Cable Deal Bespeaks Faith in Newspapers

In a move that speaks volumes about the future of the newspaper business, Times Mirror Co. has forced itself to sink or swim in the unknown multimedia future in which computer networks will play a larger role than ink and paper.

The stock market initially reacted sourly as investors and analysts focused on the present--in which Times Mirror will cut its dividend and transfer its profitable cable business to a venture with Atlanta’s Cox Enterprises in return for cash and stock.

But the future is more interesting: It will marry the centuries-old newspaper business to evolving computer technology. Yet the thought to keep in mind is that the heart of the multimedia business will always be edited information--the essence of newspapers.

Meanwhile, all is flux. Times Mirror’s deal will leave it a $3.2-billion-in-sales publisher of newspapers, books and information services with $1.3 billion in fresh cash to invest in new media. But Invest in what? is the big question. The information industry at this point is filled with small companies and big ideas. “Our forward horizons are the next three to five years rather than the next six months,” says Times Mirror Chairman Robert F. Erburu.

In its plans, Times Mirror has to think ahead to a different America, in which perhaps half the population will be using computers much as they now use television sets.

That’s actually not so wild a bet. Fifty million personal computers were sold last year, six times the number of television sets, according to George Gilder, futurist and author of the forthcoming book “Telecosm.”

Andrew Grove, president of Intel, says the personal computer will become “the interactive center of the home,” combining functions of the telephone, television and computer.

What has that to do with the newspaper? Simply that the computer is likely to displace the TV but provide an outlet for the content of newspapers and magazines, says Gilder, because computers and newspapers are attuned to delivering specific information to individual readers.

Such analysis reflects the thinking of newspaper companies today. Times Mirror, publisher of the Los Angeles Times, has acquired newspapers--Newsday, the Baltimore Sun and others--along with television stations and cable properties over the past 25 years. But it sold the TV stations last year and now has cut direct activities in cable, while looking for opportunities to invest in future extensions of its newspaper and information service properties.

It is not alone. Washington Post Co. recently acquired Mammoth Micro Productions, a developer of the software that has made possible a computerized edition of Newsweek. Other companies are pursuing similar visions.

Which is fascinating because newspaper companies, although they have owned TV stations, have never really gone into other fields before. Essentially the business hasn’t changed since the 1840s when James Gordon Bennett introduced a one-penny paper called the New York Herald and drew a mass readership followed by mass advertisers.

There hasn’t been much reason to change. Although newspaper readers as a percentage of the U.S. population have been diminishing for 50 years, the decline has been gradual and newspapers still carry more advertising than any other medium. It’s a cyclical business that does very well in good times and not so bad in bad times--because other businesses must advertise at all times.

But now advertisers are not content to reach thousands of people who may never buy their product or service; they want the newspaper to reach specific numbers of target customers. Also, readers are demanding more specific information, geared to their individual interests. The model for what is going on is the magazine business where general interest publications, such as Time, used to dominate but now the most profitable publications, such as Forbes, PC Magazine, or Outside, have special interest readerships.

And growing computer usage accentuates the trend toward tailored news. Times Mirror noticed it first in professional services, which supply information for legal firms and medical practices. As technology changes, such information can be delivered on-line or on CD-ROM.

The fees for specific information are higher, because the information is more current, more valuable to the business receiving it. And the trend to more specific information will spread to newspapers, says J. Kendrick Noble, of Noble Consultants, a Bronxville, N.Y. media firm. That’s already happening as newspapers offer mortgage services over phone lines or faxed reports on individual stock portfolios.

In the future will come specialized information on health care, and combinations of advertising and reviews for movies, concerts and plays for a fee. The idea is to reduce dependence on advertising and increase income from fees.

Journalism as it has been known will change. Newspapers will supply more specific information locally, readers will choose and pay for specific items. And advertising in some cases will be sold separately, as in the shopping services the Los Angeles Times and Pacific Bell, and Newsday and Nynex, are introducing.

The newspaper as the community bulletin board “had better be the low-cost and most adept provider of all such information services,” says one media expert, “because there’s going to be a lot of competition for the business.”

What kind of companies would Times Mirror think of backing or acquiring with its cash? Several kinds, say analysts: Small software, electronic and telecommunications firms, or information gatherers such as J.D. Power & Associates, the automobile customer service. But big acquisitions--paying half a billion dollars for well-known firms such as Broderbund Software--would be unwise and are not in the cards.

But a good question arises: Why would customers pay extra to newspapers for such information, when the Internet and many computer service organizations can supply it? The answer is that newspapers gather, edit and interpret the information, make it usable, and--most important--stand behind it. Credibility, in a word, the asset derived from the reputation of a newspaper’s staff in gathering facts and providing interpretation of events--the asset not listed on the balance sheet but on the masthead--will be even more important in selling services.

The bottom line: The newspaper business has a solid future, for those who have the wit to capitalize on emerging trends. And in that context Times Mirror’s managers, and the shareholders behind them, have just made a profound long-term decision in dropping the currently profitable cable business to bet that they can invest $1.3 billion wisely enough to ensure the company’s future in the 21st Century.