Saturday, August 23, 2008


Family Cottages and Newspapers

I recently spent a pleasant week in a cottage on a lake in Michigan. The lake is near Traverse City. The cottage is jointly owned by members of the family of my late sister's husband. He has a 1/7 share of the cottage and the property. The other six children of his parents each inherited a similar share. By now most of the original heirs have died and bequeathed their shares in the cottage to their children. Some of the children have 1/21 share each of the property.

At first all the heirs shared in the upkeep of the cottage. They still share in paying the property taxes owed each year to the county and the township in which the cottage is situated. However, many of the heirs now live in distant States: California and Nebraska and others. These distant heirs rarely if ever visit the cottage and are annoyed at the prospect of having to share in paying the utility bills, let alone painting and other repairs needed on a regular basis because of the harsh winters in Michigan. The task of maintenance falls on the two heirs who still live in Michigan.

Sooner or later the time will come when the family will decide collectively that maintaining the cottage is too much bother for a family and will decide to sell the cottage and the land it occupies. I suspect the new owner will raze the cottage and replace it with a more modern dwelling.

A similar fate seems to overtake newspapers that are owned privately. The original creator of the paper started with a small weekly and gradually expanded it into a daily paper. He or she worked hard to build up a news staff and a business staff to solicit advertising. Eventually the paper became one of the leading news sources in the nation.

Meanwhile, the original owner died and bequeathed the newspaper to his children. They in turn bequeathed it to their children, and so on. The newspaper was a good source of revenue for the family, and excess money was invested in other enterprises. The family became wealthy.

Finally, the family found that they could no longer agree on how to manage the newspaper. They decided to convert it to a publicly held corporation and sold shares of stock. For a while members of the family retained ownership of a majority of the shares, but eventually they decided to invest their money in something more profitable. Another news corporation took over the paper and discovered that the return on the investment was lower than the average return on other shares traded on Wall Street. The new owners undertook to cut costs by getting rid of some of the members of the news gathering staff. This started a downhill path for the paper. Less news meant fewer readers. Fewer readers meant fewer advertisers. Fewer advertisers meant less money. Costs were cut again by laying off more news staff. And so it went.

By now you may have guessed that the newspaper in question is the Los Angeles Times. It has been acquired by the Tribune Company and is experiencing the decline described above.

The moral is, family ownership of a cottage or a newspaper is fine as long as the family is interested in maintaining the cottage or newspaper. When the family loses interest, the property is sold and the new owners demolish the property (cottage or newspaper) and sell the remainder (the lot or the building and equipment of the newspaper).

Sic transit gloria mundi.

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