have had his eye on The Advertiser for years. Gannett previously owned the Star-Bulletin, then an afternoon newspaper, but sold it to Liberty Publishing in 1993 to take over the morning Advertiser. Liberty Publishing reached a deal with Gannett to close the Star-Bulletin in exchange for a payout, but after legal challenges and community opposition, sold the Star-Bulletin to Black in 2001.

Cahill said the Canadian publisher told him in 2000 "that he would take over The Advertiser. I think that's probably been his goal."

'DEVASTATING NEWS'

Attorney General Mark Bennett said he doubts antitrust issues will unravel the deal given the economic conditions facing the newspapers and the broad range of local media that accept advertising.

Federal antitrust law is intended to promote competition and discourage predatory business practices and monopoly power over markets.

"It would be difficult to see that antitrust issues would prevent the transaction," Bennett said.

But the loss of a newspaper would likely diminish the amount of original reporting, and would follow consolidation in the local television news market, where KGMB and KHNL, the local CBS and NBC affiliates, merged newsroom operations with K5 into Hawai'i News Now last year.

"This is devastating news," said Richard Port, a Democratic activist who helped organize Save Our Star-Bulletin, a group that fought to prevent the Star-Bulletin from closing a decade ago. "My feeling is the same as before, we do not want a monopoly in Hawai'i."

Gerald Kato, a University of Hawai'i-Mānoa journalism professor, said Honolulu has benefited from having competing daily newspapers.

"The possibility that there will be only one newspaper is sad, to say the least," he said.

Kato said he believes it will be difficult to find a buyer for the Star-Bulletin given the recession and the precarious financial state of the newspaper industry.

"I would think that it's going to be difficult to put it mildly finding a buyer," he said.

STAFFS STUNNED

Although political and business leaders occasionally have a combative relationship with newspaper reporters and editors, many expressed sadness yesterday about the potential loss.

"The press is a vital part of our community and Honolulu has long been well served by two major dailies and alternative voices. The economy, however, has not been kind to the newspaper business. Many papers all across the country have had to close their doors. It's a sign of the times and it shows no one is immune," Mayor Mufi Hannemann said in a statement from Washington, D.C., where he is meeting with federal officials on transit and other issues.

"We hope for the best for all of those involved for whatever the end result of this purchase agreement may be."

The announcement of the deal, made simultaneously in the newsrooms of both papers at 4 p.m., came as a surprise to many reporters and editors whose job it is to get such scoops in advance.

At the Star-Bulletin on Restaurant Row, one reporter described the moments before the announcement as another "near-death experience" at a newspaper that has fought against odds to stay alive.

While some were optimistic a buyer will be found for the tabloid, others expressed fear. "I think the intent is to close the Star-Bulletin," said reporter Robert Shikina, adding that he has not given up hope.

At The Advertiser, stunned employees peppered Evan Ray, Gannett's senior vice president for finance and operations, with broad questions about whether the newspaper's brand would survive and practical worries about healthcare benefits and pension plans.

Rumors of the sale to Black had reached some top editors by noon, but the newspaper's operations committee did not receive official word until a 3 p.m. meeting. Ray himself said he only learned about the deal on Tuesday.

Both newspapers will continue to publish and compete during the transition.

Mark Platte, The Advertiser's editor, said he is proud of the newspaper's staff and believes the paper has established itself as the state's dominant news organization.

"It's taken a lot of hard work. And I think this is exactly why David Black wanted to purchase us," he said.

Lee Webber, The Advertiser's publisher, said the sale is a unique opportunity for Black and sets up the newspaper for a much stronger position in the community.

"They're going to do the right thing by this state, and by the readers, and they're going to want to run a profitable organization ... and I believe they'll do that. I believe they'll do it well."

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