Publishers' Pains

The price of newsprint for one dizzy moment in 1921 was $130 a ton. About a third of the cost of publishing a newspaper is the cost of newsprint and publishers were pleased when it dwindled to

$40 a ton in 1933. In 1936 it went up to $41. Last year it stood at $42.50. Last week, on the last day of 1937, the Boston Evening American and the Washington Evening Star announced that they were going to raise their prices from 2-c- to 3-c- and eight other U. S. newspapers--from the Atlanta Georgian to the Omaha World-Herald--raised their weekly subscription rates 5-c-. For by the end of 1938 all newsprint will be costing $50 a ton. That will raise the year's operating costs of U. S. newspapers about $25,000,000.

Monopoly? Homer Cummings and the Department of Justice have for the last few months been looking into the way the newsprint mills fix what to charge the publishers. Formerly newsprint prices fluctuated as restlessly as any lover of free competition could desire. But in more recent times (and consistently since the newsprint industry tasted the sweets of NRA) it has announced its next year's contract price all at once--and the price is generally the lowest asked by any mill turning out more than 100,000 tons a year. In the majority of cases this mill has been Great Northern Paper Co. of Maine.

Many publishers in recent years have contracted for their newsprint on the condition that it was not to be above that asked by Great Northern. One-third of the newsprint used in the U. S. (3,700,000 tons last year) is made in the U. S.; almost one-third of the newsprint made in the U. S. is made by Great Northern. Great Northern's customers include Scripps-Howard, the New York Herald Tribune, the New York Sun and some 200 smaller papers. To them Great Northern's president, handsome William Arthur Whitcomb, has not been tough in making prices. Result is that he is popular with publishers but poison to his colleagues in the newsprint industry.

What Great Northern's competitors regard as its inexcusable policy of undercutting has worked out well for Great Northern. It has $42,600,000 total assets, no funded debt, and an earned surplus of $16,000,000. It has paid dividends regularly since 1909. In 1936 its profits were $1,200,000, an amount not remarkable for a company of its size but very comforting to Mr. Whitcomb when he reflects that not so long ago 40% of all North American newsprint capacity was bankrupt.

Most of the solvent mills operated at a net loss throughout the six years of Depression. Labor costs have gone up and it was inevitable that newsprint prices would go up too. But publishers put their trust in Great Northern at least to raise them gently. Last March, International Paper & Power, biggest paper company in the world and leader of the Canadian mills which would like still higher prices, beat Great Northern to it, announced a $50 contract price for the first six months of 1938. Great Northern's price, announced seven months later, was $48 for the first six months and $50 for the second six months, which in effect keeps International from raising its price again till 1939.

Many a publisher thinks that the paper industry is passing along not legitimate costs but costs of bad management. Newsprint financing has always been optimistic to the point of exultation. Big Abitibi Power & Paper Co. Ltd. of Canada once had 21 issues of bonds, notes and purchase-money obligations and an immense number of preferred stock issues. Between 1928 and 1930 it bought five other paper companies and went into the power business seriously. It is now in receivership. Even International, which made $5,000,000 in 1936, had to recapitalize last year so its stockholders could be paid "some dividends.

Whether all this indicates monopoly in newsprint, only Homer Cummings knows. Solid, reticent Mr. Whitcomb, though he may not want to speak for Canada, says flatly: "There is no monopoly among U. S. newsprint manufacturers."

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