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The Dallas morning blues: it's been nothing but bad news lately for Belo, the media conglomerate that owns the state's leading newspaper. But to understand how Texas's oldest company can survive in the brave new world, you have to read between the lines.

Article Excerpt
The following tabloid-style headline would never run in the conservative, sober sided Dallas Morning News: "Scandal Shocks Family Empire!" Nor would this shamelessly embellished subhead: "Company Reels From Onslaught of Bad News." Both, however, could easily describe, in a sensationalized and distinctly un-Morning News sort of way, the current plight of Belo Corp., the company that owns the Dallas newspaper. In August, Belo chairman Robert Decherd indeed shocked his family's empire when he announced that the Morning News had somehow "overstated" its Sunday circulation by 11.5 percent and its daily circulation by 5 percent. Though some critics preferred the word "fudged," either way, the numbers--a key determinant of ad rates--were staggering, and a deep embarrassment to the paper. (The errors were later upwardly revised to 11.9 percent and 5.1 percent.) They meant, among other things, that sales of more than 90,000 Sunday papers were pure fiction. Belo's stock price tumbled, while Decherd and his fellow officers scrambled to control the damage. Decherd immediately announced a plan to compensate advertisers by sending out 19,000 checks worth a total of $21 million, fired most of the managers in the circulation department, canceled management bonuses, including his own, and paid a law firm $2 million to find out how such an unthinkable mistake had been made.

The effect on the people who own and manage the company was, by their own accounts, devastating. Belo is not just any media outfit. It is Texas's oldest and most influential company. Robert Decherd is a great-grandson of G. B. Dealey, the man who founded the Morning News in 1885, as is the paper's publisher, Jim Moroney. Though Belo owns four newspapers and nineteen television stations across the country, including WFAA, in Dallas, KHOU, in Houston, and KVUE, in Austin, its financial and spiritual hub has always been the Morning News. "You could not have come up with something," says Decherd, "that would have been more disappointing or more hurtful to the men and women who run this company at the top."

But it was not the end of the bad news. Less than two months later, Belo announced that it was laying off 250 workers--150 at the Morning News alone--citing sluggish growth and depressed ad revenues. The paper, as it turns out, was losing readers and circulation even before the scandal. Home delivery had dropped 10 percent since 2000. Its Sunday circulation had dropped 3.9 percent from the previous year. Profitability had been off 35 percent in the previous three years. Meanwhile, over at WFAA, Belo's broadcast flagship, ratings were half what they had been a decade before. Critics--mostly former star reporters for the Morning...

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