A Game of Chicken in Detroit

By Laurence Zuckerman

For a quarter-century, Detroit has been the scene of one of the nation's bitterest newspaper wars. All-out efforts by the afternoon News and the morning Free Press to beat each other into submission cost millions and kept newsstand prices and advertising rates at rock bottom. Then two years ago both papers agreed to an odd sort of truce. Gannett Co., owner of the News, and Knight-Ridder Inc., owner of the Free Press, decided to take advantage of a federal law designed to preserve the editorial voice of a dying newspaper by allowing it to combine its business operations with a healthy competitor. They thus joined forces in applying to the Justice Department for approval of a "joint operating arrangement." Testifying at a hearing last August, Knight-Ridder Chairman Alvah Chapman backed up the proposal with a harsh ultimatum: unless the Justice Department approved the J.O.A., he would recommend that Knight-Ridder "close down the Free Press and dispose of its assets."

Administrative Law Judge Morton Needelman was not impressed. He noted that Knight-Ridder, one of the country's richest and most distinguished newspaper chains, had invested tens of millions of dollars in the Free Press and had never before folded any of its papers. Thus, Needelman concluded, "I have assigned little weight to this threat." But last week, less than a month after Needelman issued his report to Attorney General Edwin Meese recommending against the controversial J.O.A., Chapman pursued his threat further. Emerging from a Detroit meeting of the 17-member Knight-Ridder board, he solemnly announced that the 157-year-old Free Press will stop publishing unless the Attorney General approves the plan.

Knight-Ridder's move ends years of high-stakes poker and initiates a risky game of chicken. By placing the future of the Free Press (and its 2,200 employees) squarely in the lap of the Attorney General, Knight-Ridder is gambling that Meese will have no choice but to save the paper. To up the odds, the company has launched an all-out public relations blitz designed to win over local opponents and to sway Meese. After last week's board meeting, Chapman scheduled private meetings with leaders of the paper's unions and Mayor Coleman Young, who has already hinted that he may abandon his opposition to the plan. Free Press Publisher David Lawrence triggered a ground swell of support with a front-page editorial asking readers to write in what they would miss most about the paper.

There are currently J.O.A.s in 22 cities throughout the country, including Cincinnati, San Francisco and Seattle, and no application has ever been denied. But Detroit presents an unusual case. By far the biggest consolidation ever proposed (worth $300 million in annual advertising and circulation revenues), the Detroit J.O.A. would last for an initial term of 100 years, twice the life-span of most others. The result, warns Michigan State Senator John F. Kelly, would be a dangerous precedent. "If the J.O.A. is approved in Detroit," he declares, "there's no way any other J.O.A. in any other city in the country could be denied."

Also troubling is the fact that it is far from certain that either Detroit paper is in immediate danger of failing. While Knight-Ridder executives insist the Free Press (circ. 639,312 daily; 735,000 Sunday) cannot survive continued competition from the News (circ. 686,787 daily; 840,000 Sunday), Needelman's report paints a different picture. Both papers, he says, spent "extravagantly" in the expectation that they would either triumph over the competition or be rewarded anyway with a lucrative J.O.A. Monies currently cited by Knight-Ridder as part of the Free Press's $100 million losses were once accepted by its board as "investments" in a long-term strategy to beat the News.

And while Chapman is pleading near bankruptcy, one of his own memos (to Gannett Chairman Al Neuharth) included in Needelman's report makes a strong case that the Free Press should receive an equal share of the J.O.A.'s future earnings. "The Detroit Free Press is a well managed newspaper with a loyal readership base and a proven and continuing capacity to expand its reach," Chapman wrote, before listing several favorable statistics not usually associated with failing newspapers.

Needelman blames both papers' losses on their keen competition; only in Detroit does a metropolitan paper still cost 15 cents. "At higher circulation and advertising prices," he writes, "Detroit can sustain two profitable papers." He concludes that the Free Press is not dominated by the News and cannot yet be classified as a failing paper.

Knight-Ridder executives hotly dispute Needelman's report, arguing that he contradicts his own conclusion by admitting that neither paper can unilaterally raise prices without risking a huge loss in circulation. Many industry analysts agree. "Needelman completely missed the point about competitive newspaper economics," says Bruce Thorp of Provident National Bank. Without the J.O.A., adds Thorp, "there is little question in my mind that one paper will disappear."

Before then, however, the great Detroit newspaper war will be settled in Washington, where the Attorney General will face the thorny choice of flouting the recommendations of his staff or being blamed for the death of a venerable American institution. Either way, Meese will not question the seriousness of Knight-Ridder's threat. Says Free Press Executive Editor Heath Meriwether: "Anyone who has looked at Alvah Chapman's record knows that he's not the sort who bluffs."

With reporting by Anne Constable/Washington and B. Russell Leavitt/Detroit