"In this market, where we built the largest ad agency since N.W. Ayer left town, I learned you can't buy around the newspapers," he said. "I always thought that they were leaving a lot of money on the table."
Mr. Tierney leads investment group Philadelphia Media Holdings, which this week paid $562 million for Philadelphia's two major daily newspapers. He is best known for founding Tierney Communications and turning it into the City of Brotherly Love's most prominent ad agency before selling it off to Interpublic Group of Cos. And he predicts that the same outsider perspective that helped him in advertising can revitalize revenue and circulation at the Philadelphia Inquirer and Daily News.
Citing its tepid growth prospects, robust cash flows and ample profitability, media-industry observers have long opined that newspapers are a better business for private investors-who typically care more about cash flow than growth-than for publicly traded companies. But this sale from a large media chain to a group of local investors is the first big deal to bank on that assumption.
It frees the 705,965-circulation Philadelphia Inquirer and the 123,483-circulation Philadelphia Daily News from Wall Street's oppressive growth and profit-margin expectations-which neither paper was meeting, due to falling circulation and rising costs. But will a new ownership group led by a veteran PR executive be any better for advertisers?
Mr. Tierney said Wall Street analysts too often dismiss newspapers because of their aging readership and don't consider the possibilities for capitalizing on dailies and the authority they bring. "You can have a great business with [readers] over 25 or 30," Mr. Tierney said, adding that there are plenty of opportunities to reach out to a younger population as well.
"I have two children, 20 and 23, and they read an awful lot," he said. "What the print publication has to do is to reach out and connect at a different level with a younger audience. It's not, 'You are wrong and we are right.' We have Web sites and print publications, and the issue is relevancy."
Mr. Tierney likened his new venture to building his agency during the 1990s. His challenge wasn't coming up with campaigns, but rethinking and developing platforms. "I looked at it a lot differently from a lot of other people because I came out of a different environment," he said, noting his lack of advertising background at the time.
The deal turns PMH into a major media presence in the nation's No. 4 media market. In addition to the Inquirer (No. 8 nationwide) and the Daily News (No. 98), the group also will own the papers' joint Web site, Philly.com. Last year, the cluster generated nearly as much national-ad revenue ($97 million) as the entire McClatchy chain ($100 million).
Mr. Tierney's new team of owners includes "savvy businesspeople" with significant experience and perspective on strategies to grow the brands, Mr. Tierney said. "With people like [NutriSystem Chairman-CEO] Michael Hagan, who started Verticalnet, we have smart people who aren't normally involved in newspapers. We won't cure cancer and we don't expect all others to fall over," but he believes they can turn the properties around.
One of the first signs of change was evident in the sale announcement, which did not use either the Philadelphia Newspapers logo or the Philadelphia Media Holding logo. Instead it went out under the banner of the three brands-The Philadelphia Inquirer, The Philadelphia Daily News and Philly.com. The company will launch the first extensive marketing campaign for the papers in several years, Mr. Hagan said.
Private ownership of the papers-the dailies had been owned by Knight-Ridder, then briefly by McClatchy Co.-will allow the kind of investments needed without worrying about meeting short-term profit goals, Mr. Hagan said. "Instead of looking to each quarter's earnings, we can build these businesses for what is best. Corporate ownership is great in certain times, but when industry is going to transition, private ownership offers advantages."
contributing: jeremy mullman