The Thomson Corporation

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The Thomson Corporation

Toronto Dominion Bank Tower, Suite 2706
P.O. Box 24
Toronto-Dominion Centre
Toronto, Ontario M5K 1A1
Canada
(416) 360-8700
Fax: (416) 360-8812

Public Company
Incorporated: 1977
Employees: 46,400
Sales: $5.98 billion
Stock Exchanges: Toronto Montreal London
SICs: 2711 Newspapers; 2721 Periodicals; 2731 Book Publishing; 2741 Miscellaneous Publishing; 7999 Amusement and Recreation, Nec

A towering media, information, and travel empire, The Thomson Corporation ranks as the fifth-largest and third most profitable publisher in the world, according to Fortune’s July 1992 global business survey. Through its three major groups—Thomson Information/Publishing, Thomson Travel, and Thomson Newspapers—the sprawling, markedly decentralized company can lay claim to dozens of definitive trade periodicals, including American Banker and Physicians’ Desk Reference; a number of market-leading niche publishers, including military specialist Jane’s Information Group, who together provide over 50,000 individual products; the largest commercial provider of scientific data in the world, the Institute for Science Information; the leading British retail holiday chain (Lunn Poly); the leading British leisure airline (Britannia Airways); the largest collection of regional newspapers in Great Britain; and the largest chain of Canadian and U.S. daily and weekly newspapers, over 200 in all. Founded with a small radio station in the 1930s by Ontario entrepreneur Roy Thomson, the company evolved by Thomson’s death, in 1976, into the largest privately owned communications conglomerate in the world, then named The Thomson Organisation (subsumed in 1978 by the public holding company International Thomson Organisation Ltd.). The Thomson Corporation was created in June 1989 by a merger of the Toronto-based Thomson Newspapers Ltd. and International Thomson, to control newspaper, publishing, database, and travel holdings centered principally in the United States, Canada, the United Kingdom, Australia, and Scandinavia. Control of the company has long rested in the hands of Thomson’s son, Kenneth, as well as company president Michael Brown and deputy chairman John A. Tory. Thomson (Canada’s richest man and heir of his father’s title, Lord Thomson of Fleet) also has a 25 percent stake in the venerable Canadian department store chain Hudson’s Bay Co. and an 83 percent interest in Markborough Properties, a real estate development company.

Born in Toronto in 1894, Roy Thomson left school at 14 to become a bookkeeper and, later, branch manager of a cordage company. After a brief, unsuccessful attempt at farming in Saskatchewan, he returned to Ontario in 1920 to establish an automotive parts distributorship, which also proved unsuccessful. Finally, in 1930, Thomson agreed to a franchise arrangement to sell radios in the remote town of North Bay. As Susan Goldenberg reported in The Thomson Empire: “Only someone with Thomson’s optimism, stamina and ebullient salesmanship would have accepted such an assignment under the odds he faced. In addition to the Depression and poor radio reception, the single transmitter in North Bay was decrepit.” Thomson solved the predictable problem of feeble radio sales by opening his own radio station, CFCH, in 1932 on borrowed money. Roy Thomson’s avowed ambition was to become a millionaire by the time he was 30 but, nearing the age of 40 now, he was nearly penniless. His decision to capitalize on advertising revenue in his current venture, however, helped him to belatedly achieve his goal several hundred times over. Within two years of CFCH’s debut, Thomson had bought additional stations in Kirkland Lake and Timmins. This latter purchase coincided with Thomson’s entry into newspaper publishing, another source of advertising revenue and what would soon be the cornerstone of his empire, via the Timmins Press, a paper whose offices were in the same building as his newest station. By 1944 his holdings included five newspapers and eight radio stations. Newspapers became Thomson’s main concern, while Jack Kent Cooke, with whom he went into partnership in 1940, assumed management of the radio end of the business. Their partnership ended in 1949, just as Thomson began buying newspapers outside Ontario.

In 1952 he bought his first non-Canadian newspaper, the Independent of St. Petersburg, Florida, to add to the 12 he already owned. A turning point came in 1953, when Thomson moved to Great Britain, leaving his North American operations under the control of Kenneth, then 30. Thomson’s first U.K. acquisition was the Scotsman, a prestigious Scottish daily that had been founded in 1817 but was suffering financially. Owning Scotland’s leading newspaper put Thomson in an excellent position to make his successful bid for a commercial television franchise covering central Scotland when it became available in 1957. Famous for his frugality as well as for his quotes on the topic of wealth, he called this coup “a license to print money.” The enormous profits from Scottish Television (STV) made it possible for him to buy London’s leading Sunday paper, the Sunday Times, as well as 17 other local newspapers, from the Kemsley family in 1959. This was the first “reverse takeover” in U.K. business history. Kemsley Newspapers bought Thomson’s STV company in return for Kemsley shares, which gave Thomson majority control of the group and allowed it indirectly to retain STV as well, with 70 percent control of the total business. Later, stricter government controls led to a forced reduction in Thomson’s holding and the company sold its remaining interest in 1977.

Presciently, Thomson did not restrict himself to newspapers and television. Thomson Publications, the forerunner of what has become Thomson’s largest and most profitable group, Thomson Information/Publishing, was established in 1961 to publish books and magazines. This subsidiary began with the acquisition of the Illustrated London News Company, which owned not only the magazine of that name and the Tatler, but also the trade book publisher Michael Joseph. To this base Thomson Publications added in the first half of the 1960s the educational publisher Thomas Nelson & Sons; George Rainbird, specializing in illustrated books; Hamish Hamilton in trade books; and Derwent Publications in scientific and technical information. The company moved into consumer, professional, and business press publishing in the United Kingdom, Australia, and southern Africa. It also revamped the regional newspaper group; launched four newspapers; started new magazines, including Family Circle and Living, to be distributed only through supermarkets (a novel concept that proved highly successful in the United Kingdom); and started the Sunday Times color magazine, which by 1963 was an unqualified success. In addition, Thomson Publications created a paperback imprint, Sphere, in 1966, aiming its titles at confectioners, news agents, and tobacconists rather than established bookshops. This venture suffered losses, in part because it could not secure the paperback rights of books published by other Thomson companies, since most of these had already been bought by rival paperback publishers.

In 1964 Roy Thomson made it clear that Britain rather than Canada was now his base by taking British citizenship and accepting a seat in the House of Lords as Lord Thomson of Fleet, an honor sponsored by prime minister Harold Macmillan. From television, newspapers, books, and magazines, Thomson next extended his empire into the travel business starting in 1965, when foreign travel was just beginning to become a popular activity in Britain. Three existing package tour companies and a small airline, Britannia Airways, were bought and formed the basis for Thomson Travel. After an initial period of good profits, the company encountered intense competition in the early 1970s, which resulted in the failure of several competing companies. Thomson Travel survived as the largest operator due to a reconstruction of its management, organizational, and commercial policies.

In 1972 the group moved into travel retailing with the acquisition of Lunn Poly. Thomson introduced Yellow Pages to the United Kingdom as a long-term profit venture. Once he had won the contract from the Post Office to sell advertising in its telephone directories, Thomson persuaded the agency of the need for a classified directory for all 64 telephone regions. From this enterprise the company learned the constraints and difficulties of working in a commercial venture with a public utility. In 1980 International Thomson relinquished the Yellow Pages contract and started its own local directory operation in partnership with the American firm Dun & Bradstreet.

Thomson had been looking for a national daily newspaper to put together with the Sunday Times, and in 1966 he bought the London Times and its associated weeklies, Times Literary Supplement and Times Educational Supplement, from the Astor family. Thomson described the acquisition as the summit of a lifetime’s work, and the man who admitted that he was “tighter than any Scot” cheerfully bore the continuing financial losses as his one extravagance. At the time of his death, the Times’ American counterpart, the New York Times, reported that“Lord Thomson poured at least £10 million into rescuing the Times, expanding the newspaper’s staff, introducing a business supplement, promoting the daily issues, livening up the stolid paper … and peeking to give it a new informal style,” Yet, “the newspaper itself, now plagued by spiraling newsprint costs coupled with the impact of the stagnating British economy, remains in somber financial shape.” It would be left to his son to sell this prized possession. Perhaps even more to his credit than his financial commitment was Roy Thomson’s well-known pledge, applicable as much to the Times as any of his other holdings, that the editorial support of his newspapers was not for sale to anyone, that the organization’s headquarters would not guide the policies of the papers, and that the papers’ editors would be free and independent.

In 1971 the Thomson group went into its single most profitable area of business when it joined with Occidental Petroleum, Getty Oil, and Allied Chemical as the sole U.K. partner in a bid for licenses to explore for oil in the North Sea. The consortium’s first strike, in 1973, was in the Piper field, containing more than 800 million barrels of oil. Thomson rejected the U.S. partners’ offer to buy his 20 percent stake, and his investment turned out even wiser than had been expected when a second strike, in the Claymore field in 1974, brought the consortium another 400 million barrels. Within a decade the International Thomson Organisation was gaining most of its overall profits from North Sea oil on the basis of an initial stake of just $5 million and a series of bank loans using the oil itself as collateral. In 1977 International Thomson showed a trading profit of almost $190 million, compared with less than $20 million in 1971.

When Kenneth Thomson succeeded his father, he inherited control of a $750 million media monolith. British government policy on monopolies prevented expansion of newspaper holdings in the United Kingdom, and exchange controls—since abolished—would have made overseas investment from a base in London very costly. The decision was made to concentrate on expanding in North America by investing oil profits into publications and publishers with proven track records. In 1978 International Thomson Organisation Ltd. (ITOL) was established and corporate headquarters were moved back to Toronto. ITOL’s philosophy, according to a 1988 Forbes article, became: “Buy the market leader, even in a specialized field, and then you can afford to pay for the acquisition.”

In 1979 ITOL’s first acquisition in North America was the U.S. college textbook publisher Wadsworth Inc., quickly followed by others in business and professional publishing and information services, such as Callaghan & Company, Van Nostrand Reinhold, Research Publications, and Warren, Gorham & La-mont, as well as numerous business magazines. By 1983, 25 percent of ITOL’s sales were to the United States and nearly 20 percent of its work force was employed there. Acquisitions continued over the next several years, bringing in such companies as Gale Research (parent company of St. James Press); American Banker/Bond Buyer; South-Western Publishing Co.; and Mitchell International.

Back in the United Kingdom, Times Newspapers had become a source of continual trouble for the group. By 1978 strikes over pay and conditions were seriously disrupting the publication of both titles. The situation continued to deteriorate until the company suspended publication for 11 months. Not long after the papers’ operations resumed, International Thomson gave up the unequal struggle to introduce new technology on terms acceptable to the company and, in 1981, sold the titles to Australian media magnate Rupert Murdoch for £12 million; the trading losses and losses on disposal for the previous year were an estimated US$36 million.

The Canadian company Thomson Newspapers Ltd., which was separate from ITOL, had long restricted itself to owning small Canadian and U.S. newspapers with circulations below 20,000; the strategy was in keeping with Roy Thomson’s drive to contain costs while nonetheless being assured of near monopolies in local advertising. During the 1950s under Kenneth Thomson, the group published the largest number of newspaper titles in Canada. In the following decade a bold U.S. acquisition program was launched. In 1967 the company acquired 16 daily and 6 weekly newspapers, mainly from the purchase of The Brush Moore Newspaper, Inc., and was publishing more daily newspapers in the United States than in Canada. By 1974 the group owned more than 100 newspapers.

In 1980 its profile was transformed through the acquisition of FP Publications and its chain of newspapers in most of the big cities of Canada, including Toronto’s Globe & Mail, which Thomson has tried to turn into a national newspaper along U.K. lines. Soon afterward Thomson closed down one of the FP papers, the unprofitable Ottawa Journal. Simultaneously a rival newspaper chain, Southam, closed down its Winnipeg paper and bought Thomson’s shares in two newspaper firms in Montreal and Vancouver, while Thomson closed down the FP News Service.

By the 1980s Thomson Travel ranked as the largest inclusive tour operator based in the United Kingdom (about three times the size of its nearest rival), owned the country’s biggest charter airline, and was one of the largest travel retailers. Within a few years of entering the U.S. market it became one of the top three U.S. tour operators, although by 1988 it had withdrawn completely in order to concentrate on its activities based in the United Kingdom. This same year Thomson strengthened its U.K. leadership in tour operating, charter airlines, and travel retailing with the acquisition of the Horizon Travel Group, which had been one of its major competitors.

For ITOL, expansion continued throughout the 1980s in Britain and the United States alike. With the 1986 acquisition of Southwestern, the largest American publisher of business textbooks for schools and colleges, ITOL became second overall in U.S. college textbook publishing. The following year saw one of ITOL’s biggest British purchases, when it acquired Associated Book Publishers (ABP), a group including the legal publisher Sweet & Maxwell and the academic publisher Routledge, Chapman & Hall. ABP represented a major advance for ITOL in legal, scientific, technical, and academic publishing in the United Kingdom, North America, and Australia.

This trend toward what Laura Jereski calls “high-profit publishing niches,” was orchestrated by Thomson’s right-hand man, Gordon Brunton, and furthered by Michael Brown; both were keenly aware that ITOL’s oil holdings were rapidly becoming depleted. The 1986 fall in oil prices dragged the North American petroleum subsidiaries into overall losses and both were sold off in 1987. In 1989 ITOL finalized its move away from oil and gas by selling its remaining British interests. Although the immediate cause was the major accident on the Piper Alpha oil rig in 1988, the longer-term rationale was that the company had been less and less dependent on North Sea oil revenue, which had fallen both absolutely and as a proportion of ITOL’s business since its peak in 1982. At that time it had provided about 75 percent of ITOL’s profits, but by 1985, when the Scapa field in which it had invested came onstream, this proportion had fallen to just over 50 percent.

By leaving the petroleum industry altogether ITOL was able to concentrate even more resources and attention on its core activities of publishing and information services. In 1988, for instance, Thomson & Thomson launched a database containing over 300,000 trademarks and logos; Mitchell International developed further its involvement in the computerizing of motor car building and repairs; and ITOL acquired 36 free newspapers in Britain. By the end of 1988, after 54 years of growth, Thomson Newspapers was publishing 40 daily and 12 weekly newspapers in Canada, and 116 daily and 24 weekly newspapers in the United States, representing the largest number of daily newspapers of any newspaper publishing group in either country. The daily circulation exceeded three million.

In March 1989, to remain competitive in a dawning era of mega-mergers among media conglomerates (e.g., Time Inc. and Warner Communications Inc. had proposed a landmark merger, which was completed in early 1990), ITOL and Thomson Newspapers announced preparations to merge as The Thomson Corporation, a $4.7 billion entity which began operations a few months later. Thus empowered, the new company then bought the Lawyers Cooperative Publishing Company for $815 million, the largest acquisition ever by a Thomson company. In 1990 Thomson Newspapers purchased five daily newspapers and several associated weekly publications in the United States, its largest ever single purchase. Eight more Canadian local papers and the Financial Times of Canada were also bought. Thomson newspapers are now being published in 32 of the 50 American states and in 8 of the 10 Canadian provinces.

From 1990 to 1992, Thomson saw its revenues and profits rise from $5.36 to $5.98 billion; its operating profits, however, stumbled from $726 million to $692 million, before partially rebounding to its current figure of $714 million. Two straight years of double-digit profit declines for Thomson Newspapers, caused by recession-influenced decreases in advertising, explain this recent trend. However, according to Thomson’s 1992 Annual Report, U.S. circulation increased slightly and overall market share remained strong. In addition, more than 400 new products were introduced, including the first corporation-generated project, an entertainment weekly entitled CoverSTORY, whose circulation, primarily through Thomson newspapers, approached one million. Consequently, the division faces the future optimistically and expects to renew its growth track with the economic recovery.

Writing in 1984, Goldenberg claimed that ‘The Thomson empire has been in the vanguard among media empires in branching into nonpublishing ventures, but it is a member of the pack, not the leader, in today’s mecca for the press lords— information services.” Yet, by 1992, Thomson had gone far toward quelling such criticism, for it could now boast ownership of 190 online services, 161 CD-ROM products, and a large number of other software offerings, all part of the Thomson Information/Publishing Group (TIPG). At 44 percent of corporate revenues and 56 percent of operating profits, TIPG has clearly come to represent the vitality and future of the company. Largest of the group’s six divisions in profits is International Thomson Publishing (which includes South-Western) and, in sales, Thomson Professional Publishing (which includes Lawyers Cooperative). In April 1992 Thomson accelerated its entry into information services with the $210-million purchase of New York-based JPT Publishing; according to Publishers Weekly and Thomson’s chief financial officer, the deal was struck primarily to acquire data provider Institute for Scientific Information (ISI). ISI enjoys over 300,000 customers worldwide and is believed to be generating healthy annual profits approaching $15 million.

With its longstanding reputation intact as a bottom line-oriented conglomerate, The Thomson Corporation may be expected, contrary to Goldenberg’s thesis, to forge through the 1990s as a leader in its own right. Its financial clout and acquisition savvy, together with its ability to expand market share and profits through organic growth, have made it a true media empire, one founded upon old-fashioned principles but nonetheless guided by the urge to remain a smart performer and front-running competitor.