Paddock Publications, Inc.

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Paddock Publications, Inc.

155 East Algonquin Road
Arlington Heights, Illinois 60005
United States
Telephone: (847) 427-4300
Fax: (847) 427-1146
Web site: http://www.dailyherald.com

Private Company
Founded: 1898
Employees: 1,033
Sales: $100.7 million (2000)
NAIC: 511110 Newspaper Publishers

Based in the Chicago suburb of Arlington Heights, Paddock Publications, Inc. is a family-owned newspaper publisher. Its flagship publication, The Daily Herald, is the third largest newspaper in Illinois, with a circulation of nearly 150,000. Eschewing the Chicago market, the Herald serves many of the city’s suburbs by publishing a number of community-specific editions, focusing on local events while still offering coverage of national and international events. This strategy has allowed the Herald to maintain healthy growth during a time in which most newspapers have suffered severe erosion in circulation. Paddock also operates Reflejos, a bilingual Latino newspaper also catering to suburban readers. In addition, the company has significant investments in two Web businesses: DriveChicago.com and chicagojobnetwork.com.

19th-century Origins

The founder of what would become Paddock Publications was Hosea Cornish Paddock, born in 1852. He became enamored with the newspaper business early in life, starting out as a reporter at the age of 16. He worked for several downstate Illinois newspapers: the Sterling Gazette, the Prophettown Spike, and the Morrison Sentinel. For a time he also tried his hand at teaching school and working as a salesman for Rand McNally, but the newspaper business remained his passion.

At the age of 28, in 1880, he became the editor of the Plainfield Enterprise and three years later became a newspaper owner when he acquired a weekly called the Wheaton Illinoisan. After five years in operation, however, he was struck by misfortune when a friend defaulted on a loan he had co-signed, forcing him to sell the paper. Paddock briefly owned the Rochelle Register, then turned his attention to the town of Waukegan, where he and a partner launched the Waukegan Register and challenged the supremacy of the Waukegan Gazette, an effort that ultimately failed.

Paddock next moved to Libertyville, where in 1892 he started the Lake County Independent. Three years later, a fire in the town’s business district destroyed the newspaper office; unfortunately, Paddock had allowed his insurance to lapse only a few days earlier. Salvaging his printing press, he tried to continue publishing out of his home but in the end had to sell what was left of the operation. To support his wife and six children, he returned to teaching school, as well as canvassing the countryside by horse and buggy to sell subscriptions to Chicago newspapers. In 1898, he learned that the Palatine Enterprise was for sale by its owner, W.C. Williams. Paddock scraped together $275, and on December 15, 1898, he purchased the weekly newspaper that would one day evolve into The Daily Herald.

The Palatine Enterprise was renamed the Enterprise-Register, and the middle-aged Paddock devoted all his energies into making this attempt at the newspaper business a success despite considerable obstacles. His press was unwieldy, its lever so heavy that it required help from his 16-year-old son to print a page. Paddock then turned to the Chicago Newspaper Union to print the newspaper, but this required hauling heavy pages of hand-set lead type by train into the city. According to company lore, he bribed conductors with movie tickets in order to gain passage with his bulky cargo.

In addition to his other roles, Paddock continued to scour the country for subscribers, charging $1 per year. He was known to sit on a plow or other machinery a farmer might be attempting to use, refusing to leave until he received an answer. If cash was hard to come by, he also proved more than willing to accept produce in payment. Unlike previous ventures, the Enterprise-Register quickly succeeded. Less than a year later, in March 1899, he was able to purchase the Cook County Herald in Arlington Heights. He solidified his presence in that community when he eventually acquired the Arlington News and a building in town with a printing press, eliminating the need to have his newspapers published in Chicago. Paddock operated his newspapers under the company named H.C. Paddock and Sons, the sons being Stuart and Charles.

H.C. Paddock Sells Out to Sons in 1922

As a newspaper publisher, Paddock established a focus on local news that would endure until this day. He also adopted a cogent motto for the business: “To fear God, tell the truth, and make money.” Paddock added to his holdings in the early years of the 1900s, buying a number of weekly newspapers, including the DuPage County Register, the Franklin Park Beacon, and the River Grove Herald. He maintained ownership until 1922, when he sold his interests to his sons Charles and Stuart. Paddock continued to serve as a senior editor until just days before his death at the age of 83 in 1935.

Charles Paddock was in charge of production operations, while brother Stuart was responsible for editorial and business promotion operations. Stuart’s sons, Stuart, Jr., and Robert, and his daughter Margie also began to become involved with the newspapers. As boy, Stuart, Jr., worked as a printer’s devil, a job that entailed pouring molten lead into the molds that produced type. After graduating from Knox College in 1937, he was hesitant about joining the family business, concerned that it was not large enough to support him and his siblings. Instead, he elected to strike out on his own, hitchhiking to California to find a job. He eventually found himself in Cheyenne, Wyoming, where he spent his last nickel on a sweet roll. Afraid to ride freight trains with the unsavory hobos he encountered, he decided to hitchhike either east or west, depending upon chance to determine which direction he would take. A family heading to Indiana picked him up and took him as far as Iowa, where an aunt was able to give him $20 and return him to Illinois and the family newspaper business. Stuart became an assistant editor as well as a bookkeeper. After a stint in the service during World War II, he once again returned to the company, becoming a board director in 1948. Younger brother Robert also earned a degree from Knox, graduating in 1939. With Stuart in the military, he shouldered a number of responsibilities during the war in addition to his primary role as a sports editor. Margie also went to work for the family enterprise, becoming involved in advertising, and was eventually named a vice-president and assistant treasurer of the corporation.

Paddock Publications was content to remain a collection of small weekly newspapers until 1966, when the Chicago Sun-Times, owned by the heirs of tycoon Marshall Field, launched a suburban daily, The Day. By this time, Stuart Paddock, Sr. had retired and his brother Charles had assumed control of Paddock Publications. With Charles’ death in 1967 and Stuart’s in 1968, it was left to a third generation of the Paddock family to meet the challenge of The Day. Stuart Paddock, Jr., purchased the stock owned by his uncle’s son-in-law and gained control of the business. He shared ownership of the company with his brother and sister. A close-knit family, they worked together in running Paddock Publications over the ensuing years. In the short term, The Day soon proved to be a major threat to the very existence of the company. Despite increasing the publication frequency of the company’s newspapers to three times a week, circulation declined by 40 percent within three years, dipping below 20,000. Matters grew so dire at one point that the company was unable to pay Stuart Paddock, Jr.’s Lions Club dues, and he found himself refused entry to a meeting. As he later told an interviewer, “We either had to go daily or die.” In March 1969, soon after he became president of Paddock Publications, he oversaw the conversion of the company’s weekly newspapers to a five-day-a-week daily called The Arlington Heights Herald. The fortunes of the company quickly reversed, and little more than a year later management of The Day decided to quit the field, selling out to Paddock Publications. In order to finance the deal, the Paddocks had to bring in some outside investors, who then advised them to sell the operation and turn a tidy profit. Instead, the Paddocks began to buy back the stock, which they eventually put to use in an employee retirement trust. In 1970, Paddock Publications also entered Lake County, where a number of community weekly papers were established.

Arlington Heights Herald Becomes The Daily Herald in 1977

While the Herald began to enjoy steady growth as a daily, the prospects for newspapers in Chicago were not as bright in the early 1970s. The city boasted four dailies, including Chicago Today, the Chicago Tribune, the Chicago Sun-Times, and the Chicago Daily News. Combined circulation topped 2.1 million. By the mid-1980s, only two papers remained in business, the Sun-Times and the Tribune, with a total circulation of less than 1.4 million. The new battleground for subscribers lay in the suburbs, where Paddock Publications was well entrenched. In 1975, a Saturday edition was added to its daily newspaper; in 1977, the Arlington Heights Herald changed its name to The Daily Herald; and in 1978, a Sunday edition was introduced, making Paddock a major force in the Chicago suburbs. The Lake County weekly papers then went daily in 1984. Moreover, Paddock Publications expanded into DuPage, Kane, McHenry, and Will counties. The Herald launched a number of zoned editions targeting individual communities featuring at least one local lead story each day. As a result of these efforts, circulation grew to 73,000, and the Herald became Illinois’ fourth-largest daily newspaper. Moreover, Paddock Publications published This Week, a free shopper with a circulation topping 250,000. To support this increased activity, the company opened a state-of-the-art printing plant.

Company Perspectives:

Our Aim: To fear God, tell the truth, and make money.

Despite competition from the large Chicago dailies and rival suburban publishers, Paddock Publications continued to enjoy sustained growth with the Herald. By 1991, circulation exceeded 100,000, making it the state’s third largest daily newspaper. In large part, this success was a reflection of the Chicago suburbs coming of age. No longer mere bedroom communities living in the shadow of a major city, they were establishing their own identities and special needs, which in turn could be addressed by a local-oriented newspaper. Since the early 1980s, the Tribune and Sun-Times attempted to follow this significant shift in population by establishing suburban bureaus. The Herald strategy was to target high-growth areas, mostly in the western and northwestern Chicago suburbs, then enter the markets by launching zoned editions. By the end of 1997, paid circulation of the Herald had reached 132,000.

During the 1990s, Paddock Publications took on the Chicago newspapers in court. In 1993, it sued the two dailies as well as several major syndicates, including the Los Angeles Times-Washington Post News Service, Times Mirror Co., New York Times Syndication Sales Corp., Creator Syndicate, King Features Syndicate, United Media, and Universal Press Syndicate. Paddock Publications charged that the defendants violated the Sherman Antitrust Act because of their contracts that granted exclusive rights to the large newspapers for the most popular features, cartoons, and news services, thereby stunting the growth of smaller newspapers such as the Herald. Although Paddock Publications lost the case initially, it pursued the appeals process all the way to the U.S. Supreme Court. In the end, however, the Supreme Court refused, without comment, to consider the case.

In the late 1990s, the three aging Paddock siblings took steps to insure that the newspaper business remained independent and within the family. They created a trust to minimize federal estate taxes, which in many cases force the sale of family businesses. The first of the three children of Stuart Paddock, Sr. to pass away was Margie Flanders in 1997, followed by brother Robert in 1999. In the meantime, Stuart Paddock, Jr. stepped down as CEO of the company, turning over the reins to Daniel E. Baummann. Paddock remained chairman and publisher, and like the Paddocks of earlier times remained quite active in the running of the business well into his eighties.

Baumann had a long history with the Herald, starting in 1964 as a reporter. In the 1970s, he became an editor, then rose to the rank of chief operating officer in 1988. Under Baumann’s leadership, Paddock Publications turned its attention to the Internet in the late 1990s. It teamed up with the Chicago Sun-Times and the Herald News of Joliet, Illinois, to create a regional classified advertising Web site in 1999. Although rivals, the newspapers agreed to work together to fend off upstate Internet companies looking to poach on their classified ad business, which accounts for about 40 percent of revenues at most dailies. In 2000, Paddock Publications formed a partnership with the publisher of the Sun-Times, Hollinger Publications, and the Chicago Automobile Trade Association to launch DriveChicago.com, a new and used car Web site that offered the auto classified ads of the participating newspapers as well as those of some 650 area auto dealers. On a more traditional front in 2000, Paddock Publications acquired Reflejos, a ten-year-old monthly bilingual Latino paper with a circulation of 28,000 in Chicago’s suburbs. The company also initiated plans to build a major new printing facility to improve the quality of its publications.

In 2002, Paddock Publications underwent a number of significant changes. Baumann was succeeded as CEO in January by Douglas Ray, who like his predecessor had originally worked as a reporter, joining the Herald staff in the early 1970s. Of more significance in 2002 was the passing of Stuart Paddock, Jr., who in April succumbed to congestive heart failure at the age of 86. The growth of the Herald under his leadership had been impressive. When he converted the community newspapers into a daily, circulation had fallen to just 11,800. At the time of his death the Herald boasted a circulation of 148,856, making it not only the third-largest daily in Illinois but also the 84th largest in the country. His voting control interest in the Paddock Publications now passed to the three-member trust he set up with his brother and sister. Although this arrangement offered the best chance for the Herald to remain one of the last family-owned independent newspapers in America, there was no guarantee that market forces, as well as a change in family wishes, might not result in the eventual selling of the business. In the meantime, however, management of Paddock Publications planned to continue its expansion into the Chicago suburbs.

Principal Competitors

Gannett Co., Inc.; Knight Ridder Inc.; The Copley Press, Inc.; Hollinger International Inc.; Tribune Co.

Key Dates:

1898:: Hosea Paddock buys the Palatine Enterprise.
1922:: Paddock’s sons, Stuart and Charles, assume control of the newspaper chain.
1969:: The company’s weekly community newspapers become a five-day-a-week publication, the Arlington Heights Herald.
1975:: A Saturday edition is added.
1978:: A Sunday edition is added.
1991:: Circulation tops 100,000, and the Herald becomes Illinois’ third-largest daily newspaper.
2002:: Stuart Paddock, Jr., dies, and controlling interest in the company passes to trust.