November 1936 changed Roy Thomson’s business life. That’s the month when Jack Kent Cooke, a 24-year-old traveling salesman, asked for a job at Roy’s radio station CJKL. Roy was having problems with a newly acquired station, CJCS, in Stratford, Ontario, and hired Jack to turn the station around. Within six months, the station was profitable, and Roy decided to sell it for $10,000 for a profit of $6,000. Roy became fond of Jack and hired him to oversee sales in a newly created Toronto office.
Jack’s superior sales skills took that responsibility off Roy’s plate. He spent more time “figuring,” as he called it. In 1938, Roy convinced Jack to move to Timmins to manage all aspects of all five radio stations. Everything was going well until a fire in April 1939 burned down the building that housed station CKGB and the Press newspaper in Timmins. Roy was underinsured, but he bounced back. He borrowed to build a building for both his companies.
The world was on the cusp of World War II, and rumors circulated that paper would be rationed and sent to the United States. Roy figured this would lead to more advertising dollars flowing to radio, especially since more people were listening to their radios to receive war news. Not wanting to share the profits he envisioned his stations would produce in 1940, he bought back as much of his company stock as he could.
By 1940, the radio stations were running smoothly under Jack’s management. As Roy had predicted, the war was good for his radio business. Jack also found reinvestment opportunities for the profits that Northern Broadcasting and Publishing was generating. He and Roy partnered to buy their first French-language radio station in Quebec for $21,000. Two other purchases followed. Roy owned 66% of the partnership, and Jack owned 33%.
Roy and Jack expanded their radio empire by agreeing to manage Ontario radio stations owned by a senator. This capital-light approach gave the two partners 49% ownership in them.
The war, after it began, became a massive tailwind for Roy’s newspaper, too. Paper rationing made advertisers buy space in smaller rural papers, like the Press, because papers in big cities like Toronto were limited in pages and ad space.
The war had put Roy’s empire on solid financial ground for the first time. The depression years had conditioned Roy to keep salaries and expenses within budget, which boosted his profitability when wartime ad revenue surged. Roy standardized his accounting, making comparing the performance of his stations, apples to apples, easy.
Eager to reinvest profits, Roy upgraded his stations, paid off bank debt, and bought back outstanding stock in his company from outsiders. In 1943, Roy spent $880,000 to buy four newspapers with a $375,00 bank loan; the rest was seller financed. He owned eight radio stations and five newspapers after that deal closed. He and Jack agreed to a partnership in which they shared in each other’s deals; Roy got 66% and Jack 33%. The two started sourcing deals independently and evaluating and investing as a team.
Jack, eager to do more radio deals, found a Toronto radio station he could buy for $500,000. He didn’t have the money, so he convinced Roy to sell their Quebec stations. When those stations were sold, Jack's share of the proceeds provided him with capital he used to complete the purchase of the Toronto station. Roy declined to be part of the deal to buy the Toronto station, but within a few months, Jack had turned the station from unprofitable to solidly profitable. Jack became known as a radio station entrepreneur.
Roy bought two more newspapers in small towns for $750,000 and realized there was a big opportunity to purchase more small-town newspapers. Families had owned them for generations, had underinvested in them, and had to pay inheritance tax each time the ownership transferred to the next generation. Roy worked with investment bankers and issued $1,000,000 in bonds so he could go on a buying spree. Roy’s economic blueprint for buying and running rural newspapers would make him the millionaire he’d dreamed of being years earlier.
After Jack successfully managed the Ontario radio station for the senator, ran Roy’s stations, and turned around his Toronto station, a prominent media family approached him. They offered him a massive contract to manage their Ottawa radio station. On one condition: Roy could not be part of the deal. Jack accepted, and when he told Roy he wasn’t part of the deal, it was the end of their decade-plus friendship and partnership. Feeling betrayed and cut out by his young protegee, Roy started seeing Jack as a rival. The two divested themselves of ownership in each other’s companies and went their separate ways. Jack would later call that deal “one of the great mistakes in my life.”
With a thriving empire, Roy would soon begin to set his sights on taking his empire international.