Are you guys picking up audio and mark. I guess its working. We will get you gentlemen shortly. You for joining us. Im jordan worthing, and i have the honor of introducing this mornings very special programmer, a conversation with Chris Matthews and former ceo and executive vice chairman of the Hearst Corporation frank douglas. Millions of viewers turned to msnbc at7 00 , to hear chris deliver his trademark openings to hardball. Butthe roots of his journalism career are actually with first. For over 15 years, i thought it was 12, he corrected me like a journalist, chris was Washington Bureau chief of the examiner and the syndicated columnist for the chronicle after frank bought the San Francisco chronicle and then chris went on to lunch hardball with eight bestselling books. And as everyone knows, chris returned to the air after a brief hiatus recover from Prostate Cancer surgery and we couldnt be more grateful for you to being here today. Ive had the pleasure of working with frank Frank Bennack for the last 20 years. That represents less than half of his tenure with first. As weve been blessed to have frank influence for the better part of six decades, with nearly 30 years as ceo. The franks leadership the company has expanded exponentially including historic partnerships that launched a history channel, lifetime and of course our partnership in espn. Our Television Group expanding from 30 to 33 television stations in our newspaper and magazine groups have built upon their legacies as best in class brands. What my colleagues at hearst, a lot of you here today and i are most proud of is franks moral compass and his focus on the importance of Community Service and the role our business played better the lives of our neighbors. True to form his book leave something on the table highlights the importance of corporate leadership in the communities we serve. I think frank captures the culture of our company with the following passage in the books prologue and ill summarize. I believe there was one northstar and is what you know and how hard you work, its not who you know,its how other people know you and i want to take a page and just say authors, icons and north stars, lets play hardball. Thank you. That meets any Memorial Service i ever attended. One thing is you get to find out who your friends are. Iwant to ask you first of all , hes a hero of mine here sitting to my right. Working at hearst i always did the myth and the legend so iwant you to clarify that. Maybe corrected. The idea i had about you was that in fact when i came back from the peace corps on this big empty jumbo plane before they be regulated, the plane was empty. So citizen kane was playing. That was foreboding on where i was headed but the thing was we all grew up and we said build this empire, hearst built this big empire and the lights began to come out and everybody remembers that picture of the lights going out and it was the ending of the empire and then i heard about you and i heard about you and helen, the family needed somebody like you to come out from outside area to make it stateoftheart and save it. You did that. And in the book you actually point that out. [laughter] with humility. You have one of the hearst grandkids say when are you getting your money mom . And she says from mister bennack. How did you see a way through the changes, the fact that print was going to be challenged and there was new media and you better jump on the board at places like espn . What the headlines should be in the Houston Chronicle today. Thats where i was yesterday. Got to get downtown fast. Just kidding. I always wondered what the losing team right for the headlines, twomore to go for four more to go. I say in the book that bill hearst would kick me in the hall and sayhave you bought anything today . I was buying things right and left. I think the short answer is Companies Like all institutions come to different points of their lives. I happened to come on board at a purposeful time as a whole generation of leadership was retiring because of age. Many of them had worked with Mister Hearst where he almost lost the company during that time as you know. Not in the book but i always like to talk about since arnold has specified it had not that the leadership of advertising. Theres got to be one like that at every meeting. Why did you pick the theme from the stage . Were talking about business. I didnt like it. Anyway, one of the things that helps our company get through the Great Depression was that they were behind in classified advertising in almost every market as many of them were newspapers in the world was moving to morning newspapers as Everybody Knows today along came paper rationing. Which meant all of a sudden we were getting as much paper as the other guys, the big guys and they had to cut back on their classifieds in order to take care of the rest of what the newspaper does and we were able to pick up some of that classified advertising so it lifted at a critical time and i started as a classified and salesman but to go back to your original question, it was a group of us came into authority if you will all at once and we had a huge opportunity that was created, two things were important. One was the will which i thought about in thebook. Where Mister Hearst played 13 people to the trustees of his company, only five of whom were members of his family so that in effect he made the decision to have the Company Survive and live far into the future, not put into the hands of old perfectionist and hes one of those when changes or dies, their lifetime is up one or two resigned and it must be someone not a Family Member to succeed that person and vice versa. So why is that important . We were ready to take advantage of bringing in the best management that we could andwe didnt have somebody or a Family Member saying i want that job. Its the authorities simply red light resided in the trustees and the second thing was that the Tax Reform Act of 1968 required any foundation that held more than two percent of the voting stock or 20 percent of a nonvoting stock to divest of that stock, thats how we got it held by a Charitable Organization but what did that mean that to mark it meant that the foundations Mister Hearst found gave them 136 million which was the last obligation we had to fund them and we were able now to use it to grow the company and to pay very nice dividends i might add to hearst families though both of those things worked beautifully because the Family Support would have been there, but it was really there because they could see we were making progress and dividends were improving. As i say, bill hearst loved every move that we made, every new hire that we made. Putting a guy like jim bellows and was one of the bestknown editors of that era. They loved it and they gave us all the support in the world. And our culture is the answer to it. That is were a company that cares about the employees. You work with each other. We have a singular objective to have the best company we can half and every one of our categories and when people have difficulty in performing in their job we try to help themdo that. We always assume that you change them out, my own experience is that you have about a 75 percent chance of success from within promotion and about 5050 in recruiting. And you need both because obviously if you only recruit, only put people up in the company from within, you miss a lot of knowledge and a lot of experience. On the other hand the companies that rely almost exclusively on recruiting in , there was a learning curve and very difficult to keep pace with that. So these are all a few principles that i just learned. I had no idea what i was doing. I grew up and those who read the book know the great education of my father gave me and the arts and he was an artist and a songwriter and a showman and had he not been for the depression and is taking a Civil Service job, his career would have looked more like mine and it did as a postman so as i savor about 12, he treated me as an adult and watched everything i did and up until his last day, he would say are you doing okay with Mister Hearst . He never would except that i was in charge. Just couldnt be. It was all false area. You write in the bookabout how the Hearst Family which i know is interesting , you said that it works. It does. Theres so many personalities. It works in large measure because the test data mandated this will where the management majoritywould reside. In a manner of speaking itwas mandated to work. And once they saw that that cooperation and support and we got it in spades and still get it in spades, it was i think not difficult for them to decide that this is what the test data wanted. Its working. Where doing fine. We can sell, he worked with will, will is our chairman and i when i was ceo talked regularly with him but steve runs the business and i ran the business and so you start there. Then the other issue in part is that everybody thought that because their name was first they were automatically rich and they were a part of a different society, but it wasnt so until the change and until the Company Started doing well. So i had great admiration and i talk about every one of the chairman and ive worked with every one of them at a different approach to life. They all had great senses of humor and i couldnt say more about them. That family works and today, their unified with us and with management. They have their say, but in the end we have the votes. Let me ask you about some of the decisions you made. Talk about how you want when you percent of espn 468 million and i did the math, one fifth is 36. And 40 billion is eight. Tell me the day you decided that there was money insports . It never would have happened if we had built a relationship. The late leonard goldens and who was the founder really of abc as we know ittoday and i were on the board together. Allied Department Stores and we were together at a meeting one day and we started talking about this phenomenon of cable which changed a business that was really for a better signal of existing entertainment to being a programming source and that we should do that and if we were going to lose all of money, lets do it together. So we did. We lost money for seven years before the accommodation of what is now lifetime, amd and history and during that time of course both leonard and i were hearing from despite supporting boards, its a long time, i hope you know what youre doing. Ultimately they said we really had the mark,didnt we and we did. But i on the specific, espn became an opportunityfor us. Gilmore, my seniormost partner and i decided look, sports is surefire and i got a lot of pushback because the main programming seemed almost tractor pulls at that time. We went to Major League Sports which today is a part of it but you just knew that we know that lifetime and amd were losing money but you could tell it was going to work and thats one of the principles of business. You know this and television. These guys will tell you when you can see a program is working even though its working only incrementally you stay with it and some of the most successful ones, thats what happened. They didnt do great in the early days and we knew this was going to work and of course with espn, it gave us a powerful part of our company. Its today the largest single section of our company and plays the role today that magazines played in funding the expansion that we had initially. You know that a transactional Society Today its more than ever because of the president we have, not getting into his ego in the transactionalsense, everything is show me the money. Cuba gooding although he has his own problems right now everybody does. But this idea of leave some money on the table, you have this moment in the book where you and willard are talking and will i think it was says we should have paid you more. You wrote that down. I didnt have to write that down. I was thinking about what was that all about . Its the title of your book and people go wait, people say get every nickel although he said leave something on the table, this idea of it isnt a complete you know, to the death. Between employer and employee, talk about that. As the name implies it means that the other guy doesnt have to lose for you to win. And you leave something on the table in a transaction, youll get to play another day. If you dont leave something, you wont get to play another day and i learned with all due respect and ive been waiting for a long time to say this to you, the last thing in the world we believe in at hearsts hardball. [laughter] hardball has different definitions. I understand. It does mean clean. I know youre dealing. Anyway but the idea of a transactional society, yousay if you push too hard to get the last nickel in the deal. What does that augur for the future mark. Word gets around. Its a relatively small world and all of us know what other people are doing in terms of transactions and all you have to here is that i just did this deal with soandso and it was next to impossible. We almost couldnt get it done. They didnt live up to their word and so in a small environment like that where youre dealing with, im making this up, two dozen people, you better keep your reputation clean and youd better be known as somebody that recognizes that they need to have a good outcome for this transaction. That doesnt mean that you dont work hard and that you dont try everywhere you can to maximize the return that youre going to get area you may have noticed that the round table, Business Roundtable without a paper which was really unbelievably on the mark which is that the concept that everything go to shareholder value is simply not the right way to approach business. There are communities, there areemployees , there are a lot of people who have skin in the game and all of them need to be considered whereas our law and much of business has gone down the road at your required to ensure that the shareholder gets the maximumreturns. Not all there is to life. Lets talk about newspapers in print because you and i , we talked about papers make a return and how do you justify a somewhat lower return you canmake more money selling whatever . How do you do that . As you know, our newspapers make money. They dont make the money they had at the peak. Interestingly enough the margins are similar to what they were in our better days of the top line is simply not what it was. Advertising and the other part of the equation is that the reader has been asked to pay more. The other day at the texas business hall of fame which i was inducted to a few years ago but i spoke there breakfast and a woman came up to me afterwards and said i live in austin and i take the austin statesman, thats the name of the paper and she said it was sold to the san Antonio Express news is news to us because it wasnt sold to us. We tried to buy and we didnt succeed but anyways, one point was that the price she pays now for the paper to be delivered is double what she has historically paid and its still, she didnt say this, im going to say this, doesnt cover much of the cost of distribution and what it costs to put that product together. So the fleeing of classified advertising was the biggest signal event in all of that. Went to the web and it was a big source of income for newspapers. In fact, it was confirmed to me yesterday there were days in the heyday in houston when there were 115 pages of helpwanted classified advertising in the Houston Chronicle. Hundred 15 pages. And all of that, not all of it, we still have a reasonable business of classified but that was the big change. Shorter answer to your question and that is that its in our dna but we have made it work. Their profitable businesses. Those that we acquired and we keep close tabs on this have paid forthemselves at all times over. Really we look at this as in effect a lot of that is gravy and we paid for it, we got a good return and were doing something that is good for the community and for the nation. So president obama asked me at the gridiron and i say in the book if you only broke even with your newspaper when you continue to publish them . I said we may not be the right people to ask for that because we got a Strong Organization otherwise , but we wouldnt stay in business if were losing a lot of money but you wouldnt get the same answer from an independent publisher who needs capital to stay in business. And of course were down to runs of the market except for a few places but i feel better about it just because there are several things are working that will strengthen and extend the life as far as i can see. One is where doing more and more Digital Advertising and is more and more effective, were doing that in all of our businesses but a combination of getting the reader to pay the correct price, something thats reasonable. Today thats about 12 15 a week. If youre a sevenday subscriber. And holding on and off advertising and building enough Digital Advertising is the formula for today whereas when i was a local publisher we were 90 percent advertising. But think about all the history of it. The morning paper, in philadelphia where i grew up and i used to deliver. It had the biggest roots, i had 115 papers. Everybody read the bulletin, that was the paper but then of course the market closesat three or something or four and the paper have to leave. It was more than that. But the traffic. The evening news on television and it changes society because the bluecollar worker in much of that era went to work early in the morning and came home early in the afternoon and wanted the paper in the driveway when they came home. Now their hours are a lot more like their bosses and so they have moved over to morning papers so its a change in society. Its traffic, its the inabilit