INTERNATIONAL: MEDIA OWNER PROFILE; Hearst buys and diversifies to protect its media empire

Shrewd and tough management helps keep Hearst a force to be reckoned with.

Shrewd and tough management helps keep Hearst a force to be

reckoned with.



Even in an industry that routinely takes myths and packages them between

glossy covers or in 30-minute episodes, there’s something a little

special about the Hearst Corporation.



Partly, of course, it’s due to the film, Citizen Kane, a thinly veiled

portrait of the Hearst founder, William Randolph Hearst. Partly, too,

it’s in the bravado with which Hearst went about building his empire.

Starting with a west-coast paper his father had accepted as a gambling

debt, Hearst was in many ways responsible for shaping the modern

newspaper in the English-speaking world. He pioneered what might

legitimately be called tabloid tactics, introducing cartoon strips and

salacious stories to his titles. He was, in fact, the prototype media

baron, quick to spot the advertising potential in magazines and one of

the first into new media, branching out into cinema in 1913 and radio in

1928.



Hearst finally retired to his fairy-tale-like San Simeon estate in 1940,

but his family dynasty still rules to this day. The Hearst family did

lose control of the corporation after its founder’s death but managed to

recover the prize in 1974.



It has helped that the family has always fought shy of boardroom

nepotism. While it is true that 80-year-old Randolph Hearst graciously

ceded the chairmanship to his 68-year-old nephew, George Hearst, in

April this year, the fact remains that the chairmanship is a largely

ceremonial post. The corporation has actually been led since 1979 by its

president and chief executive, Frank A. Bennack Jr. It is Bennack who

first established close links with its sometime broadcasting partner,

Capital Cities/ABC. Bennack, who doubled the group’s TV interests, made

Hearst a more acquisitive newspaper proprietor and bought the successful

Redbook and Esquire magazines. And it is Bennack who is squaring up to

two of the biggest challenges the corporation has faced in its colourful

history - new media, and the difficulties facing magazines.



Magazines have had to face a multiplicity of problems, including high

paper costs, postal price increases and sharply increased competition in

magazine advertising.



Bennack’s solution was certainly unusual. Last summer, Hearst announced

plans to raise cover prices on 13 titles in its US magazines division by

between 18 and 33 per cent. At the same time ad rates were hiked by 5

per cent and circulations cut by an average 10 per cent. It was an

explosive cocktail and advertisers responded with predictable fury.

Kraft Foods pulled all its advertising, worth dollars 30 million, from

Hearst magazines and several other major advertisers, including the

fragrance giant, Elizabeth Arden, cut back spends sharply.



Now, nearly a year after the plan was first announced, most magazine

industry analysts are a lot kinder about the tough decision that Hearst

took - not least in cutting back at least two million magazine copies

every month to save an annual dollars 20 million on paper, postage and

ink costs.



Bennack’s second move was to replace the Hearst Magazines president who

had implemented the plan, D. Claeys Bahrenburg. He resigned last

November, after five years in the role, and was replaced by the dynamic

former publisher of USA Today, Cathleen Black, who has already had

considerable success in answering advertisers’ criticisms.



Chief among these is the perception that some of Hearst’s grand old

magazine titles are not ageing gracefully. It is a criticism that has

often been levelled at Cosmopolitan, which has seen its circulation fall

from more than three million to 2.5 million in a couple of years.

Bennack has now intervened to appoint Bonnie Fuller, a former Marie

Claire editor, as editor-in-chief designate at the title. The 73-year-

old incumbent, Helen Gurley Brown, responsible for much of the success

of the title in the late 60s and 70s, will step down.



However, real growth in this mature magazine market is mainly coming

from opportunities overseas. Last year, Hearst Magazines International

stretched its tentacles into Russia with the successful launch of both

Cosmopolitan and Good Housekeeping, and took Esquire to Korea and

Thailand.



Despite this, Bennack’s strategy since he joined the company has been to

try to reduce group dependence on magazine profits. Hearst picked up the

struggling Tampa station, WTMV, for dollars 28 million. The station is

affiliated to Time Warner’s WB Network, the first time Hearst has taken

on a channel not linked to one of the top four networks.



It could be the start of a new period of expansion for the corporation,

observers say. A division has been created in magazines to research

launches and brand extensions; in electronic media the company has been

among the most prescient performers. It invested in Netscape at just the

right moment and has a stake of around 30 per cent in Kid-Soft, a

branded direct selling channel for children’s computer software. In

March this year the corporation announced a deal with Compuserve’s new

online service for home use, WOW!.



By dint of shrewd management of existing properties and some canny

investments Bennack has steered Hearst into a position where, if it

can’t compete with the likes of Walt Disney or Time Warner on sheer

size, it’s at least well placed to make full use of assets that are the

envy of many media groups.



The hearst corporation



Magazines



Hearst Magazines publishes 16 titles in the US, including Good

Housekeeping, which sells more than five million copies a month,

Cosmopolitan, Esquire and, in a joint venture, Marie Claire. The

National Magazine Company in the UK publishes Company and She magazines

as well as editions of Cosmopolitan and Esquire in a total of eight

monthlies. Internationally, 70 foreign editions are published across at

least 80 countries.



Broadcasting



The Hearst Broadcasting Group owns local television stations in six US

markets, ranging from Boston to Kansas City, and is in the process of

completing the purchase of a seventh, in Orlando, Florida. It also owns

AM and FM radio stations in Baltimore, Pittsburgh and Milwaukee.



Hearst also has a stake in the cable network, A&E, a half share in

Lifetime Television and 20 per cent of the sports cable service, ESPN,

all with ABC/Capital Cities, now part of Walt Disney.



New Media and Technology



The Hearst New Media centre is a product development facility for the

World Wide Web and the group also has 1.5 per cent of the stock in

Netscape Communications.



Newspapers



Hearst Newspapers has 12 local titles in the US, including the San

Francisco Examiner, the paper on which the empire was founded. King

Features Syndicate is the largest newspaper syndication company in the

world.



Business Publishing/Books



A range of US-based business titles in the motoring, electronics and

health markets. Book publishing is centred on William Morrow and

Company and Avon Books; includes spin-off titles from the magazines.



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