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Chapter 30 - Economic Struggle Again
Chapter 30 - Economic Struggle Again
AT THE BEGINNING of Utah's centennial year of 1947 The Salt Lake Tribune, along with its sister newspaper, the evening Telegram, was riding high. It had had its ups and downs during the booming twenties, the depression thirties and the war-dominated forties. But its general direction had been up from the time of the muffling of the "irrepressible conflict" beginning in 1911. At that point it had been kept alive and fighting for a decade by infusions of money from the non-newspaper income of Thomas Kearns. It was poorly housed, poorly equipped and meagerly staffed; hated by Mormons for its long fight against various church policies; and scorned, immediately after the accommodation, by the more-hard-nosed gentiles who considered it cowardly for giving up the fight.
By 1947 it had a modern, efficient plant, ownership concentrated in a single family, a publisher of extraordinary ability, and a competent staff. It was read and respected by Mormons and gentiles, and its public acceptance indicated that the Intermountain residents regarded it as one of the country's great newspapers. It had from the beginning enjoyed prestige, even when its editorial policy restricted its general public acceptance. One thing the newspaper lacked was financial reserves or a flow of non-publishing income to tide it over periods of deficits should they return. It had been making a good profit since the worst of the depression years and was at its peak in earnings as it entered the state's centennial year. These earnings had been reinvested in the business or used to pay death taxes so that ownership could be kept in the family corporation. A large investment had been made in 1937 to purchase the newspapers a new home — the present Tribune Building, which had been owned by the Ezra Thompson estate. Substantial expenditures were being made throughout the period to expand and improve physical facilities and equipment. On January 24, 1936, Edmond J. Kearns, one of Thomas Kearns' three children, died and substantial sums were needed to pay taxes. Subsequently his widow wanted to sell part of her interest and more money was needed to buy the stock for the Kearns Corporation. On July 4, 1943, Helen Kearns Brophy, daughter of Thomas Kearns, died, and more money was needed for taxes. Less than three months later, on September 21, Mrs. Jennie J. Kearns, Thomas Kearns' widow, died and still more money had to be raised for taxes.
The abnormal profits of the war years had been skimmed off by the excess profits tax. The non-publishing enterprises of the Kearns family corporation were at this time a drag on The Tribune rather than a source of income to pay newspaper deficits as mining had been in the past. A profitable investment had been made in potentially competitive radio in the form of an interest of slightly less than one-fourth in radio station KSL. But The Tribune management was in process of selling this to acquire a one-half interest in radio station KALL. So radio, while representing a valuable asset, was a drain on and not a contributor to cash assets. In short, The Tribune was at this time the breadwinner of the family corporation and not a luxury to be supported, if necessary, with other income.
At this point, the beginning of 1947, The Tribune-Telegram held a dominant position in every county of Utah and every county of Idaho, Nevada and Wyoming within what was classified as the Salt Lake market. The Tribune's daily circulation was 84,895, more than twice the Deseret News circulation of 40,147.
In Salt Lake City proper The Tribune ranked first with 28,619 circulation, the Telegram second with 20,290 and the News third with 12,583. The Tribune-Telegram was capturing approximately eighty percent of each dollar spent in Salt Lake newspaper advertising.
The Tribune-Telegram management had been aware for months that something big was stirring at the Deseret News. It received second-hand reports that substantial sums had been earmarked by the church to launch a drive to make the News the number one newspaper of the area. On July 1, 1947, the News published a 174-page centennial issue in which its expansion plans were publicly disclosed. As related in Wendell H. Ashton's history of the Deseret News, Voice in the West:
On May 24, 1948, Newsweek published an article on the expansion of the Deseret News under the caption "Mormon Spruce- Up." Staff members of The Tribune-Telegram were disposed to regard the big push up the street as just another promotion drive which would die out in a few weeks or a few months. But they soon began hearing that they could increase their salaries if they moved to the News, as some of them did. Fitzpatrick, who was frequently far ahead of his reporters in gathering information, had been aware for months that a sleeping giant had awakened; that The Tribune-Telegram, a pygmy in financial resources by comparison with its competitor, was going to have to fight as it had never fought before for economic survival.
During the next five years the News waged one of the most aggressive and effective campaigns for circulation and advertising in the history of American newspapers. The battle was quite unlike the bitter conflicts which The Tribune and News had fought in the now distant days of the "irrepressible conflict." Readers of the newspapers were not given a blow-by-blow account of the conflict in the combatant newspapers, as they had been in the old days; but they were made aware that something unusual was going on by an outburst of telephone and door calls from circulation solicitors and a flood of premium offers. In toe-to-toe competition between the two newspapers, there had never been anything like it in the past.
Both combatants had some obvious advantages at the outset of the competition. Among those possessed by the News, the most important was the ability to out-spend The Tribune by as much and for as long as its ownership chose. Through its church ownership, it had an established promotional organization which was far beyond The Tribune's ability to match. And it had newsprint for a massive expansion at a time when The Tribune was being forced by the paper shortage to arbitrarily curtail circulation and size of paper. The News acquired its extra paper from the Finnish paper association and through an investment (with the Los Angeles Times) for a twenty-four and one-half percent interest in a paper company in Oregon City, Oregon, which was valued at about $8,500,000. 4 The Tribune, incidentally, had an opportunity to participate in the purchase but lacked the necessary cash at the time. The investment proved to be very profitable for those who did participate.
The obvious advantages of The Tribune-Telegram were dominance by a wide margin in both circulation and advertising; long-established prestige in the advertising business as an especially effective medium; a deep-rooted acceptance and preference among its readers which could not easily be weaned away by premium inducements; and an established and profitable Sunday paper.
The News sought to counter the Sunday paper advantage by launching one of its own on May 16, 1948.
The News drive on the circulation front was begun in the spring of 1947 with an offer to Mormon wards of a library of church books worth from $15 to $125 for from fifteen to 100 carrier delivered subscriptions. The Tribune circulation department was astounded. Its cost for starts gained through standard carrier contests ranged from 19 to 30 cents. Yet here was the News offering from $1.00 to $1.25 per order and this was only a beginning. During the next four years the News kept up a steady bombardment of premium offers for subscriptions — carving sets, pots and pans, thimble drome racers (scale model racing cars), radios, bicycles, watches and motion picture projectors. This was supplemented with telephone campaigns by professional telephone solicitors and intensification of efforts of the regular carrier organization. In addition to the premiums, the News solicitors enjoyed a price advantage as the monthly rate of $1.30 for the six-day paper was continued after the Sunday issue was started. The rate for The Tribune or the Telegram with the Sunday Tribune was $1.50 per month.
Audit Bureau of Circulation (ABC) reports for the five-year period 1947-1951 show that the subscription starts obtained by the Deseret News through these extraordinary promotions totaled 255,728. This total does not include subscriptions obtained by carriers or full-time payroll solicitors. The Tribune-Telegram circulation department could only guess at the cost but it was certainly far in excess of what the Kearns Corporation could have spent, even if it had been disposed to compete in the spending spree. To counter the News drive The Tribune-Telegram pushed its carrier organizations to the limit and inaugurated some special reader contests designed to bring in new subscription starts. Other types of campaigns were considered but rejected because of excessive cost or because the management believed that what they gained in circulation would be more than offset in loss of goodwill.
Most of the new starts obtained through gifts and high pressure sales tactics evaporated at the first renewal period. But enough of them stuck to give the News an audited circulation of 87,421 for the twelve months prior to June 30, 1951. This was more than double its 1947 circulation. Its unaudited circulation undoubtedly reached higher levels in surges resulting from the campaigns and the week before Christmas in 1951 the News informed advertisers by telegram that its circulation exceeded 103,000, which was well ahead of The Tribune, and that it had the circulation leadership in the city, county and "all other" zones.
Circulation was only one front of the competitive war. An equally important and costly one was advertising. The News greatly expanded its advertising staff and launched expensive direct mail and trade magazine advertising campaigns. The fact that the News was owned by the Mormon Church was a competitive factor more difficult to counter in the advertising than in circulation. In 1949, The Tribune's largest single advertiser, Z.C.M.I., withdrew from The Tribune and Telegram for thirteen weeks, and the News began circulating for the department store an eight- to twelve-page throw-away to virtually every home in the city. The most vulnerable spot for The Tribune in the battle for advertising was the evening Telegram. Under the impact of the intensive drive of the News, retailers began giving more space to the News and less to the Telegram. Tribune-Telegram salesmen, trying to counter this trend, were told, in effect: "The town doesn't need the Telegram. We could best be served if only The Tribune and Deseret News existed."
While Tribune-Telegram salesmen and executives did not concede it at the time, the advertisers were making a valid point and time was sure to vindicate their position. What they were talking about were the economic facts of life which decreed at an earlier date that either The Tribune or the morning Herald had to die because the market would not support two newspapers in the morning field. The clear message now was that the market would not support two newspapers in the afternoon field; that either the News or the Telegram must die. No one among the advertisers or in The Tribune-Telegram organization had even a fleeting thought that the casualty would be the News.
It is probable that Fitzpatrick had read the message before anyone else and that this set him to thinking about and planning a solution which would satisfy the economics of newspaper publishing in the Salt Lake area.
During the period of the competitive confrontation other problems arose to harass Tribune-Telegram management and shake staff morale. Rumors began sprouting like toadstools after a spring rain that The Tribune had been sold. One day the buyer was the Philadelphia Bulletin; a few days later it was the Chicago Tribune or the Hearst newspapers, or Scripps-Howard or any other publisher who happened to register at the Hotel Utah. Had The Tribune been a public corporation, required to issue financial reports, the rumors would have been strengthened. For such a report would have shown that Tribune-Telegram profits had dwindled to less than one-fifth the 1947 level. It would have further shown that a continuation of the trend from 1947 would have, within a very few years, plunged the newspapers into deficits which the owners would be unable to meet.
The rumor that really shook the city erupted in the summer of 1950 - The Tribune had been sold to the Mormon Church. This one at least made economic sense. For at this point it is doubtful, had The Tribune decided to "throw in the sponge," that any third publisher would want to pick it up and thereby buy a fight which a competent management had decided was already lost. But a purchase by the News, viewed from the standpoint of economics alone, would have been a master coup. It would have been in keeping with what was happening, and what would continue to happen, in other cities — establishment of a monopoly by purchase. This would have stopped the massively uneconomic competitive fight and place in the hands of the single owner an impressive array of cost-reducing opportunities.
This rumor did not quickly die. It cropped up in various forms. One version was that a completely reliable person had seen the conveyance document on the desk of a banker, who incidentally was a close personal friend of Fitzpatrick. The Retail Trades Association, representing major advertisers of the city, planned a meeting to consider what position they should take. The Tribune-Telegram was deluged with telephone calls demanding to know if the story were true. Columnist Drew Pearson reported in his column that a reliable source close to the Mormon hierarchy had confirmed the purchase by the church. The Telegram at that time ordinarily carried the Pearson column, but knowing that in this instance what it reported was untrue, it was withheld from publication. This only served to "confirm" the report for some who received clippings of the column from relatives, friends or business associates. Whether publication of the column, with a denial, would have quashed the rumor was a subject of post-mortem debate around The Tribune.
The rumored sales of The Tribune, incidentally, were not entirely without factual foundation. When Mrs. Kearns placed her trust in Fitzpatrick to manage the family corporation and selected Gallivan to be educated and trained as his successor, she had presumably concluded that her own children would not be disposed to shoulder the responsibility of publishing a newspaper.
Edmond J. Kearns and Helen Kearns Brophy had pursued their own interests, left management of their inheritances wholly to Fitzpatrick and passed their interests on to heirs upon their deaths. Thomas F. Kearns, however, had participated to a greater degree than the other children in the family business affairs and, through some inter-family transactions, had acquired an interest of approximately forty percent. At this critical point he decided he wanted to sell to obtain funds for other business enterprises.
To anyone less dedicated to the perpetuation of the newspaper than were Fitzpatrick and Gallivan, it was an understandable decision. The Tribune's profits had been reduced close to the vanishing point by the economic encounter with the News; the future looked bleak and the newspapers were undoubtedly shrinking in value. To Fitzpatrick the sale of The Tribune was unthinkable and he worked feverishly to prevent it. It is probable that he already had in mind a plan to keep The Tribune ownership in the family corporation — a plan which involved a sale to the Mormon Church but not of his beloved Tribune.
During this period A. L. Fish and T. J. Mullin, general manager and business manager, respectively, were forced to retire for reasons of health. Their replacement from the outside strengthened the rumors of a sale and intensified apprehension among staff members. This in turn strengthened an organizational drive by the American Newspaper Guild because some staff members who did not want the guild under the existing management felt they might want it under different ownership. Thus, when an election was held in the spring of 1951, the guild was able to establish bargaining units for the editorial and the circulation departments. Subsequent negotiations resulted in the filing of unfair labor practices against the newspaper, which were dismissed following hearings. Another off-shoot of the negotiations was the filing of a half-million dollar suit against The Tribune for purportedly libelous statements against the guild by the general manager. The guild soon died a natural death from lack of interest on the part of the employes.
A particularly menacing cloud for The Tribune then appeared a few thousand miles away. The United States Department of Justice filed charges in the Federal District Court of New Orleans attacking as a monopolistic practice the combined advertising rates of the New Orleans Times-Picayune and its sister paper, the States. The system of combined advertising and circulation rates used by the New Orleans newspapers was identical to that used by The Tribune-Telegram. It was the understanding of The Tribune management that the New Orleans action was taken at the insistence of the Item, a third New Orleans newspaper that was in the same competitive position as the Deseret News. If the New Orleans action were successful the News could bring a similar action against The Tribune-Telegram.
The seriousness of this threat can be indicated by a few advertising linage figures. Even with the power and prestige of The Tribune pushing advertising into the Telegram at a very low cost to the advertiser for the additional circulation, the Deseret News was clearly winning the battle with its free-spending sales program and its low-cost price for space. In 1947 the retail advertising volume in the Telegram was 337,463 inches compared with 288,352 for the News. For 1951 the Telegram total was 499,354 inches compared with 515,167 for the News.
A continuation of this trend for very long would surely kill the Telegram, even with the combination rate. Without the combination rate it probably would have expired some time earlier as a viable economic enterprise. Without the Telegram to "run interference" in the afternoon field, The Tribune's economic position would have been weakened at a time when it was already being pushed to the brink of the deficit grave into which so many of its contemporaries had disappeared.
At this juncture a light appeared. Massive losses by the Deseret News and disappearing profits, with prospects of insupportable losses, for The Tribune had at long last brought about discussion between the managements of the newspapers of possible solutions. One satisfactory to both parties was found in what was known as a newspaper agency operation.
The plan involved the sale of the Telegram to the Deseret News for merger into a single afternoon newspaper, something Fitzpatrick had advocated twenty years earlier when The Tribune had reacquired the failing Telegram; and the transfer of business and production operations of the surviving Tribune and Deseret News to a non-profit, jointly-owned agency corporation. As this solution developed, the money obtained from the sale of the Telegram, along with borrowed funds, enabled Fitzpatrick to purchase the interest of Thomas F. Kearns and thereby keep Tribune ownership within the family corporation.
