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Wednesday, November 29, 2006

Portland 1950, part 1

The Oregonion presents, in 3 parts, Chapter 20 of "Newspaperman: S. I. Newhouse and the Business of News", by Richard H. Meeker (© 1983. Meeker is publisher of Portland's Willamette Week.

Chapter 20 - Portland (part 1)
Buy the Oregonian or pay huge federal taxes

A.J. Liebling, the rotund journalist/gastronome considered by many to have been the inventor of modern press criticism, coined a special phrase to describe Sam Newhouse. He called him a "journalist chiffonnier," chiffonnier being the French word for "rag man" or "rag picker." By this, Liebling meant that Newhouse seemed to spend his time digging in the garbage can of American newspapers, picking around the castoffs to claim as his own. There was also the clear implication that no paper accumulated this way could have much journalistic merit.

In terms of Newhouse's holdings at mid-century, such an assessment was accurate. Virtually all of the papers he had acquired were throwaways, and none had developed a reputation for high-quality reporting or writing. But in late 1950, Newhouse made a deal that, for the first time in his life, put him in charge of a publication of real stature.

At the time, the Portland Oregonian was widely regarded as the finest American newspaper west of the Rockies and north of San Francisco. For its size - it had a daily circulation of around 200,000 - the Oregonian had the best crew of editors and reporters to be found anywhere in the U.S. Looked at as a business, however, the Portland paper was more typical. For some time, it had been in the hands of its founders' second- and third-generation descendants. Some were well along in years and in failing health; none had risen about the others to give the paper the clear financial guidance it so desperately needed.

At the close of WW II, the heirs of Harvey Scott and Henry Pittock made the mistake that was to prove their undoing. Despite rising costs and declining cash flows, they decided to construct a new headquarters for their newspaper in downtown Portland. To make matters worse, they engaged the city's only world-renowned architect, Pietro Belluschi, who set about designing on a grandiose scale. The result was a building that cost nearly twice the amount budgeted for it.

Midway through the construction, the Oregonian's board selected a new president, a local banker by the name of E. B. MacNaughton. He saw immediately that the only way the Pittock and Scotts could keep their newspaper alive - and their inheritances intact - would be to sell. Thus, in the summer of 1950, the year of the Oregonian's one-hundredth anniversary, MacNaughton went shopping for a buyer. From his experience as head of Portland's largest bank, he knew that no one in town would come up with the cash he thought the paper was worth, so he sent feelers to banking friends back east. At the same time, he was greatly worried by the prospect that he might have to hand the Oregonian over to a publisher whose editorial policies would not be in tune with the conservative, staid, inbred Portland.

That July, MacNaughton was given Newhouse's name. He had not heard of him before but became most interested when Newhouse was described as a new kind of newspaper operator - someone whose interests were purely financial and who believed in preserving a newspaper's existing, locally established editorial content. MacNaughton did a little checking, primarily of the Syracuse newspapers, and was encouraged by what he heard: the editors of the Herald-Journal and Post-Standard were, indeed, left alone. In an era still smarting from abuse at the hands of chains - most notably Hearst's - when editorial policies that often turned out to be misguided were dictated from central headquarters, the possibility of selling to an outsider and still maintaining the Oregonian's honor loomed at least as large in MacNaughton's mind as Newhouse's ability to pay. That, too, he verified with a call to the Chemical Bank of New York.

The idea of buying a newspaper on the other side of the country had never occurred to Newhouse. All along, as his holdings and financial reserves grew, he had planned to continue picking up new properties in his part of the country – basically in the territory that was within easy striking distance of his home in New York City. However, a major problem had developed with this approach, in that by 1950, he had pretty much exhausted the local supply. He had no interest in buying "funerals," as he called papers that were in no position to turn a profit, and now that the postwar economy was taking off, good buys within a reasonable distance of Manhattan – like the Harrisburg papers – simply would not come along very often.

Moreover, as the economy picked up, so, too, did his own newspapers' profits. Newhouse was awash in huge cash reserves; unless he made a big purchase soon, he would be forced to forfeit a large chunk of his earnings to the federal government under the IRS's surplus profits rule, which had been reinstated in 1939.

Part 2 in a series: Newhouse profits & power - How the West was Won

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