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Monday, December 4, 2006

An unregulated toll booth

Monopoly rules

Sam Newhouse liked to buy monopoly newspapers, or where there were "potentialities" like in Oregon. When Newhouse bought The Oregonian in 1950 for $5.6 million, he did so after making a handshake cooperative deal with the owners of the afternoon paper, the Oregon Journal, which he later bought in 1961 for for $8 million and then folded into The Oregonian. The article from Time Magazine in 1951, below, describes an earlier deal cementing a Newhouse monopoly. As Newhouse gained profits & power, he received better and better press.

"The best tonic for Sam's bottom line was to acquire a city's first newspaper, then get his hands on its second, thereby allowing him to set advertising rates as high as he pleased. He would promise to keep both papers in business and in competition. But he would eventually move in for the kill by merging the two, which generally meant closing the afternoon paper and keeping the morning. He thus created a monopoly money machine of the sort billionaire investor Warren Buffet likened to "an unregulated toll booth." Buffet, an investor in a profitable monopoly paper, the Washington Post, has often observed that there are few better ways to make money than in a monopoly paper." - Carol Felsenthal, "Citizen Newhouse", p. 25
"Newhouse chain adds a virtual monopoly
in teeming Hudson County"

Another for Newhouse

Time Magazine, Nov. 26, 1951

Manhattan's bustling Sam Newhouse seldom stops running on his constant tours of his chain of ten newspapers.* Last week, Publisher Newhouse stopped long enough in Hoboken to buy the sickly Jersey Observer and merge it with his Journal in adjoining Jersey City. The Observer, which cost him a little more than $1,000,000, will give his Journal a combined circulation of almost 100,000 and a virtual evening-paper monopoly in teeming (pop. 646,000), industrial Hudson County.

Like many U.S. dailies, the 59-year-old Observer had been squeezed between rocketing production costs and a static advertising intake. The bigger Jersey Journal, said its new owner, will be strong, and thus "a better product" for readers. Among newspaper tycoons, little (5 ft. 3 in.) Samuel I. Newhouse is growing fast. A month earlier, he had bought complete control of the money-making Journal (he had held half interest since 1946), only eleven months after he bought Portland's Oregonian. He is still looking for more papers. Says Newhouse: "Publishers can make up for rising costs by increased volume."

*Syracuse Herald-Journal, Post-Standard, Long Island Press, Star-Journal, Newark Star-Ledger, Staten Island Advance, Harrisburg News, Patriot, Portland Oregonian, Jersey Journal.

Part 6 in a series: Newhouse profits & power - How the West was Won

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