The Daily's Dollars

Rich Oppel has undoubtedly improved the quality of the local daily. But a better product may not matter. The Austin American-Statesman would likely be profitable with a staffer from The Daily Texan at the helm. That's no slap at Oppel, it's a happy fact of life for the American-Statesman's parent company, Cox Enterprises. The Statesman is the biggest daily newspaper in a region that is growing rapidly, and its nearest major competitors are 200 miles away. Thus, it can be argued that turning a profit at the Statesman, which employs 1,000 people, is no great feat. Advertisers and readers alike simply have no other option available. So whether the content in the local daily is good, bad, or indifferent, Cox Enterprises is probably going to have a profitable operation. How profitable? That's difficult to say. Mike Laosa, the Statesman's publisher since late 1995, refused to discuss the paper's financials. "We are a privately held company," said Laosa. "It's safe to say we are profitable."

While Laosa will not discuss the paper's financial information, industry analysts and sources close to the paper indicate that its annual revenues are in the neighborhood of $150 million. (The Austin Chronicle, which is owned by Louis Black and Nick Barbaro, has annual revenues of about $4 million.) And the local daily's revenues appear to be headed upward. The Statesman is one of the few Texas newspapers that is gaining subscribers. The increase in readership is due to several factors: the region's burgeoning population, the paper's ongoing marketing campaign, and its efforts to court new readers in what it calls the "northland" -- the Round Rock-Georgetown area -- which is one of the fastest growing regions in Texas.

The surge in readership is good news for the reclusive Cox sisters, the billionaire owners of Cox Enterprises, one of America's largest media companies. Barbara Cox Anthony and Anne Cox Chambers may be the world's richest women. With a combined net worth of about $6 billion, the secretive sisters oversee a cable TV, newspaper, broadcasting, and auto auction empire with more than $4.6 billion in annual revenues and 43,000 employees. The sisters were born into an empire created by their father, James M. Cox, who got into the newspaper business in 1898, when he bought the Dayton Evening News for $26,000. He later served three terms as the governor of Ohio. And in 1920, he became the Democratic nominee for president (Franklin Roosevelt was his running mate), but lost to Warren G. Harding.

In 1957, Cox was succeeded by his son, James Cox Jr., and the company began moving into the television business. In 1964, the company began trading on the New York Stock Exchange, but in the mid-1980s the sisters took the company private again in a $1.2 billion deal.

The only publicly traded portion of the Cox empire is Cox Communications, which owns and operates 82 cable TV systems in 20 states. Last year, the company, with 3.3 million customers, had revenues of $1.46 billion. Cox Enterprises owns 75% of the company, which also has interests in programming. It owns 25% of the Discovery Channel and 10% of E! Entertainment. It also sells wireless and wireline telephone service and has half-ownership interest in cable systems in the UK and Denmark.

Moreover, Cox Enterprises owns 12 television stations, 50 radio stations, and Manheim Auctions, the world's largest auto auction company. The conglomerate's newest facet, Cox Interactive Media, which launched last July, sells Internet access in Austin and Atlanta. Within the next six weeks, Cox Interactive will begin offering Internet access in about 30 more cities, according to company spokesman Marleen Burford. Austin 360, the company's operation in Austin, offers Web access to the archives of the Statesman. Until a few weeks ago, that access was free. Now, accessing the archives costs a minimum of $5.95.

But while the Internet may be a growth area for the future, Cox's roots are in newspapers; the company owns 16 daily papers and 15 weekly papers ranging from the flagship Atlanta Journal-Constitution to The Daily Sentinel in Grand Junction, Colorado. In Texas, it owns six papers: the Statesman, and dailies in Waco, Nacogdoches, Lufkin, Longview, and Marshall. And while it's doubtful that Cox will sell the local daily anytime soon, the Statesman -- which is the oldest continuously operated business in Austin -- is obviously a very valuable asset.

John Reidy, a media analyst with Smith Barney in New York, says that publications are often valued on the basis of their subscription base, with each subscription given a value ranging from $500 to $2,000. The Fort Worth Star-Telegram, which has a Sunday circulation of 342,343, was part of a package deal in which Knight-Ridder bought it and three other papers for $1.6 billion. Prior to the sale, newspaper analysts put the value of the Star-Telegram alone at up to $600 million, which would be $1,754 per subscription; using that figure for the Statesman, which has 241,758 Sunday subscribers, would yield a value of $424 million. Using the higher rate of $2,000 per subscription would put the paper's worth at more than $483 million. One justification for using the higher figure would be the daily's circulation trend. While daily papers across the country are showing substantial declines in circulation, the Statesman's circulation has been holding steady or gaining slightly for the past several years.

That valuation would also be pretty much in line with the revenue estimate cited above. Reidy notes that daily papers like the Statesman usually sell for about three times their annual revenues, so the $150 million estimate of the paper's annual revenues appears to be fairly reliable.

And if the Statesman is pulling in $150 million, how much are the Cox sisters making on the deal? Profit margins at the Fort Worth Star-Telegram before it was bought by Knight-Ridder were estimated at 30%. If the Statesman is making that same margin, Cox Enterprises is taking some $45 million in net profits out of the Austin area every year. There's no way to know if that figure is correct. But even if you divide the estimate by half, the Cox sisters are still making a handsome profit off of a paper that for many years has been little more than expensive fish wrapper.

Oppel may bring distinction to the local daily. He's made no secret of his ambition to win some major prizes. But even if Oppel doesn't succeed -- many editors before him have failed -- it won't change the bottom line. And the bottom line at the local daily looks like it will remain solidly in the black for years to come.