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Post and Daily News Explore Print Pact
Tuesday July 15, 2008 11:35 pm ET
By TIM ARANGO

Rupert Murdoch, whose News Corporation owns The New York Post, and Mortimer B. Zuckerman, the real estate developer and owner of The Daily News, who for years have been bitter tabloid competitors, are considering the unthinkable: cooperation.

Representatives of Mr. Zuckerman and Mr. Murdoch have been in discussions for several weeks to find ways to combine some business functions of The Daily News and The Post, according to people briefed on the matter. They spoke anonymously because the talks are at a sensitive stage and both sides had hoped they would remain confidential.

Talks between the two papers began in earnest in May after the announcement of a deal to sell Newsday, the Long Island daily, to the Cablevision Systems Corporation for $650 million. Both Mr. Murdoch and Mr. Zuckerman had bid for Newsday, which was being sold by the debt-laden Tribune Company. Each had offered $580 million and was unwilling to match Cablevision’s higher price.

One executive involved in the talks between The Post and The Daily News described the discussions as “preliminary,” but said both sides were committed to reaching an agreement. The talks have not yet involved Mr. Murdoch’s and Mr. Zuckerman’s meeting face to face.

Representatives for Mr. Murdoch and Mr. Zuckerman declined to comment.

In addition to a broader pact between The Post and The Daily News, the two newspapers and The Wall Street Journal, which is also owned by the News Corporation, are considering combining their home delivery operations to save money, and have sought bids from vendors.

Speaking only about this aspect, Howard Rubenstein, a spokesman for the participating newspapers, said: “The request for proposal is an opportunity we are jointly exploring to lower costs, improve efficiency and strengthen our respective newspapers.”

Lawyers for the newspapers are trying to find a structure for an agreement that would not require a joint operating agreement — a mechanism other papers have used that would require creating a separate entity with a separate board and essentially mean merging all business functions while maintaining separate newsrooms.

Instead, the talks have centered on combining printing, distribution and other back-office functions, while maintaining separate companies and news staffs, in an effort to cut millions in annual costs.

One important hurdle is deciding which newspaper’s printing presses would be used. Several years ago The Post invested nearly $300 million on a new printing plant in the South Bronx. In February The Daily News announced a large investment that would make it the first major newspaper in the country able to print color on every page.

The Post loses an estimated $50 million a year. The Daily News roughly breaks even. Mr. Murdoch had sought a joint venture with Newsday, an arrangement that could have wiped out The Post’s losses. A deal with The Daily News would not make The Post instantly profitable, but it would be a step toward eliminating the paper’s losses.

It is not the first time the rivals have talked about sharing costs. In 1999, the papers held exploratory talks, and the issue has been broached at various times over the years. Now, according to the executive involved in the talks, the discussion has become more urgent, given the sagging economics of the industry. This executive said the impetus for the discussions were “the realities of the modern newspaper business.”

The talks underscore the deteriorating economics of the industry, which faces declining circulation and a flight of advertising dollars to the Internet. Heavy traffic to the newspapers’ own Web sites means a larger audience for the content that papers produce, but increases in Internet advertising have failed to make up for losses in revenue from print advertising.

“If you look at any other industry out there, you’d see shared services,” said Alan L. Marx, a lawyer at King & Ballow in Nashville who has worked on many newspaper joint operating agreements.

While the New York tabloids are searching for an arrangement that falls short of a full joint operating agreement, any business cooperation between them could bring legal scrutiny.

Mr. Marx said that sharing printing costs and making joint purchases of materials like paper and ink would present few legal issues. When papers discuss joint sales of advertising — it is unclear whether this is a point of discussion between The Post and The Daily News — they run the risk of coming under scrutiny for anticompetitive practices.

“The only area you get into potential issues would be the sales side, with prices,” he said.

Formal joint operating agreements have existed as far back as the 1930s, but became relatively common after enactment of the Newspaper Preservation Act of 1970.

“The rationale for the Newspaper Preservation Act was maintaining two distinct editorial voices,” with the idea that was a public benefit, said Rick Edmonds, a media business analyst at the Poynter Institute, a journalism training center in St. Petersburg, Fla.

Over the years there have been 28 joint operating agreements around the country, but now, according to the Newspaper Association of America, there are fewer than 10.

“J.O.A.’s have not worked very well,” Mr. Edmonds said. “I think one of the things that often goes wrong on a J.O.A. is when there is a stronger paper and a weaker paper, you usually get to the point where the stronger paper is not supporting the weaker paper in terms of circulation and advertising.”

Working together on the business side would present a stark cultural shift for the papers’ news staffs, each accustomed to seeing the other side as the enemy. Rumors that the two rivals might be in business together has already set off whispering in the Post newsroom and cocktail chatter in Mr. Zuckerman and Mr. Murdoch’s media mogul circles — it was one point of gossip during the recent Allen & Company conference in Sun Valley, Idaho.

Their rivalry goes beyond competing for scoops and the best photographs of New York City’s crime scenes.

Each paper gleefully, and often, reports with verve about the other’s internal gossip and the foibles of its prominent owner. The Post refers to its rival in print as the “Daily Snooze,” and in 2004 it published a nearly 4,000-word article that accused The Daily News of inflating its circulation figures. (The Daily News later accused The Post of dumping thousands of papers at recycling facilities in Brooklyn.)

In 2006, when a contributor to The Post’s Page Six gossip column was accused of trying to use extortion against the billionaire investor Ronald W. Burkle, The Daily News named the scandal “Page Sick” and “Page Fix.”

On the circulation front, The Post briefly zoomed ahead of The Daily News in 2006, in part because The Post cut its newsstand price to 25 cents. When The Post surpassed its rival, its front page blared, “Post Makes History: Beats News.” (The Post recently raised its price to 50 cents on weekdays).

The most recent circulation figures from the Audit Bureau of Circulations, released in April, show the papers roughly equal on weekdays: The Daily News comes in at 703,137, while The Post is at 702,488. On Sunday The Daily News has a substantial lead: 704,157 compared with 401,315 for The Post.



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