When Time Inc. bought The Washington Star for $20 million in February 1978, the paper was losing between $1 million and $2 million a year. Ten months later, by the end of 1978 Time had already lost nearly $10 million on The Star, and total losses since the paper was purchased have now added up to 485 million.
Evening papers in large metropolitan areas are in serious trouble, but no other evening paper has lost money at this rate.
Announcing their decision to close The Star on Aug. 7, Time Inc. executives said yesterday that they was no chance of making the paper profitable in the future. Asked to explain what went wrong, Time President J. Richard Munro replied:
"We were either naive or unrealistic enough to think that we could come in and steal some of the market share from one of the most powerful papers in the country." In the end, Munro said, nothing Time Inc. tried would work.
One thing Time tried was spending money According to sources close to Joe L. Allbritton, was was forced to sell The Star by the Federal Communications Commission, Time simply reversed the management strategy Allbritton adopted to bring The Star to the brink of profitability. Allbritton's approach was rigorous cost-cutting; Time opted for rigorous spending instead.
"Everything they did was first class," one former Allbritton associate said of Time's approach. "That's expensive."
Don Arbogast, the Star's chief financial officer, said yesterday, "There isn't anything magical about where the money went." Most of it was straightforward operating losses, he said -- the difference between costs and revenue.
According to newspaper executives, it was surprisingly easy to spend $85 million in the unsuccessful effort to make the Star profitable. They cited this list of Time Inc.'s expenses:
Purchase of The Star from Allbritton: $20 million.
Old debt assumed at time of purchase: $8 million.
December 1978 labor agreements, including a buyout of printers' contracts: $17 million.
Large promotion campaigns to boost circulation and advertising through the use of radio and television commercials: several million.
Payroll costs of expanded staff and better salaries: several million.
Capital expenditures, including new computer systems, a new fleet of delivery trucks and other equipment: between $3 million and $5 million each year since 1978.
Those add up to well over $60 million without calculating the cost of an expensive system of "zoned" suburban editions that require the publication of five different versions of The Star afternoon. Though Time never published the cost of the zoned editions, it probably added up to millions a year, according to sources in the newspaper industry.
In addition, publication of The STAR'S "A.M. Extra" edition for morning street sales cost the company at least $1 million a year, according to Arbogast.
And perhaps more expensive than zoned editions, industry officials said, was the Star's policy of aggressively discounting advertising rates in a vain effort to get more ads into the paper. The Star has published 25 percent of the advertising linage in both Washington papers but because of discounts and lower rates, The Star has been getting barely 15 cents of every newspaper advertising dollar spent in this city. The Washington Post gets the rest.
Arbogast of The Star said yesterday that discounting produced an increase in net revenue on "the bottom line," but other industry sources said they found this hard to believe. In any case, Time could not attract any significant amount of new advertising to the paper. In 1978, the first year of Time ownership, the Star published 27.8 percent of the advertising linage in both Washington papers. In the first six months of this year the comparable figure was 24.8 percent. During those years daily circulation fell more than 25,000.
Newspaper executives said yesterday that The Star had gotten itself into a condition of vulnerability that no large evening paper in the country has even been able to reverse. "In the big metropolitan areas,," as one executive put it, "when the morning paper gets ahead, the evening paper doesn't seem to be able to catch up."
This has happened in Philadelphia, Cleveland, St. Louis and other cities. In Detroit, The News has held on to first place infierce competition with the morning Free-Press, but its success is unusual, and it has not done so well in advertising linage.
Three of the newspapers in the top 15 for total advertising published in 1977 dropped off the top 15 by 1980; all three were evening papers.
On the other hand, some evening papers are thriving. The Houston Chronicle, the San Jose Mercury-News, and the Fort Lauderdale News, all evening papers, are among the nation's top 10 in ads published. The Denver Post, an evening paper, moved into the top 15 during the last three years. And the Times-Mirror Co., publisher of The Los Angeles Times, Newsday, The Dallas Times-Herald and other papers, apid $95 million this year to but The Denver Post.
Robert F. Erburu, president of Times-Mirror, said yesterday that while the differences between morning and evening papers were real, the specific conditions of a newspaper and its market area were more important than the time of publication. n
As to the future of an evening paper in Washington, newspaper executives seem to agree that if The Star does die, someone else will bring out another one. Someone is likely to launch a new paper "with a product that is targeted somewhat differently than The Star," predicted Warren Buffet, who has large interests in a number of papers, including The Post.
James R. Shepley, the Time executive most involved in running The Star, said yesterday, "some people accused us of being too much like The Post. Maybe they were right." Munro, Time's chief executive officer, said another management might succeed in Washington with "a different kind of nespaper, a newspaper we wouldn't car to produce."