Spurning A Father's Advice

By James Kelly

George Hearst, mining tycoon and Senator from California, tried to dissuade his son by offering him the chance to manage a ranch in Mexico or a gold mine in South Dakota. But William Randolph Hearst, then 23, would have none of it. He wanted to run a newspaper, specifically a tawdry sheet in San Francisco called the Examiner. Father relented; in 1887 young Hearst assumed control of the Examiner and proceeded to build the largest newspaper empire of his day.

The Hearst Corp. celebrates its centennial this year, and while the founder would obviously have difficulty recognizing the company 36 years after his death, so would anyone else who has not kept up with the firm over the past decade. Since 1978, when Frank Bennack Jr. was named president, Hearst has spent $1.4 billion acquiring more than 20 companies, including three TV stations, ten daily newspapers, two magazines (Esquire and Redbook) and two book companies (Arbor House and William Morrow & Co.). Since the company remains privately owned, the balance sheet is a closely held secret. Industry observers calculate that Hearst's gross revenues last year totaled $1.9 billion, leaving an estimated pretax profit of $285 million.

During his yellow-journalism heyday in the 1930s, Hearst dictated rat-a-tat headlines and punished political enemies in 18 big-city papers, including the New York Journal-American, the Chicago Herald-American and the Pittsburgh Sun- Telegraph. Today the company publishes 15 dailies, most of them in smaller cities such as Midland, Texas, and Bad Axe, Mich. After years of mounting losses, the firm sold the Boston Herald American to Rupert Murdoch in 1982 and shut down the Baltimore News-American four years later. As if to prove that it was not deserting big cities entirely, Hearst bought the Houston Chronicle in March for $400 million. The Chronicle (circ. 425,000) is vying for reader loyalty with the Houston Post (circ. 316,000), and victory will require greater infusions of cash.

Today's Hearst papers are a mostly pallid lot. The San Francisco Examiner, however, has brightened considerably under Publisher (and founder's grandson) Will Hearst, while the San Antonio Light has improved its design and added more feature stories. Nearly all make money either because they are the only papers in town or because, as in the case of the Examiner, they have entered into joint operating agreements with their competitors, allowing both papers to save on production costs. But, admits Bennack, "it's no secret that we have had some significant problems in the newspaper field." Los Angeles is particularly tough. He says, "We haven't yet solved the riddle of how to participate in that vast market."

The Los Angeles Herald Examiner (circ. 240,000) has been hemorrhaging money for a decade and currently loses an estimated $10 million to $14 million a year. Once in a tight race with the Los Angeles Times, the paper suffered a nine-year strike that began in 1967 and cost it 400,000 readers. Now the Herald Examiner's 170 editorial employees seem destined to play David to the Goliath Times (circ. 1.1 million), with its 850 staffers and annual profits of $200 million. Though the Herald has much to commend it, including playing up local stories and sometimes producing sprightlier writing than the Times, Hearst seems unsure what to do with its laggard child. Company officials, especially Robert Danzig, general manager of Hearst newspapers, are chronically indecisive about a redesign, despite having commissioned five prototypes over the past eight years, including versions of a tabloid format favored by Acting Editor John Lindsay. He quit in disgust in February. Lindsay is not alone; the positions of publisher, managing and executive editor and art director remain vacant.

The company has been more surefooted with its 13 magazines, which include Cosmopolitan, sassy bible of the single woman, and Good Housekeeping. Under the guidance of John Mack Carter, 59, GH's longtime editor, the firm has created a pair of winners, Country Living and Colonial Homes, and has just launched Victoria, a glossy, evocation of the Victorian era complete with recipes for potpourris. Though the magazines contribute an estimated 65% of the company's net profits, some face increasingly aggressive rivals. Hearst's Harper's Bazaar, the tony fashion journal that has run second to Conde Nast's Vogue, is now being challenged by the frisky, well-designed Elle, an American cousin of the French original. House Beautiful is losing ad pages to its onetime equal, House & Garden, which has gone upscale by offering lavish picture spreads and admiring articles by well-known writers about the residences of the rich and well furnished.

The firm wins high marks for its lean management but lower grades for its treatment of employees. Top editors are paid well; Helen Gurley Brown, still Cosmo's guiding light at 65, reportedly earns $500,000 a year, plus a slice of her magazine's profits. But middle-level staffers tend to earn less than their colleagues at other magazine-publishing companies, and turnover is high. Bennack and Gilbert Maurer, president of the magazine division, pride themselves on giving editors freedom in running their publications, though the absolute power is not always uplifting. "Working at Hearst is like life in the Medici Palace," observes a longtime Hearst executive. "All is favoritism."

Of the founder's 40 or so living descendants, about a dozen work at Hearst, but most of them hold relatively minor jobs. John Hearst Jr. is an editor of Motor Boating & Sailing, while Anne is an editor at Town & Country. The Examiner's Will Hearst, one of the company's stars, is considered a candidate to run the company, but he denies that ambition and praises Bennack. "Having a Hearst in charge could make things more divisive within the family," he says.

William Randolph Hearst Jr., 79, editor in chief of Hearst newspapers and one of the founder's two surviving sons, contributes a weekly conservative diatribe to the company's papers, but his involvement is otherwise sporadic; he has been known to phone editors late in the evening to complain about an editorial cartoon or the placement of an ad. What makes the relatively minor role of the Hearstlings in running the shop so intriguing is that they own the store. The family trust holds 100% of the stock, and dividends are distributed only to relatives. Yet only five of the trust's 13 directors are family members, and only seven Hearsts sit on the 20-member board.

The arrangement would suit the founder, who in his will avoided giving his sons control of the company. Besides, why should any of the Hearsts be unhappy? Five are listed among Forbes' 400 richest Americans, and the company is prospering. No longer synonymous only with tabloid sensationalism and the gaudy splendors of San Simeon, the firm seems intent on making a good corporate name for itself by sponsoring a seven-part PBS series called The Presidency and the Constitution. William Randolph Hearst Sr. would probably be pleased, but his father George would be even happier, glad that his son never took his advice.

With reporting by Mary Cronin/New York and Dan Goodgame/Los Angeles