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Taxes Take Toll on Family-Owned Newspapers in U.S. By Loren Fleckenstein,The Press -Enterprise Leaders of family-owned newspapers, their ranks diminished by the rise of big newspaper chains, expressed sadness Friday after learning a Dallas-based company will buy majority ownership of The Press Enterprise. A.H. Belo Corp., a company with newspapers and television stations across the country, is acquiring controlling interest in the Press Enterprise Co., ending the Hays familys 67-year ownership of the newspaper. The newspaper joins a long list of once-independent newspapers now owned by conglomerates that began snapping them up in the 1970s, Today the forces pushing families to sell include the twin realities of high inheritance taxes and the high cost of upgrading operations in a rapidly changing technological environment. "Its like one of the brethren leaving the flock," said Mike Fisch, president and chief executive officer of the Bakersfield California, which is owned by the Fritts family. "Among the independent newspapers, that is, those of us that are left, we stick pretty close together," Fisch said. "Were disappointed and dismayed a little bit, but we understand." Publisher Frank Blethen, whose family owns a controlling 51 percent share of the Seattle Times, praised A.H. Belo for maintaining high standards of journalism and community service. "Thats the good news for The Press-Enterprise--Belo runs their newspapers very much as a family business," he said. However, no outside company responsible to investor stockholders can match the dedication of local owners to their local communities, Blethen said. "Every time I see a family newspaper go out of the hands of the family, I think its a sad day for that community and for the newspaper industry," Blethen said. Of the nations 1,020 daily newspapers, 325 remain independent, a number that continues to decline. Maryland-headquartered newspaper analyst John Morton said. Only a handful of family-owned newspapers have circulations comparable to the 162,235 of The Press-Enterprise. Most family newspapers have circulations less than 20,000, Morton said. "It is one of the last big newspapers controlled by a local family," Morton said. The most important factor pushing family owners to sell newspapers, Blethen and Fisch said, is the federal estate tax. Adopted in 1916 to break up large fortunes, the tax can force heirs to pay taxes up to 55 percent of their inheritance. "Its like the sale of the family farm. You have all the money wrapped up in the land. So when mom or dad dies, you have to sell the farm to pay the estate taxes," Fisch said. Congressional Republicans are pushing to reduce or even repeal the tax. Estate tax reform, Fisch and Blethen said, would significantly reduce the sales of all sorts of family-owned businesses, including newspapers. The high cost of upgrading plants to keep up with the fast-changing information and publishing industries also pushes independent newspapers into the arms of large corporations. The chains have the deep pockets to invest in expensive new publishing technology. They can command deep discounts for newsprint and other raw materials and supplies by buying in high volumes, Morton said. Last month, the Patriot Ledger, which has served the Quincy area south of Boston for 160 years under local ownership, went on the block. The 83,000-circulation daily newspaper has been owned by the Lowe family for four generations. Editor William Ketter said he was deeply saddened by Publisher K. Prescott "Scott" Lowes decision to sell the newspaper, but Ketter said he understands the reasons. The Patriot Ledger dominates its market in terms of advertising sales and readership, Ketter said. However, revenues languished during New Englands recession, which dragged on from 1989 to 1995. Those losses were compounded by increases in the price of newsprint. The newspaper still publishes exclusively in black and white. It was unable to build up cash to invest in color printing presses and up-to-date computer systems, Ketter said. "We were starved for resources. We needed someone to come in and invest in the newspaper," Ketter said.
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