The decision to shut down the ailing Washington Star was inevitable when Time Inc.'s directors sat down at their 10 a.m. board meeting here on July 16 in the giant publisher's Rockefeller Center headquarters.
Still, the meeting ran four hours as directors examined and reexamined the voluminous analyses of the Star's position, from its legal situation to its financial prospects.
It was the financial prospects, bad and getting worse, that convinced directors to close the 128-year-old newspaper.
"Everyone participated in the general discussion. There was a full range of questions and answers. The whole thing was thought through before it was brought to the board," said a Time director.
"It was the hardest thing we've done since we killed off Life [magazine]," said another director. "Killing off any publication is tough as hell.
"Once it was clear that a joint publishing arrangement with The Washington Post wasn't going to be feasible," the director said, it also was clear there was no way to reduce The Star's $20 million-a-year losses. Officials at both Time and The Washington Post refused to discuss details of the joint production talks other than Star officials' statements that Saturday and Sunday editions of their paper would have been halted.
Newspaper industry analyst John Morton of the investment firm of John Muir & Co., in Washington, suggested three reasons why joint production talks broke down after four months: The Post's own press capacity problems, only recently alleviated when a suburban printing plant was opened in Northern Virginia; The Star's union contract with the Teamsters for delivery of the paper; and "no economic incentive for The Post."
Thus, Time's directors unanimously authorized management to take "appropriate steps" to deal with The Star's losses. There was no doubt that the only workable step was to cease publication of the afternoon daily.
The final details, such as the Aug. 7 closing date, were worked out in a meeting of the executive committee of Time's board of directors. The chairman of that committee is James R. Shepley, former president of the corporation who also is chairman of The Washington Star.
"We'd been groping for a long time for an alternative," said a director. "There wasn't one. It was a decision taken with great sadness."
If directors and top management were sad, the same sense of bereavement was not as widespread a notch lower in Time Inc.'s management layers.
"No one like to see a newspaper or magazine fold," said a high-ranking official on one Time Inc. publication. "But at the same time, nobody likes things around that are losing lots of money, especially when there are lots of other opportunities for Time to use the money it has been pouring into The Star: cable television, pay television and other magazines."
He said there is surprisingly little remorse in the Time-Life Building. "When the old Life went, it was a little tragic. It was an integral part of Time, and a lot of us worried that if Life could go, Time [magazine] wouldn't be far behind. But with The Star there has always been a feeling that 'they're down there,'" in Washington.
Dbut another Time executive called the closing of The Star a "heart-wrenching decision." It was strictly a matter of dollars and cents. The cash drain, while "not so sizable to Time, Inc.," was large enough that, given The Washington Post's domination of the market, there was no alternative. "Unless you can see viability . . ." he said with a shrug.
The executive said The Star had been getting its full share of national advertising, where the influence of the parent corporation and its resources was a great asset. Locally, however, he asked, "What can you do when the retailers just won't support you?"
This executive, echoing earlier comments of Star Editor Murray Gart, also put part of the blame for the failure of The Star to make a go of it under Time Inc. ownership on its "conservative" editorial philosophy. Washington "is a liberal area," he said, "and The Star had a conservative stance. The editorial content was a hell of a lot better [than The Post's], but it just didn't get support in the area."
The folding of The Star, he maintained, "will not be good for The Post, either." He said he had watched the folding of magazines such as Colliers, Look and the Saturday Evening Post and had listened to Time and Life salesmen say, "Great!"
"It wasn't, and I told them so. You lose the [ad] salesmen on the street selling the concept," and advertisers may switch not to a direct competitor but to a competing medium such as radio or television. In this case, the "concept" is newspaper advertising. f
The executive also said that "while The Post has been very competitive in the trenches, it has been very statesmanlike overall."
As for the closing of The Star, he said sadly, "I hate to see it. I think it makes any city poorer to be a one-newspaper town. There ought to be different editorial philosophies.It makes people think.
"But if we can't make it fly, who the hell can?" he wanted to know.
Since Time is folding The Star rather than selling it, the apparent answer is nobody.
"Time is a patient company," said another executive.
"It nursed Sports Illustrated along for 13 or 14 years. Even Money magazine had been consigned to the graveyard several times but then kept afloat. Life would still be going under its old format if they felt there was some hope," said another executive.
Time Inc. pulled the plug on the old Life magazine in 1972, but resurrected a new, monthly version two years ago. The new Life is still losing money, but not a lot, corporate insiders say. "We can swallow small losses," said one executive. "But at The Star it didn't look like the losses were ever even going to get small. There were a number [of Time Inc. officials] who felt the Star was a good turnaround situation. It didn't turn around."
Time bought The Star in March 1978 and lost $85 million before taxes in three-and-a-half years, according to the company. After taxes, the loss added up to $35 million.
On balance, Wall Street analysts said, the decision to close The Star was the only one Time could have made. "From Time's point of view, from a financial point of view, it was the only thing that could have been done," said Ellen Sachar, who follows Time for the big investment firm of Goldman Sachs.
One analyst suggested that Time's new top management -- Ralph Davidson replaced Andrew Heiskell as board chairman and J. Richard Munro replaced Shepley as president -- has a less emotional attachement to The Star than Heiskell and Shepley, and is "more bottom-line oriented."
"That's a common view," said one longtime director, "but I don't see it. It's true there are more businessmen on the board than there used to be, but they are just as dedicated to the editorial side of the product as anyone else."
There is a difference between the Time Inc. of today and that of a decade ago, however, he conceded. Time today remains the largest magazine publisher in the country -- Time, Sports Illustrated, Money, Life, Fortune, People and a new science magazine, Discover -- and also publishes books and owns the Book of the Month Club.
But Time Inc. in the last eight years has expanded rapidly in both cable and pay television and forest products. Video and forest products now account for more than half Time's revenues.
Time's American Television and Communications Corp. is one of the nation's major cable television operators, and Home Box Office is the country's largest pay television programming network By the end of 1980, Home Box Office had more than 6 million subscribers among 2,500 cable television systems across the country. American Cable, at the end of 1980, owned and operated 125 cable systems in 32 states and had 1.3 million subscribers.
Time is the 135th-largest industrial company in the United States. Like many a publisher, it has long been in the forest products industry. But in 1973 it acquired Temple Industries and in 1978 the Inland Container Corp.
Its Temple-Eastex subsidiary owns 1.1 million acreas of timberland in eastern Texas and is the largest landholder in that state. Temple-Eastex produces pulp, paper, paperboard, gypsum wallboard, plywood and other products. Its Inland Container Corp. is a major producer of corrugated boxes.
Time Inc. will invest $300 million in its operations this year, 60 percent of it to expand its video operations, principally in the wiring of new homes for cable television.
Last year Time had revenues of $2.88 billion and net income of $141.2 million. To help finance its big capital investment program, the company sold $150 million of preferred stock in late January.
If Time gets no acceptable offer for The Star before its closing -- and Munro said last week the firm would be "able to make a very good deal" -- the New York firm will put its Capitol Hill offices and plant in Washington, and other assets, up for sale.
An official of the Arthur Rubloff & Co. real estate firm, which has been retained by Time, said, "We're working on something now and I can't discuss it with you," when asked about The Star's plant at 225 Virginia Ave. SE. According to D.C. government records, the property was assessed at $11.75 million for fiscal 1982.
Other real estate businesspersons said the property, zoned for commerical use, would bring a higher price. Said one appraiser, who asked not to be identified, "It's a very valuable piece of property for the right user, something like a computer form willing to expand its operations or relocate in D.C."