Piled Up Over Two Decades, Losses Became Insurmountable

Once it was the newspaper for the city’s working class, a key piece of Hearst’s sensational empire.

In the end, however, Hearst Corp. was willing to give the Los Angeles Herald Examiner away, as long as a buyer had the financial backing and commitment to seriously attempt a turnaround.

At least one group made an offer in recent weeks, although it wanted Hearst to continue to share in the losses.

But 86 years after William Randolph Hearst founded what was then called the Examiner and after losing more than $85 million since 1984 alone, Hearst Corp. wanted out. And no qualified buyers wanted it on those terms.

The announcement Wednesday that Hearst was giving up the search says something about how newspapers became a white-collar medium after World War II. It says something too about the troubles of the Hearst Corp.

When it began in 1903, Hearst had already inherited the Examiner in San Francisco and had started the Journal in New York.

He was a champion of the progressive era and of sensationalist “yellow journalism,� and had started building an empire that would extend to movies, magazines, newsreels, the International News Service and more. He was still attempting a political career that would end in two failed runs at the presidency.

And Hearst’s arrival marked Los Angeles as an emerging city.

In 1913, he commissioned Julia Morgan of San Francisco to design a Spanish Renaissance headquarters at Broadway and 11th Street, with a hand-painted tiled lobby of gold and marble and a private apartment for Hearst upstairs.

In 1922, Hearst bought the afternoon Herald (founded in 1876), and in 1931, he bought the the Express (founded in 1871).

Two companies now dominated the city: Hearst with its morning Examiner and evening Herald-Express and Times Mirror with its morning Times and evening Mirror.

These were wild days, and no one epitomized Hearst’s papers better than reporter and later Herald-Express city editor Agness Underwood.

Aggie’s speciality was crime news, Hearst style.

“Sensational New Clues in Hunt for Fiend� headlined one of her stories, typical of the day.

And her first paragraph, about three children strangled in Inglewood, said it all: “What little Jeanette Marjorie Stephens loved in life--a ruffled blue organdy dress--will be her shroud in death.�

After she became city editor in 1947, Underwood kept a baseball bat on her desk to use on obstreperous press agents, she would recall later.

And reporters swore she kept a gun with blanks inside her desk drawer, which she allegedly would fire at the ceiling if the place got too quiet.

After the war, and after William Randolph Hearst’s death in 1951, Hearst newspapers had the same problem in Los Angeles as they did in other cities.

Hearst readers were generally blue collar and “that is the traditional audience that television took away in droves,� said John Morton, a Washington newspaper analyst.

Hearst’s heirs, who are now running the company, also failed to re-orient their papers toward an America that was becoming more suburban.

When Otis Chandler took over as publisher of The Times in 1960 and set about improving the paper, The Times already led in morning circulation over the Examiner by 150,000. Hearst’s Herald-Express had a narrower lead in the afternoon.

Then in 1962, in a move some would later call collusion, Times Mirror closed the afternoon Mirror. Hearst, in turn, merged the Herald-Express and the Examiner and abandoned the morning field to The Times.

The choice would prove fateful. Afternoon papers were difficult to deliver on time in the suburbs, Morton said, and only blue-collar readers tended to want a paper delivered at that time of day.

By 1967, the rival Times enjoyed a 2-1 lead in advertising, despite only a 120,000 advantage in circulation. The Herald Examiner still had 720,000 in circulation, but it was stagnant and advertisers were fleeing.

Then came the strike.

The American Newspaper Guild struck the Herald over wages in 1967. Eleven other unions eventually joined.

Labor, the heart of Herald readership, started to switch to The Times.

The strike lasted 10 years, in part, say Herald staffers from the era, because Publisher George Hearst wanted to break the unions.

When the strike ended in 1977, Herald circulation was cut in half to 330,000.

In the years since, Hearst changed from a company run by William Randolph’s heirs to professional managers, and the company hunted for a plan to save the Herald Examiner.

It installed Francis Dale as publisher and in 1978, named James Bellows as editor. Bellows was best known as the innovative editor of the New York Herald Tribune, where he worked with such writers as Jimmy Breslin and Tom Wolfe.

Their strategy, essentially, was to position the paper for younger, sophisticated readers who might see The Times as stodgy--a newspaper designed for the Westside and the movie colony.

It never took hold.

“Hearst was putting a lot (of money) forward,� Bellows recalled Wednesday. “It just needed more.� Bellows left in 1981, replaced by Mary Anne Dolan, one of the first women to edit a newspaper in a major city.

Others, such as Herald Examiner President N.S. (Buddy) Hayden, wondered why the newspaper was tackling the Westside, where the Times was strongest. He set out on a split course called “Class and Mass,� a mix of upscale readers on Sunday and blue-collar readers during the week. Slick prototypes of a new Sunday paper were developed.

But Hearst management chose to study further. In 1984, Hayden left and later was followed by Dale.

By then, the paper was losing nearly $14 million a year on revenues of $44 million, according to the sale prospectus prepared by the investment firm of Lazard Frere & Co.

More recently, the paper had considered going tabloid and more prototypes were produced. But again Hearst management in New York hesitated.

One of those who negotiated with Hearst in recent months to buy the Herald Examiner and who saw the market research for the tabloids called it “incredibly poor.�

In the meantime, losses inched upward to more than $18 million last year.

Still, the paper continued to attract gifted reporters and remain a scrappy competitor, particularly at covering City Hall. Among the stories on which it has bettered the competition are financial and safety improprieties at the Southern California Rapid Transit District, the questionable campaign finances of City Councilman Richard Alatorre and Mayor Tom Bradley’s connections to Far East National Bank, one of the elements in the revelations about Bradley’s finances.

As recently as two years ago, Hearst officials told interested suitors they did not want to sell, despite the losses, now nearly two decades old.

Privately, though, Hearst did make inquiries about two years ago about the possibility of a joint operating agreement with The Times, in which The Times effectively would subsidize the continuation of the Herald. Those discussions went nowhere.

In the last 12 to 18 months, the management at Hearst, its commitment exhausted, began looking for a buyer. Among those who looked but did not buy--as recently as a few weeks ago--were the Toronto Sun Publishing Co. of Canada, movie and oil tycoon Marvin Davis, British tabloid publisher Robert Maxwell and a group involving Tom Quinn, owner of City News Service, a local news wire service. An attempt by a management group to mount a leveraged buyout also failed.

Several suitors interviewed by The Times said the cost of turning the paper around could be enormous, perhaps as much as $100 million, and take years.

The suitors said that toward the end, Hearst was willing to sell the paper for virtually nothing if the buyer had the financial resources and commitment to attempt a serious turnaround.

“The issue is not the purchase price or the real estate or the paper,� said Barbara Lindemann Schlei, a local attorney who represented one consortium of suitors who looked at the paper. “The issue is ensuring there is a plan to turn it around and the money to do it. . . . That offer is not on the table.�

Wednesday, after 86 years and more than two decades of losses, Hearst gave up waiting.