D’ARCY JENISH July 17 1989



D’ARCY JENISH July 17 1989

Conrad Black loves military history and powerful people, small newspapers and big words. Wealthy, influential and learned, Black is Canada’s fastest-rising and most flamboyant media tycoon. As chairman of Toronto-based Hollinger Inc., he owns 207 newspapers ranging from the London Daily Telegraph, Britain’s largest-circulation quality paper, to The Little Giant Shopper, a weekly giveaway published in Canton, Ill. To oversee his burgeoning empire, Black has assembled a board of directors that includes former American secretary of state Henry Kissinger, Canadian billionaires Paul Reichmann and Peter Bronfman, and British aristocrat Lord Carrington. And in late June every year, Black hosts the annual Hollinger dinner, which he has turned into one of Toronto’s premier social events after drawing Kissinger in 1987 and British Prime Minister Margaret Thatcher in 1988. This year, former U.S. president Ronald Reagan attended—and that left many guests wondering what Black will do for an encore in 1990.

While Black shared the head table with Reagan, Prime Minister Brian Mulroney, Finance Minister Michael Wilson and several other dignitaries, Kenneth Thomson, Canada’s largest, wealthiest and perhaps least flamboyant media giant, sat at Table 5, surrounded by fellow businessmen and corporate executives. Although both Black and Thomson own newspapers and magazines, they are very different individuals. Yet both are driven by a desire to create larger companies, primarily by acquiring more newspapers. And over the past two months, Thomson has completed two transactions that have transformed his publishing empire into one of the top 10 in the world. First, the Thomson organization paid $972 million for Rochester, N.Y.-based Lawyer’s Co-operative Publishing Co., which produces legal manuals and textbooks. Then, in early June, Thomson merged two family-controlled companies to create The Thomson Corp., a global publishing giant with annual sales of $5.8 billion. Said Thomson: “We will be able to compete for any conceivable target.”

Ambition: The emergence of global media companies, owning newspapers, magazines, book publishers, television stations, cable networks and even movie studios in several countries, is driven by two factors. The first is the incredible ambition of media entrepreneurs—including Canadians Thomson and Black, Australian native Rupert Murdoch and Britain’s Robert Maxwell—who are determined to expand their companies but who cannot find adequate opportunities in any single market, except perhaps the United States. The second cause—which is behind a complex, three-way takeover battle currently unfolding in New York City and involving Time Inc., Paramount Communications Inc. and Warner Communications Inc.—is the concept of synergy, or the ability of one company to create, package, market and distribute a product on a worldwide basis. The growth of the giant media companies signals another fundamental change that is sweeping the entire industry. Said Maxwell: “The communications and information industry will consolidate, in the same way as the oil, chemical and financial services industries did in their time, to the point where some 10 major corporations will dominate the global market.”

Daring: To a large degree, the industry is being transformed by a handful of daring and dynamic entrepreneurs, most of them well-educated, and some of whom are known to despise each other. Perhaps the most innovative is Rupert Murdoch, 58, who started in 1952 with a faltering Australian newspaper and now owns papers, magazines, TV stations and production studios on four continents. The Oxford-educated Murdoch, who rode the London subways to work for a time in order to observe commuter reading habits, is considered reserved and amiable—except with business adversaries like Maxwell. The two collided in 1968 while trying to purchase News of the World, a sensationalist British weekly paper. When Murdoch won, Maxwell called him a “moth-eaten kangaroo.”

Two decades later, Czech-born Maxwell, who grew up in a poverty-stricken family of seven children, has finally achieved his goal of owning a global media company—and the status that comes with it. In late May, dozens of prominent Washingtonians, including the Rev. Jesse Jackson, attended a party hosted by Maxwell aboard his 190-foot yacht, The Lady Ghislaine.

By comparison, Thomson tends to avoid the spotlight and public spats with business rivals. He inherited a substantial company from his father, Roy Thomson, Lord Thomson of Fleet, who died in 1976. The elder Thomson launched the family empire by acquiring the Timmins, Ont., Daily Press in 1934. Kenneth Thomson has expanded the family holdings enormously, but his real passion is the huge collection of art treasures, including nearly 200 paintings by the early Canadian painter Cornelius Krieghoff, on the 25th floor of the Thomson Building in downtown Toronto.

Black is building his publishing empire in much the same way that the Thomsons did—by acquiring small-town daily and weekly newspapers in Canada and the United States (page 28). He has also demonstrated Murdoch’s flair for dramatic foreign acquisitions by acquiring the faltering Daily Telegraph in 1985 and quickly turning it into a money-maker. Last April, he made another daring move by acquiring 77 per cent of the influential but money-losing Jerusalem Post.

But according to many observers, Black faces a formidable challenge if he wants to make a large acquisition that will quickly and substantially increase the size of Hollinger. The big obstacle is the global giants, not only those run by Murdoch, Maxwell and Thomson, but also the long-established European companies that have shaken the entire U.S. media industry with major acquisitions. They range from top-ranked Bertelsmann AG, a 154-year-old West German company with annual revenues of $8 billion from the sale of magazines, records, videos, movies, radio and TV programs in 25 countries, to the 162-year-old Paris-based Hachette Group, whose books, newspapers, magazines, films and broadcast programming reach consumers in 36 countries.

Race: The major money battles of the global media giants increasingly are taking place on two fronts: in the United States and Europe. Government deregulation of television and radio in several Western European countries, notably Britain, France and West Germany, has triggered a race by private companies to set up broadcasting networks and has created a huge new market for programming. In an interview with Maclean’s, Warner Communications chairman Steven Ross said that his company’s British sales of TV programs, video cassettes and movies had remained flat at $9.6 million for five consecutive years up to 1988.

In the United States, foreign companies have been buying up print and electronic media assets simply because there is a huge pool of properties available and the United States is regarded as the most open market in the world. The New York City-based merchant bank Henry Ansbacher Inc., which specializes in arranging sales and purchases of media properties, estimates that there are 38,000 media companies in the United States—from Black’s Good Sense Shopper, a weekly giveaway published in Atlantic, Iowa, to the vast Philadelphia-based Triangle Publications Inc., which Murdoch purchased last August for $3.6 billion. Triangle owns TV Guide, Seventeen—a magazine for teenage girls—and The Daily Racing Form, a horse racing guide.

Risks: Smaller competitors and industry critics have expressed concern about what they say are disturbing trends in the emergence of the media giants. David Wagenhauser, staff lawyer with the Washington-based Telecommunications Research and Action Centre, a public-interest and advocacy group, said that concentration of media ownership leads to less diversity of opinion. It also gives such individuals as Murdoch the potential to promote their political and economic views, he said. The global companies are now making ever-larger acquisitions, driving up the prices of almost any kind of media property, particularly in the United States, and making it much more difficult for smaller competitors to grow by acquisition. David Jolley, executive vice-president of Torstar Corp., which owns Canada’s largest newspaper, The Toronto Star, and one of the few remaining independents, said, “Those major players are paying prices that smaller companies can’t afford to pay, and they can afford to take risks that even I can’t afford to take.”

Still, despite the emergence of global communications companies, and their unprecedented financial strength, medium-sized competitors in both Canada and the United States continue to acquire media assets at an extraordinary rate even as prices rise. William McCluskey, managing director of Henry Ansbacher Inc., said that his company has represented buyers or sellers in 350 transactions over the past six years. In Canada during 1988, Pierre Péladeau’s Montreal-based Québecor Inc. made 20 acquisitions, including newspapers and printing companies. Québecor also launched the Montreal Daily News during 1988 in partnership with Britain’s Maxwell. Similarly, since early 1988, the Toronto Sun Publishing Corp. has started a daily paper in Ottawa and turned The Financial Post from a weekly to a daily. Sun Publishing also acquired four small dailies and nine weeklies in Western Canada and Ontario last year. In mid-June, the company agreed to pay $17.4 million for a twice-weekly newspaper and five shoppers’ guides in Florida. Maclean Hunter Ltd., which publishes Maclean’s and more than 200 other periodicals, also owns a majority share of Sun Publishing.

Fail: Two other key segments of the communications industry—magazines and cable TV—are also booming. In 1988, more than 75 magazines joined the Canadian Periodical Publishers Association. And in the United States, about 500 new magazines came into existence, devoted to everything from home decorating to sports-related travel—even though an estimated eight out of 10 new magazines fail within four years (page 30). The cable television industry is driven largely by technological improvements, many of them developed in Canada, a pioneer in the field. According to Michael Hind-Smith, president of the Ottawa-based Canadian Cable Television Association, almost two-thirds of Canada’s 9.6 million households subscribe to cable, a market penetration rate matched only by Belgium (page 32).

Currently, most Canadian cable systems carry about 36 channels, but within four years they will carry more than 50 and have capacity for still more. By the turn of the century, Canadian cable subscribers will have access to more than 200 channels, predicts E. S. (Ted) Rogers, president of Toronto-based Rogers Communications Inc., the country’s largest cable system.

Growth: The strength of the industry is evident from advertising revenues—which, in both Canada and the United States, have risen every year since 1970—and the balance sheets of individual companies. In 1988, Thomson Newspapers Ltd., now part of Thomson Corp., showed an operating profit of $367 million, or 31 per cent of the company’s $ 1.2-billion revenue. The growth rate in overall ad revenues has either matched or exceeded overall economic growth in both countries yearly since 1980. The total amount of money spent on advertising in Canada jumped to $8 billion last year from $3.8 billion in 1980.

As for the future, senior media executives in Canada, Britain and the United States predict a long period of expansion and even larger acquisitions. Thomson said that information, the basic product of any media company, has become an essential commodity as the industrial societies of the Western world have become more complex. Britain’s Maxwell described information as “the world’s most universal need,” and added that demand for information “grows exponentially with the advance of science.” Frank Hawkins, vice-president of corporate relations and planning with Miami-based Knight-Ridder Inc., which owns 29 U.S. dailies with a combined circulation of 3.9 million, said that the emergence of English as a global language has dramatically increased the need for information products in English. Said Hawkins: “People who own English-language media and data bases are in the driver’s seat.”

The media and entertainment business is also becoming dominated by giant global firms. That trend led Time—under chairman Richard Munro and president Nicholas J. Nicholas Jr.—and Warner to announce a proposed merger early in March. Then Paramount stepped in with a bid for Time and Warner, which Time spurned—a takeover tangle that is now stalled in the courts. The Time-Warner merger alone would catapult the new company past rival giants, including Bertelsmann AG, Thomson Corp., Murdoch’s News Corp., Hachette Group, and Maxwell Communications in terms of revenues. And it would introduce a powerful new media presence on the international scene. Time Inc., which publishes Time, People, Fortune, Sports Illustrated and 23 other magazines, and which owns Home Box Office, the largest U.S. pay TV network, currently derives only about 10 per cent of its annual revenue from foreign sales. Warner, which is primarily known for its production of movies, television programming and recorded music, earns 40 per cent of its revenues from foreign sales.

Boggling: The most inconspicuous of the global media giants is the Toronto-based Thomson Corp., which was created in early June through the merger of Thomson Newspapers Ltd. and International Thomson Organization Ltd. Thomson Corp. publishes 156 Canadian and American dailies, with total circulation of 3.1 million per day, and 36 weeklies. Its most prominent papers are the Toronto Globe and Mail and The Winnipeg Free Press. The company also publishes 23,000 trade, professional and educational products, including newspapers, magazines, books and newsletters. Although most of his products are less glamorous than those of other huge media-entertainment conglomerates, Thomson says that his new company will be financially stronger and capable of making larger acquisitions than ever before. He added, “When you put these two companies together, the prospects are almost mind-boggling.”

The emergence of the global media giants is ushering in a new era of enormous takeovers, huge risks and communications empires of breathtaking international size and scope. At the forefront of the new era are individuals, including Murdoch, Maxwell and Thomson, as well as such corporations as Hachette and Bertelsmann, Time and Warner. Behind them are the rising forces of the media world, including Black. But given his energy, drive to expand and growing financial resources, Black’s encore in 1990 may well be a major acquisition, rather than yet another impressive guest of honor at the next Hollinger dinner.


The Media Giants Company & 1988 Revenue


1. The Thomson Corp. $5.81 billion

2. Southam Inc. $1.65 billion

3. Maclean Hunter Ltd. $1.30 billion

4. Québécor Inc. $1.29 billion

5. Thomson Newspapers Ltd. $1.21 billion

6. Torstar Corp. $956 million

7. Hollinger Inc. $683 million

8. Rogers Communications Inc. $358 million

9. Groupe transcontinental GTC Itée $326 million

10. Canadian Broadcasting Corp. $326 million


1. Bertelsmann $8.0 billion

2. Capital Cities/ABC $5.9 billion

3. The Thomson Corp. $5.8 billion

4. Time Inc. $5.5 billion

5. The News Corp. Ltd. $5.3 billion

6. Warner Communications Inc. $5.2 billion

7. Hachette $5.0 billion

8. Gannett Co. Inc. $4.1 billion

9. Knight-Ridder Inc. $2.6 billion

10. Pearson PLC $2.6 billion

* Maxwell Communication Corp. PLC stands 11th with revenues of $2.1 billion. (All figures in Canadian dollars)