Does the future look Black?

Talk about Conrad Black to industry pundits outside his inner circle, and they will tell you that the proprietor of The Daily Telegraph is all in a muddle at the moment, that he does not know which way to turn, that his business is in a mess. Put this argument to his confidants and friends, and they say the opposite; what may look like a forced retrenchment is in fact a coolly executed commercial strategy designed to net him and his company considerable future gains.

There may be a degree of truth in both views. Second-quarter results from Mr Black's Hollinger International, listed on the New York stock exchange, showed a $15.5m loss, compared with $26.8m profits for the same period last year. Shares in Hollinger stand at $13, down from a 12-month high of nearly $17. The National Post, the newspaper he launched less than three years ago as a Daily Telegraph for Canada, has run up colossal losses. One analyst put the cumulative deficit from the National Post at just short of £200m.

In Britain, The Daily Telegraph and The Sunday Telegraph are heavily dependent on discounted subscriptions and bulks to bolster full price sales. The Daily Telegraph sells 560,000 copies a day at full price, with the rest of its 1,016,000 circulation made up of reduced rates and give-aways. At The Sunday Telegraph, the reliance on cheap copies is even heavier, with 232,000 of its 802,000 sales being made at normal price.

Such proportions, while they boost sales, also create their own problem: with circulation declining slowly, advertising revenues suffering and newsprint costs rising, Mr Black would, presumably, like to follow his rivals and raise prices. Indeed, he is on the point of doing so: I understand the weekday paper will rise from 45p to 50p and the Saturday edition from 75p to 85p. But his heavy discounting means the gains from such increases could be slow to come through.

Mr Black's empire has been shrinking, too. Fairfax in Australia has long gone, and he sold Southam, his Canadian regional paper operation, last year. Now he has disposed of his remaining 50 per cent stake in the National Post, leaving him with no substantial voice in his native land. There are rumours, too, that the venerable Jerusalem Post, another Hollinger title, is also up for grabs. Once mighty Hollinger is a shadow of its former self, reduced mostly to the Telegraphs and The Spectator magazine in this country, the Chicago Sun-Times, the Windy City's second paper and regional titles in the US, and the Jerusalem Post, which enjoys influence out of all proportion to its sale of around 30,000.

As his business has shrunk, Mr Black has moved down the league of media moguls. While his one-time rivals continue to think grand, global plans, Mr Black's focus appears to have become narrower: coming between Telegraph editors squabbling over coverage of the Tory leadership contest; choosing who should run The Spectator. It is hard to imagine Rupert Murdoch, for example, becoming embroiled in a row about the Middle East reporting of a magazine that sells 60,000 copies a week, as Mr Black did with The Spectator recently.

The National Post debacle, said a Canadian analyst, will have hit Mr Black hard. Hollinger may be publicly quoted but control lies with Mr Black: "Make no mistake, the losses are his losses." In a fragmented Canadian market – four papers are slugging it out in Toronto alone – National Post has failed to make much headway and the sale of his shares to CanWest Global Communications, owned by Izzy Asper, his rival, for a nominal sum, must have been a blow.

Outsiders predict that Mr Black's next move is clear. Having disposed of bits of Hollinger he wants to concentrate on his beloved Telegraphs, to still be heard in London political salons, to turn his back on the rest of the world, especially Canada where he is at loggerheads with Mr Chrétien. There's no danger, they say, of him ever selling the Telegraphs. "Without them he would be a nobody in London, an ageing Canadian millionaire, that is all'' said one observer. "Black likes to be around rich, powerful people – he can't do that without the Telegraphs."

He may even, they say, desert the stock market and take Hollinger entirely private. It would be clean and simple: the Telegraphs in London, a few other pieces here and there, and all owned by Mr Black, a man who does not suffer fools easily and who must be frustrated by the market's low appreciation for his company. He does, after all, have a track record in this regard. He took the Telegraph back into Hollinger's ownership after floating the business.

All this ignores two salient points. One, Mr Black has never shown any sign of wanting a quiet life; he is a fierce competitor who plays games based on great military encounters for relaxation. Two, he displayed great presence of mind by exiting Southam when he did, selling at the top of the market, for more than £1.5bn. Sure, he has abandoned National Post but smart gamblers know when to cut their losses. It was bad enough trying to establish the new paper in the good times, but the advertising downturn sweeping North America heralds even greater losses.

While many in the industry are coming to terms with recession, Mr Black finds himself sitting on a cash pile of $2bn, poised to pounce. Hollinger is cash rich and, according to his deputy, Dan Colson, "if you look at what we've done over the last 20 years you will find we've always been acquisitive by nature and opportunistic by design – and we're not going to change. We will be watching out for newspaper opportunities over the next year or so."

Going private, maintained Mr Colson, is not on the agenda. "There is speculation but that is all it is," he said. Neither is the Jerusalem Post on the block. "Because we sell one thing, people assume anything and everything is for sale," said Mr Colson.

The three biggest acquisitions in Hollinger's history, said Mr Colson were the Telegraph, Fairfax and Southam. "All three were market leaders in their jurisdictions, all published major broadsheets, all were family owned, all had been in existence for over 100 years and they all came unstuck within 10 years of each other."

Given Mr Black's interest in the US, some suggest his target will be in New York or Washington. More pressing is the onset of recession in Fleet Street. "We will weather it," said Mr Colson, "we, like every other newspaper group are being reminded of how cyclical the newspaper industry is. We've had eight consecutive years of annual growth." The Telegraph, he said, was no worse off than any other newspaper group. "The Telegraph and The Times will bear the same amount of pain, as will the FT," he said. But, he claimed, in Hollinger there was some protection against the worst of it. There is the cash and Hollinger owns 150 regional papers in the US, many occupying local monopolies in smaller cities and are well placed to defy the depression. "They are relatively recession proof," said Mr Colson.

Conrad Black, diminished tycoon on difficult times or deliberate tactician? Or a mixture of both? Time will tell.