The Hearst Corporation Business Information, Profile, and History

Company Perspectives:

Each day, more than 18,000 people are at work at Hearst, helping to inform, educate, entertain, and inspire millions of readers, viewers, and listeners in virtually every area of communications. Although the company has expanded dramatically in recent years, the principal on which it was founded remains the same--a commitment to excellence.

History of The Hearst Corporation

The Hearst Corporation is one of the largest diversified communications companies in the world. It has interests in print, broadcasting, and the news media, including newspapers, magazines, book and business publishing, television and radio broadcasting, cable network programming, newspaper features distribution, television production and distribution, and electronic publishing. Hearst Magazines is the largest publisher of monthly magazines in the world. It publishes 16 titles in the U.S., including Cosmopolitan, Esquire, House Beautiful, O, The Oprah Magazine, and Talk. The division also puts out over 100 international editions, with distribution in more than 100 countries. A subsidiary, the National Magazine Company Limited, is one of the leading magazine publishers in the United Kingdom. The magazine division also publishes books, with titles mostly tied to its periodicals in some way. Hearst Newspapers publishes 12 daily and 16 weekly newspapers in the United States. The division also operates a subsidiary company which publishes Yellow Pages directories in Texas and is part owner of an Internet-based classified advertising company.

Hearst-Argyle TV is one of the largest independently owned broadcasting groups in the nation. It includes 26 television stations and two radio stations. Its stations reach over 17 percent of all U.S. households. Hearst Entertainment and Syndication includes the company's cable network partnerships with ABC, NBC, and ESPN; television programming and distribution activities; and the King Features group of syndication companies, which is the world's largest distributor of editorial features, comic strips, and panels to newspapers. Other business units include Hearst Interactive Media, which operates partnerships in Internet-based services such as iVillage and Hire.com, and its Business Media unit. The business media division handles a variety of business-to-business publications as well as databases and on-line services such as a used car guide and a collision database.

Founder William Randolph Hearst

The shape and history of the company's early years were intertwined with the history and designs of its founder, William Randolph Hearst. A man who inherited enormous wealth, Hearst was also a person of enormous ambition and activity whose initial interest in journalism in an era when the newspaper business could hardly be separated from the political arena led to a consuming passion for political office that was destined to end in frustration.

The company that became a behemoth in communications started out as payment for a gambling debt, when William Randolph Hearst's father, George Hearst, a self-made millionaire who had earned his fortune in mining and ranching, took possession of the San Francisco Examiner in 1880 after its owner had lost a wager with him. Seven years later, William Randolph Hearst, recently expelled from Harvard College for an elaborate prank, took over the running of the paper.

Newspapers in that day were, for the most part, organs of propaganda for individual politicians and political parties. Indeed, Hearst's father had accepted the paper only for the purpose of enhancing his own political career. William Randolph Hearst had big plans in mind for the money-losing four-page daily paper. Taking Joseph Pulitzer's New York World as his model, he began by sinking large sums into the latest printing technology and changing the paper's appearance to make it more compelling. In addition, he hired new staff members--bagging such luminaries as Ambrose Bierce--and charged them with the aggressive pursuit of stories that would improve the paper's circulation. The first big coup came with the Examiner's sensational coverage of a big hotel fire, just one month after Hearst took over. Slowly the paper's fortunes improved, helped along by a large dose of self-promotion. Hearst was soon referring to his paper as "A GREAT PAPER."

Hearst employees were diligent in their pursuit of shocking and titillating material to draw in more readers. In the absence of genuinely sensational news, they did not hesitate to manufacture newsworthy events, or simply to make things up. Much of the manufactured news was billed as crusading exposure of social ills, as when a woman reporter feigned illness to expose the condition of the city's ambulance corps and hospital, or when one intrepid Hearst journalist threw himself into San Francisco Bay from a ferry to test rescue procedures. Both of these stories did in fact result in improvements in the city agencies involved. In his first year, Hearst launched more than a dozen crusades, taking on such established powers as the city's political machine and the Southern Pacific Railroad. All of this activity, along with Hearst features, such as the publication of the scores of popular songs on Sunday and the introduction of a column devoted to union activities, added up to a new kind of journalism and contributed to a slowly growing circulation. Advertising revenues remained low, however, and Hearst's paper continued to consume large sums of his father's money until 1890, when it first went into the black.

By 1895, the Examiner was thriving, both in terms of circulation and revenue, and Hearst was ready for a new challenge. He found it in New York, taking over a decrepit daily paper, the New York Journal. He began by sending for the best of his San Francisco staff, dropping the price of the New York paper to a penny, and increasing its size. Hearst was going after his old ideal, Pulitzer's World, and his most successful tactic was the wholesale raiding of Pulitzer's staff. Waving enormous salaries, he lured some of his rival's best staff away, including the creator of the popular comic "The Yellow Kid," which would inspire the phrase "yellow journalism," used to describe the sensational and irresponsible coverage that Hearst and his rivals pioneered.

In the ensuing contest between the two papers, the techniques that Hearst's organization had first polished in San Francisco--sensationalism and crusading campaigns on behalf of the ordinary person--were taken to new heights. In addition, the paper became inextricably involved with political parties, power, and disputes, becoming heavily identified with presidential candidate William Jennings Bryan and the Democratic Party. Since all the other large newspapers backed William McKinley, the Journal rapidly became the leading Democratic newspaper in the country.

Perhaps the ultimate manufactured news event was the one that started the Spanish-American War. From the start, Hearst's paper had strongly supported Cuban independence from Spain. When the American battleship Maine mysteriously blew up in Havana harbor in February 1898, Hearst and his employees printed two weeks' worth of fraudulent material blaming Spain for the attack. This coverage, which Hearst orchestrated but in which he was not alone, resulted in increased circulation for the paper--and in war.

With the dawning of the new century, Hearst's fledgling network of newspapers continued to expand. Attempting to bolster support for Bryan's 1900 presidential bid, Hearst founded the Chicago American, whose first issue rolled off the presses on July 4, 1900. Bryan lost once again to McKinley. Hearst's overwhelming identification in the public's mind with opposition to the president became a grave liability after McKinley was assassinated in September 1901. Some groups boycotted and banned Hearst papers. Nevertheless, his New York paper, the Journal, claimed the greatest number of paid subscribers in the world by the end of the year. When Hearst was elected to Congress the following year, his papers became his personal forum for conducting political activity. In 1904, the Boston American was added to the fold. Two years later, the 1906 San Francisco earthquake dealt a major blow to the flagship of the Hearst organization, reducing the physical plant of the Examiner to a ruin. Despite the devastation, the three San Francisco papers produced a joint issue on the first day after the quake and, shortly thereafter, the Examiner was back on its feet.

The Hearst organization branched out into magazines in 1903, with the founding of Motor magazine, a venture inspired by The Car, a British publication Hearst had come across on his honeymoon. Two years later, he bought Cosmopolitan, a magazine of fiction and nonfiction. Filled with the work of some of the best writers of the day, its circulation soon doubled. Hearst's most important magazine acquisition was Good Housekeeping in 1911. This purchase also included the laboratory facilities that would develop into the Good Housekeeping Institute and the Good Housekeeping Seal, heavily promoted under the new owners.

Hearst papers took a vigorous anti-British and isolationist stance in the era leading up to the United States's entry into World War I, bannering slogans like "America First" and "No Entangling Alliances" in fierce opposition to the policies of President Woodrow Wilson. When the United States declared war in April 1917, Hearst's opposition to the U.S. effort to aid the Allies and perceived pro-German sentiment resulted in lower circulation for his newspapers in many cities. Throughout this era, William Randolph Hearst continued his political activities in pursuit of the presidency, and Hearst papers were instruments in his crusade.

Nevertheless, throughout the second decade of the century, Hearst enterprises grew at a prodigious pace. By 1920, the print operations numbered 13 newspapers and seven magazines, including the profitable American Weekly newspaper insert and the British Nash's. As offshoots of the newspapers, the organization also owned a money-losing newswire, the International News Service, which had emerged from World War I with its credibility badly damaged, and the King Features Syndicate, which sold the work of Hearst writers and artists to other papers.

In addition, Hearst had entered the film industry in 1913, when the first newsreel--footage of Woodrow Wilson's inauguration--was shown in movie theaters. This showing led to the establishment of the Hearst-Selig News Pictorial in 1914, which pioneered film journalism throughout the 1920s, evolving into Hearst Metrotone News with the arrival of sound in 1929. For entertainment, Hearst produced in partnership with Pathé Fréres such long-running serials as The Perils of Pauline. Intent both on promoting the career of his mistress, Marion Davies, and becoming a movie mogul himself, William Randolph Hearst formed Cosmopolitan Productions and in 1919 built a studio in Harlem where movies could be filmed. Hearst papers duly praised the resulting products. In time, the studio moved to Hollywood where it joined with other studios, producing musical extravaganzas like Broadway Melody and other films.

As William Randolph Hearst continued to seek political office in the 1920s, Hearst operations continued to grow. Papers were acquired or founded at a brisk pace, including three in 1921, six in 1922, one in 1923, and three in 1924. On the international front, Hearst expanded its magazine holdings in Britain to include Good Housekeeping, Connoisseur, and Harper's Bazaar. By the early 1930s, the tally of Hearst papers was up to 28 and the magazines numbered 13. Along with his other ventures, this necessarily gave Hearst great influence in public affairs. His influence was enhanced by the Hearst company's entry into the fledgling radio industry in 1928 with the purchase of WISN in Milwaukee, Wisconsin. By the mid-1930s, it owned ten radio stations. In 1934, the Hearst organization was restructured to give Hearst editorial control while trusted subordinates handled day-to-day business matters. By the following year Hearst had become implacable in his opposition to the policies of Franklin Delano Roosevelt, whom he had initially helped win the Democratic nomination in 1932. In the 1936 campaign Hearst papers supported Roosevelt's opponent Alf Landon. Throughout the 1930s, Hearst papers were unstinting in their opposition to socialism and communism. This fact, combined with Hearst's love for Germany, where he traveled often, and his growing conservatism, often led his opponents to charge him with fascism.

Repercussions of the Great Depression

Throughout the years of financial turmoil and decline that began with the stock market crash in 1929, Hearst, who was accustomed to wealth of unimaginable proportions, had not significantly altered his activities. He continued to spend lavishly on art and on the construction and upkeep of his several estates. In addition, the company had used several bond issues to raise capital, resulting in debts that reached $137 million. In 1937, under pressure from the shareholders, as well as various banks and newsprint companies to whom Hearst owed money, the company tried to float another set of debentures, but was prevented from doing so by the Securities and Exchange Commission. The crash had come. Faced with the virtual bankruptcy of his vast empire, Hearst, now nearly 75 years old, turned over complete financial control of his holdings to a lawyer, one approved by his creditors, who quickly began to restructure drastically the Hearst organization. Six money-losing newspapers and seven radio stations were sold, a magazine was scrapped, and Hearst's New York flagship paper, the New York American, was merged with its evening counterpart. A Conservation Committee was formed to sell off assets, including two-thirds of Hearst's art collection.

Four years later, in 1941, the Hearst organization was still fighting for fiscal survival. By that time there were 94 Hearst entities with complex financial ties. With the entry of the United States into World War II, Hearst papers (reduced to a total of 18) dropped their isolationist stance and wholeheartedly supported the war effort. It was the war, opposed so staunchly by Hearst editorialists, that helped the company to regain its financial health by increasing circulation and advertising revenues.

At the end of 1943, the trustee and the Conservation Committee appointed in 1937 were succeeded by a voting trust that included two of Hearst's five sons. The trust continued to sell off property, including two-thirds of Hearst's vast San Simeon estate, and to rearrange assets, consolidating everything in 1943 within The Hearst Corporation holding company. By the end of the war in 1945, the company was on more solid financial ground once again. Three years later, the company entered a new field in communications when WBAL-TV in Baltimore, Maryland, began to broadcast.

New Leadership in the Postwar Period

By 1947, William Randolph Hearst, elderly and suffering from heart problems, had little involvement in company operations. On August 14, 1951, Hearst died, ending an era in U.S. journalism. His will stipulated that his $57 million estate be divided for tax purposes into a charitable trust and a restructured corporation. Hearst left the 100 shares of voting stock that controlled the company in the hands of a board made up of five family members and six company executives, insuring that those outside the family would have control of the corporation. One of the executives, Richard Berlin, took over as chief executive officer at Hearst's death, after 32 years with the company.

During Berlin's tenure, the company saw the collapse of its first base of operations, its newspapers, and expanded its holdings in other fields of the communications industry, such as magazines and television. The advent of television ended newspaper journalism as William Randolph Hearst had known it. No longer did the papers provide the public's primary source of news. This change in social habits resulted in a vast shake-out in the newspaper industry, in which afternoon papers in particular were hard hit, the Hearst publications included. The first paper to go was the Chicago American, a long-time money-loser, which was sold to its competitor, the Tribune, in 1956. Two years later, the Hearst newswire, International News Service, and its affiliated photo service were sold to rival United Press. Under Berlin's direction the company shed papers in San Francisco, Pittsburgh, Detroit, Boston, Los Angeles, and Milwaukee in quick succession. In 1963, Hearst sold its money-losing morning tabloid the New York Mirror, which had the second largest circulation in the United States. The cruelest blow came in 1966, when Hearst's flagship Journal-American folded in New York.

In contrast, Hearst expanded its magazine operations throughout this period, concentrating on special interest publications rather than broad, general interest titles. In 1953, the company purchased Sports Afield and five years later added another men's magazine, Popular Mechanics. Shortly thereafter, a Spanish edition of the magazine was granted the first license for a Hearst magazine foreign edition. Eventually, the company would successfully license over 100 foreign editions of its publications. In 1959, the company branched out into book publishing when it purchased Avon Publications, Inc., which produced paperbacks. In addition to new acquisitions, old publications underwent renovations, enabling them to contribute strong performances to the magazine group. Cosmopolitan, for instance, retooled in 1965 from a general interest magazine of fiction and nonfiction to the interests of working women and became a huge money-maker. In 1966, another venerable Hearst magazine, Good Housekeeping, became the leader in its field.

At his retirement in 1973, Berlin left Hearst debt-free and rich in capital, yet far poorer in publications and importance than it had once been. The following year the company was again restructured when it used the cash built up during Berlin's tenure to buy back the stock held by Hearst charitable foundations, which had been established at Hearst's death to avoid inheritance taxes. The Hearst family regained control of the company's assets, now privately owned, and the chain of command within the company was simplified. Throughout the second half of the 1970s, under the leadership of John R. Miller, Hearst experienced a huge growth in profits, as properties that had been allowed to lie dormant began to produce. For instance, the company tapped the reserve of goodwill built up in the names House Beautiful and Good Housekeeping when it successfully spun off Colonial Homes and Country Living from the older publications.

New Ventures in the 1980s and Early 1990s

In 1979, Hearst again began to expand its newspaper holdings by buying five daily papers in mid-sized cities in Michigan, Texas, and Illinois. In the early 1980s, acquisitions continued until the newspaper group was 15 strong, with publications in Houston, Seattle, Los Angeles, and San Francisco, as well as other, smaller cities.

By the start of the 1980s, the Hearst magazine division was the largest U.S. producer of monthly magazines. It continued to perform well throughout the 1980s, adding Redbook, Esquire, a U.S. version of the British Connoisseur, and other titles. The Hearst magazine distribution network, which already included three subscriber services, purchased a fourth, Communications Data Services, Inc., in 1982.

During the 1980s the company's scope shifted beyond print to encompass the whole spectrum of communications enterprises. Television and radio stations were acquired, and partnerships were formed to create the Arts & Entertainment Network (A&E) and LIFETIME, a network devoted to programming for women. In late 1990 the company bought a 20 percent interest in the sports network ESPN.

In 1995, A&E launched The History Channel, devoted to historical programming and viewed by more than 37 million households in the United States. Also that year, Hearst partnered New Century Network, a national network of local online newspaper services, with eight other newspaper publishers; the company ceased, however, its CD-Rom operations that were part of Hearst New Media & Technology. In 1997, A&E teamed up with Groupe AB of France to launch La Chaine Histoire, to offer French viewers French and international history programming drawn from the History Channel International's program catalogue.

New Deals in the Late 1990s and After

The Hearst Corporation's forays into new media continued in the late 1990s. A major deal was the merger of Hearst's six television stations with Argyle Television in 1999. Argyle was a young company headed by Robert Marbut, whose career spanned the newspaper, broadcast, and direct mail industries. The combined company became a publicly traded entity, Hearst-Argyle Television Inc. The new company owned a total of 15 television stations and had assets of around $1.8 billion. The deal was spearheaded by Hearst CEO Frank Bennack, Jr., against the wishes of some of the Hearst heirs. William Randolph Hearst II filed a lawsuit protesting the plan, but the deal was completed anyway. Hearst Corp. owned 86 percent of the new company, which soon grew to blockbuster proportions. By 2002, it owned 26 television stations, claiming 17.5 percent of U.S. households as viewers. The Hearst Corp. also invested in a variety of on-line media in the late 1990s. Its business publishing division bought up a web-based electronics industry inventory database called Stocknet in 1999. The company was also part of a media consortium that bought an Internet-based classified ad distributor that year called AdOne. The company reorganized its New Media & Technology division in 1999, renaming it Hearst Interactive Media. The division collaborated with other investors and the toy company Mattel to form a new Internet company Genealogy.com. The company made many other stabs into computer-based media, many in joint ventures with other companies.

In print media, the Hearst Corporation also made major changes in the late 1990s. One of its big successes was the magazine division's launch of O, The Oprah Magazine in April 2000. The glossy monthly was a joint venture with television talk show hostess Oprah Winfrey. By its sixth issue, O had garnered 900,000 readers and was pulling in hundreds of pages of advertising. The magazine division accounted for an estimated $1.5 billion of Hearst's revenues for 1999, with $1.4 billion coming from newspapers, $900 million from its various cable holdings, and $500 million from its publicly held subsidiary Hearst-Argyle. Overall, revenue climbed 16 percent in the last two years of the 1990s, according to estimates made by Forbes magazine (December 25, 2000). In its march toward ever higher profitability, Hearst Corp. decided to fold William Randolph Hearst's first paper, the San Francisco Examiner, in 2000, and bought the city's rival paper, the Chronicle. Hearst Corp. paid $660 million for the Chronicle, a morning paper which was a stronger seller. The deal was complex. The two papers had had a joint operating agreement since 1965, but the weak performance of the afternoon Examiner led Hearst to announce it would shut the paper down. But when Hearst purchased the Chronicle, it was soon slapped with an antitrust suit alleging the single paper would form a monopoly. Though the suit was eventually dismissed, Hearst ended up selling the Examiner to a rival San Francisco publisher, Ted Fang. Hearst then gave Fang's company a $66 million subsidy to help get the newspaper going. Hearst hired most of the Examiner's staff for the Chronicle, and both papers put out their first editions under new management on the same day in November 2000.

Hearst CEO Bennack retired in December 2001, after leading the company for 23 years. He was credited with having grown the company into a modern media complex, while increasing revenue sevenfold and plumping profits to thirteen times what they had been when he started. He was succeeded by Victor F. Ganzi, formerly chief operating officer, who had been with Hearst since 1970. At the time of the transition, the company seemed to be in good shape, with a sound portfolio of media properties. The Hearst Corporation had evolved from a newspaper chain known for sensationalism and irresponsible journalism, and dominated by the will of one man, to a vast and highly profitable enterprise encompassing a broad range of communications fields.

Principal Subsidiaries: Hearst-Argyle Television, Inc.; iVillage Inc. (25%); King Features Syndicates, Inc.; A&E Television Networks (37.5%); ESPN, Inc. (20%)

Principal Operating Units: Hearst Magazines; Hearst Newspapers; Hearst Entertainment & Syndication; Hearst Business Media; Hearst Interactive Media; Hearst Broadcasting.

Principal Competitors: Gannett Co., Inc.; Knight Ridder Inc.; Condé Nast Publications Inc.; Viacom Inc.

Chronology

• Key Dates:
• 1880: George Hearst acquires the San Francisco Examiner in payment for gambling debt.
• 1887: Son William Randolph Hearst begins running the Examiner.
• 1895: Hearst acquires the New York Journal.
• 1903: The Hearst empire moves into magazine publishing.
• 1923: Hearst moves into radio with purchase of WISN in Milwaukee.
• 1951: William Randolph Hearst dies, leaving company to be run by non-family management.
• 1979: The Hearst Corp. begins to expand its newspaper holdings.
• 1999: The publicly owned Hearst-Argyle Television formed.
• 2000: The company buys the San Francisco Chronicle and sells the Examiner.