The Dallas Morning Blues

It’s been nothing but bad news lately for Belo, the media conglomerate that owns the state’s leading newspaper. But to understand how Texas’s oldest company can survive in the brave new world, you have to read between the lines.

THE FOLLOWING TABLOID-STYLE HEADLINE would never run in the conservative, sober-sided Dallas Morning News: “Scandal Shocks Family Empire!” Nor would this shamelessly embellished subhead: “Company Reels From Onslaught of Bad News.” Both, however, could easily describe, in a sensationalized and distinctly un— Morning News sort of way, the current plight of Belo Corp., the company that owns the Dallas newspaper.

In August, Belo chairman Robert Decherd indeed shocked his family’s empire when he announced that the Morning News had somehow “overstated” its Sunday circulation by 11.5 percent and its daily circulation by 5 percent. Though some critics preferred the word “fudged,” either way, the numbers—a key determinant of ad rates—were staggering, and a deep embarrassment to the paper. (The errors were later upwardly revised to 11.9 percent and 5.1 percent.) They meant, among other things, that sales of more than 90,000 Sunday papers were pure fiction. Belo’s stock price tumbled, while Decherd and his fellow officers scrambled to control the damage. Decherd immediately announced a plan to compensate advertisers by sending out 19,000 checks worth a total of $21 million, fired most of the managers in the circulation department, canceled management bonuses, including his own, and paid a law firm $2 million to find out how such an unthinkable mistake had been made.

The effect on the people who own and manage the company was, by their own accounts, devastating. Belo is not just any media outfit. It is Texas’s oldest and most influential company. Robert Decherd is a great-grandson of G. B. Dealey, the man who founded the Morning News in 1885, as is the paper’s publisher, Jim Moroney. Though Belo owns four newspapers and nineteen television stations across the country, including WFAA, in Dallas, KHOU, in Houston, and KVUE, in Austin, its financial and spiritual hub has always been the Morning News. “You could not have come up with something,” says Decherd, “that would have been more disappointing or more hurtful to the men and women who run this company at the top.”

But it was not the end of the bad news. Less than two months later, Belo announced that it was laying off 250 workers—150 at the Morning News alone—citing sluggish growth and depressed ad revenues. The paper, as it turns out, was losing readers and circulation even before the scandal. Home delivery had dropped 10 percent since 2000. Its Sunday circulation had dropped 3.9 percent from the previous year. Profitability had been off 35 percent in the previous three years. Meanwhile, over at WFAA, Belo’s broadcast flagship, ratings were half what they had been a decade before. Critics—mostly former star reporters for the Morning News and WFAA—suggested that the declines at both of these holdings were due at least in part to the diminishing quality of their news.

At the same time, Belo said that it was abandoning three local cable news stations it operated with Time Warner at a cost of nearly $19 million, eliminating another 190 jobs. Its third-quarter earnings plunged by two thirds due to charges for all of the above. Belo’s five-year-old Texas Cable News Network ( TXCN) continued to bleed red ink, as did its two newest print publications, the Metroplex Spanish-language daily Al Dia and the free, easy-read tabloid Quick. By the fall of 2004 Belo had begun to suggest to some observers a sort of corporate Mr. Magoo, blundering myopically from deal to deal, creating financial havoc and ruin, all with the best of intentions. While none of this signals that Belo is in financial trouble—it isn’t—one has to wonder about what investors call the “trend line.” And one has to wonder, as it might be phrased in the headline of a Morning News business story: “Can an Old-line, Family-Run Media Company Survive in Today’s Cutthroat Market?”

BY MOST MEASURES, Robert Decherd, the slender, earnest, and somewhat boyish-looking 53-year-old who has run Belo for eighteen years, is one of the more remarkable figures in American journalism. He is a Dealey, to be sure, but his rise to the top of Belo had more to do with drive, guts, and brains than pedigree. At 22, a year out of Harvard, he ruffled family feathers by asking for a seat on the board. At 23 he played a crucial role in defeating the powerful Pressmen’s union. At 30 he led the drive to take the closely held family company public (while retaining private control), and at 33 he assumed the presidency, edging out older family members. In the eighties he and his hand-picked editor, Burl Osborne, took on and decisively beat the Dallas Times Herald in one of the great, protracted newspaper wars of the latter twentieth century. By spending more than $2 billion on acquisitions of television stations and newspapers between 1983 and 1997, Decherd remade Belo into a media powerhouse whose television stations now reach 13.8 percent of the American public and whose newspapers—the Morning News, the Providence Journal, the Denton Record-Chronicle, and the Riverside ( CA) Press-Enterprise—have a circulation of 1.2 million. He now personally controls 28 percent of the company’s voting stock; the extended Dealey heirs control 50 percent.

Nowadays, Decherd wrestles with a more subtle, insidious challenge than vanquishing the Times Herald: declining numbers of people who want his company’s principal products. In 1964, 80.8 percent of American adults read a newspaper. By 2004, thanks in no small part to the rise of the Internet and the accompanying blogosphere, that percentage had fallen to 52.8. The numbers for local and network TV are even worse. What they add up to is sluggish growth at best for midsized media companies like Belo. Wall Street, of course, abhors sluggish growth, which has forced Belo and its peers to try all sorts of nontraditional business ventures to boost revenues. Hence the Internet and cable plays; hence all the mistakes.

But listening to Decherd in the hushed, odorless corporate air of his seventeenth-floor office in the Belo Building, in Dallas, the turbulence

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