What's Next After Arkansas Democrat-Gazette, Morning News Merger in Northwest Arkansas

by Rob Keys  on Tuesday, Oct. 27, 2009 11:27 am  

The Arkansas Democrat-Gazette's printing operation in Lowell.

The U.S. Department of Justice will allow the merger between Stephens Media LLC and the Arkansas Democrat-Gazette Inc., clearing the way for both entities to seek a return to profitability.

In Tuesday's announcement, the Arkansas Democrat-Gazette said advertising revenue for the first nine months of 2009 is down 18.5 percent, and ad revenue for calendar 2008 was down 13.2 percent. The Morning News of Northwest Arkansas' publisher Tom Stallbaumer declined to reveal any financial information for that publication.

Declining revenue has been an ongoing concern for the newspaper industry as a whole. According to the Newspaper Association of America, total print advertising decreased from $44.9 billion in 2003 to $34.7 billion in 2008, a 23 percent decline.

The NAA reported an even more significant drop in classified advertising. According to the NAA, revenues from classified advertising dropped from $15.8 billion in 2003 to $10 billion in 2008, a 37 percent decline.

"As a result," deputy assistant attorney general Carl Shapiro told a House of Representatives subcommittee in April, "the continued viability of many newspapers has been put in serious doubt."

Steve Trolinger, president of Community Publishers Inc. of Bentonville, said that's become the case in Northwest Arkansas, too. CPI, which owns a string of newspapers in Arkansas, Missouri and Oklahoma, sold the Northwest Arkansas Times and the Benton County Daily Record to Arkansas Democrat-Gazette-owner Walter Hussman's Wehco in 2005.

"This merger is a natural evolution of the newspaper business in Northwest Arkansas," Trolinger said of the deal between Stephens Media and Wehco. "From what were basically four distinct markets just 20 years ago, we really now have one major metropolitan market. The fundamentals of the newspaper business are changing rapidly and there is no space for profit in competing daily newspapers in a single market."

Warren Stephens is the CEO of Stephens Inc. and owner of Stephens Media of Las Vegas. Hussman is the owner and chief executive of Wehco Media Inc., which owns the Democrat-Gazette and 10 other daily newspapers, including six more in Arkansas. Despite circulation gains by the Democrat-Gazette in Northwest Arkansas since 2005, both appeared poised to go the distance before the announcement of the proposed merger on Sept. 3.

Following the Justice Department's decision that the merger does not violate antitrust policies, Stephens Media will contribute its Northwest Arkansas assets to a limited liability company and Arkansas Democrat-Gazette Inc. will do the same. The two contributing companies will each own a 50 percent interest in the new company, to be called Northwest Arkansas Newspapers LLC.

Per statements from both sides, Stephens Media will be responsible for editorial control of the local newspapers in Northwest Arkansas, while Arkansas Democrat-Gazette Inc. will control advertising, business, production and circulation. The Democrat-Gazette will control the editorial functions of its Northwest Arkansas edition.

Beginning Sunday, the Democrat-Gazette will be circulated with the Morning News in Rogers and Springdale. The Democrat-Gazette will continue to be circulated with the Times in Fayetteville and the Daily Record in Bentonville.

Another result of the merger will be a reduction in workforce of about 40 percent, according to one source close to the merger. Employees of The Morning News, the Times and the Daily Record interviewed with Morning News management members for staff positions last week.



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