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2 Large Detroit Papers Plan to Join Operations : U.S. Antitrust OK Needed; Free Press, News to Stay Editorially Independent

April 15, 1986|JAMES RISEN and THOMAS B. ROSENSTIEL | Times Staff Writers

DETROIT — One of the last big-city newspaper wars ended abruptly in a truce Monday, as the Detroit News and the Detroit Free Press announced plans to merge their business operations while remaining editorially independent.

Bitter rivals for over a century, the two money-losing papers, both owned by nationwide newspaper chains, now plan to publish together under the largest joint operating agreement ever formed.

The agreement requires Justice Department approval, a process that could take up to two years. Such joint operating arrangements are allowed under an exemption to the federal antitrust laws that permits newspapers in the same city to combine operations if one can prove that it otherwise would fold.

Under the agreement, the Free Press, owned by Miami-based Knight-Ridder Newspapers, and the News, recently acquired by Gannett Co. of Roslyn, Va., will merge their printing, advertising, circulation and other administrative operations, while the news and editorial sections of the two papers will remain separate.

Joint Editions on Weekends

The Free Press will publish only in the mornings during the week. The News, which has an edge in both circulation and advertising, will publish only in the afternoons, dropping its large morning edition. On weekends, the two papers will publish joint editions, with responsibilities for the hard news and features sections split between the editorial staffs of the two papers.

Together, they will form one of the largest Sunday newspapers in the country, with a projected joint circulation of more than 1.5 million, officials said. Currently, the News, with a daily circulation of 645,016, is the eighth-largest general interest newspaper in the United States, while the Free Press, with a circulation of 634,466, is ranked 10th.

Gannett will control the venture that will publish the two papers and will receive 55% of the profits from both publications for the first five years after the joint agreement is in effect. Gannett and Knight-Ridder, two of the largest newspaper chains in the nation, will split earnings evenly after that start-up period, officials said.

Over the last decade, the News and Free Press have been locked in one of the most brutal battles for circulation and advertising in the newspaper industry, with both papers losing millions to subsidize low newsstand prices (the News costs 15 cents daily while the News costs 20 cents in the city). The papers also discounted advertising rates while Detroit suffered through a terrible economic slump.

Antitrust Exemption

Officials of the two papers revealed Monday that the Free Press has lost more than $35 million since 1980, while the News has lost more than $20 million during the same period.

Within the next two to three weeks, the Free Press will apply to the Justice Department, as the "failing" newspaper in the deal that needs an antitrust exemption, officials said. While they await the government's decision, both papers will continue to operate independently, they said.

Douglas H. Ginsburg, assistant U.S. attorney general for antitrust matters, could not be reached for comment Monday.

Gannett and Knight-Ridder officials said they were confident that the deal would be approved and pointed to their Detroit losses as the best evidence to support their application. But the sheer size of the two papers raised questions in the newspaper industry over whether the Justice Department would grant antitrust protection.

Alan J. Gottesman, an analyst with the brokerage firm of L. F. Rothschild, Unterberg, Towbin, questioned whether the losses reported Monday for the two papers were as dramatic as the companies suggested. Both chains, he said, could operate the papers without bleeding cash from other operations.

"(Knight-Ridder) could have stayed in Detroit for as long as they wanted," Gottesman said.

The battle had been fought to a standoff by the time Gannett announced that it was acquiring the News from its founding family owners last fall, and top executives from both Gannett and Knight-Ridder said the agreement to publish jointly was the only way that both papers could stay in business.

"The Free Press and the News have fought to a virtual draw," Knight-Ridder Chairman Alvah H. Chapman and Gannett Chairman Allen H. Neuharth said in a joint statement. "Present-day economics of newspaper publishing clearly indicate that this market cannot support two high-quality, high-cost independently published newspapers."

Chapman said in an interview that he and Neuharth started talking about joint operations almost as soon as Gannett agreed to buy Evening News Assn. for $717 million last year. Free Press Publisher David Lawrence added that the negotiations became more intense in the last few weeks and that a final deal was struck last Friday.

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