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Friday, November 10, 2000

By Craig T. Kojima, Star-Bulletin
New Star-Bulletin owner David Black must
negotiate a new union contract and secure an
adequate paper supply to complete the takeover.

Bulletin survives,
now must thrive

Honolulu's two daily
papers will battle for
advertising and readership

Community reaction
What it means

By Rick Daysog

As the band played in the background and beer glasses clinked in celebratory toasts, Canadian publisher David Black made his way through the throng of employees of the Honolulu Star-Bulletin, their family members and community supporters.

Star-Bulletin closing The festive mood at Murphy's Bar & Grill last night represented a welcome break from the weeks of intense negotiations that went into Black's agreement to buy the 118-year-old Star-Bulletin. But it belied the new competitive environment Honolulu's two daily newspapers face as they position themselves to battle for advertising and readership for the first time since 1962.

It won't be a party.

Black, the 54-year-old president of Victoria, B.C.-based Black Press Ltd., reached a tentative agreement with the Star-Bulletin's owner, Liberty Newspapers Limited Partnership, and Gannett Co., which owns the rival Honolulu Advertiser, to take over the afternoon daily on March 15.

The deal -- in which Black paid $10,000 for the assets of the Star-Bulletin -- was approved yesterday by Federal Magistrate Barry Kurren and U.S. District Judge Alan Kay. But it is conditioned on Black negotiating a new contract with the union that represents most of the newspaper's 97 employees by Nov. 30. He also must secure an adequate supply of newsprint by the Nov. 30 deadline.

Black and the union, the Hawaii Newspaper Guild, will begin talks next week, and both are optimistic that they can reach a deal by the deadline. Black has also said that he has secured about 5,000 metric tons of newsprint but needs to secure another 7,000 metric tons.

The contingencies are just the start.

If the deal is successful, the 38-year-old joint operating agreement between the Star-Bulletin and the Advertiser will dissolve, pitting the two dailies against each other for subscribers and advertising.

Uphill battle ahead

Under the JOA, the Star-Bulletin and Advertiser have shared printing, advertising and circulation functions but kept separate editorial departments.

Black, whose company owns 80 community newspapers in western Canada and Washington state, said he is looking forward to competing with Gannett. Black has said he plans to add a Sunday edition to the Star-Bulletin's six-days-a-week coverage and wants to expand circulation on the neighbor islands, where the afternoon newspaper's presence is marginal.

The Star-Bulletin has a circulation of about 63,500, while the Advertiser's is 107,500.

Mike Fisch, Advertiser publisher, also welcomed the new competition. The Advertiser recently announced that it was adding about 20 positions and was beefing up its neighbor island coverage.

Tom Brislin, a University of Hawaii journalism professor, said Black faces an uphill battle against Gannett, the nation's largest newspaper chain.

Given its size, Gannett, with a market capitalization of $14.7 billion, has a greater ability to spread its costs and absorb losses if an advertising rate war emerges.

Gannett also can rely on its strong marketing and research departments, Brislin said.

Black, on the other hand, must largely build the Star-Bulletin's business functions from scratch by March 15.

While he has secured a printing agreement with Kaneohe's RFD Publications Inc., which publishes MidWeek magazine, Black said he must hire about 200 workers for the Star-Bulletin's advertising and circulation functions.

Combative environment

On top of that, Black must fight a trend toward declining readership among afternoon newspapers.

Since 1989 the number of evening newspapers nationwide has declined from about 1,000 to about 800.

"It remains to be seen whether this new daily competition will survive," said Stephen Barnett, an expert in antitrust law and professor at the University of California-Berkeley's Boalt Law School.

"If it does, it's an important new development for daily papers in American cities."

In many ways the tone of the new competitive environment was set in the recently concluded negotiations between Black and lawyers for Gannett over the terms of his purchase of the Star-Bulletin.

Since late September when Black was chosen as the sole qualified bidder, the two sides have been at odds over a number of issues, such as the availability of newsprint, severance payments and the status of the Star-Bulletin's union contract.

On Sunday, Gannett released a statement saying the deal had hit a "major snag" over what it said was Black's sudden reversal to accept the terms of the union contract covering newsroom employees as part of the deal.

Severance issue resolved

Black responded that Gannett had mischaracterized his position on the contract. He noted that from the beginning of negotiations, he has said that he would begin talks with the union after a deal was reached with the owners.

As for newsprint, Black previously asked if he could acquire the Star-Bulletin's paper allocation from Gannett, saying he had not been able to secure an adequate supply independently due to an industrywide shortage.

Gannett initially balked, saying it would amount to an "illegal" subsidy.

But after weeks of negotiations, the Arlington, Va.-based company agreed to locate newsprint from its suppliers.

The two sides also were at odds over severance payments to Star-Bulletin employees should the afternoon newspaper fold. Black said Gannett should be responsible for years that he did not own the paper.

Under yesterday's deal, Gannett and Liberty will cover about $100,000 of the liability during the first two years.

Black agreed to cover the rest of the liabilities, which total about $1.6 million.

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