by Mark Hengel
Posted 11/24/2008 12:00 am
Updated 2 years ago
The ancient business plan of newspapers – in which advertising revenue and subscriber fees easily cover the cost of gathering, printing and delivering news on a regular schedule – isn't the recipe for double-digit profit margins it once was.
Some newspapers are simply reducing the number of issues they produce. But Tom Larimer, executive director of the Arkansas Press Association, says the real key to long-term success will be adding new sources of revenue "outside the traditional newspaper."
The name of the game is targeted audiences. The most obvious new source of revenue would be Web sites, since the Internet is where huge numbers of former newspaper readers have gone. But making a profit on the Web has frustrated most – but not all – news organizations, while the most successful new sources of revenue have been narrowly focused "niche" publications.
The state's dominant daily newspaper, the Arkansas Democrat-Gazette, is broadening the number of publications it offers, and its publisher, Walter Hussman Jr., admits that he's been late to the party.
A free weekly tabloid called Sync targets a younger audience than the Democrat-Gazette, and Hussman admits he and his Wehco Media Inc. underestimated the market for "slick publications."
Wehco recently began publishing Arkansas Life, a glossy monthly magazine distributed free to the upscale audience cultivated by titles like Inviting Arkansas, At Home in Arkansas, AY and SoirÉe, a sister publication to Arkansas Business.
Despite the late start and competing against established niche publishers like Arkansas Business Publishing Group and Arkansas Times LP, Hussman remains confident.
"We probably were a little bit late to the game ... but we think we can still do really well," Hussman said.
The added revenue streams will help offset poor earnings at Wehco newspapers, which Hussman blames on current economic conditions. The Democrat-Gazette and other Wehco papers have avoided losing circulation en masse as other large newspapers have; a list of the state's largest newspapers, on Page 17, shows the D-G's daily circulation was off by only 0.2 percent this year, according to is annual statement of ownership filed with the U.S. Postal Service. But the company has imposed a hiring and wage freeze at its newspapers, Hussman said.
So far, Sync is breaking even, said Paul Smith, the Democrat-Gazette's general manager, while Arkansas Life's first issue – published in September – turned a profit.
Papers around the country are expanding their offerings. Smith mentioned the Virginian Pilot in Norfolk, Va., which has developed more than 20 niche publications, he said. (Earlier this year, Smith confirmed that Wehco was considering buying the Pilot and several sister properties.)
Others papers take it even further.
"I know one paper that publishes 52 papers a year and publishes 50 special sections," Brian Steffens, the National Newspaper Association's executive director, said. "I think the model will be that newspapers have to have multiple products and revenue streams."
Jeff Hankins, president of Arkansas Business Publishing Group and publisher of Arkansas Business, isn't surprised that general audience newspapers are thinking about targeted audiences.
"Daily newspapers are struggling, but our niche publications have seen sales gains nearly across the board," he said.
Location, Location, Location
Large urban newspapers aren't the only ones that can benefit from adding niche publications. For instance, Larimer said, a paper in a rural community might attract new advertising dollars by producing a publication with content aimed directly at local farmers.
But growing revenue does not come as easy in shrinking towns,
The viability of a newspaper "is going to depend on the individual community," said Clark Smith, publisher of the Stuttgart Daily Leader, which publishes five days a week. "Some communities, especially those in the Delta, aren't faring this economic climate so well."
But bad economic times are not new to many Delta towns. Smith also runs the Helena Daily World, and he said Phillips County's population has declined from about 50,000 in the late 1960s to about 14,000 today. The Daily World switched from printing six days a week to five days a week in the 1980s because of the decline, Smith said, and recently dropped down to three times a week.
Smith wonders how long that can continue.
"There has to be a turnaround for Helena; otherwise it will only support a one-day or two-day," he said.
The Newport Independent also dropped from two editions per week to one this November. Just seven years ago, the Independent was a daily paper.
Maintaining a community newspaper requires remembering what the audience is, said Mike Graves, CEO of Graves Publishing Co. of Nashville (Howard County).
The company publishes the Nashville News and three other newspapers. Their content is as local as possible, including a recent two-page spread in the News of deer hunters displaying their kills.
That kind of coverage might not seem trivial to others, but it sells.
"I would say that a lot of our readers, that if we got away from covering local sports, we would lose lots of readership," Graves said.
The lack of younger readers does not concern Graves either, he said, because the papers target an older audience. As the younger generation ages and settles down, they too will take the paper, he said, because no other source covers local news.
Hussman has made a name for himself nationally as a contrarian when it comes to online news. He has preached for years that the news industry shot itself in the foot by giving away news content for free, and the Democrat-Gazette requires readers to buy a monthly subscription for full access to its Web site, www.ArkansasOnline.com.
Hussman is not as dogmatic as he lets on; the Democrat-Gazette's northwest edition publishes stories for free at its Web site, www.NWANews.com.
"That's much more competitive up there," Hussman said. "The Morning News [of Springdale] offers content for free, and it really hasn't hurt us that much because it's a smaller market."
ArkansasBusiness.com embraced the philosophy of free content when it launched eight years ago, and Hankins said the Web site and the free e-newsletters it pushes to anyone who registers do better than break even.
"Our Web site has been profitable for several years, with revenue up 26 percent this year," he said. "I remain amazed by the comments the Democrat-Gazette executives make regarding free content. They give it away on their Web site in northwest Arkansas, and they are launching free publications in central Arkansas."
It's not that Hussman hates the Internet; he just hasn't found a model for monetizing the medium as effectively as a print product, he said.
An advertiser wanting space in a Wehco paper might pay between $20 and $40 per 1,000 copies, depending on the ad, Hussman said. A comparable banner or pop-up ad on the Internet generates less than $1 per 1,000 page views, Hussman said.
"The problem is not traffic. You get millions of people who go to look at newspaper Web sites every day," Hussman said. "The problem is the fact that you can't get $1 a thousand for it because there are millions of people out there selling that advertising. So there's an oversupply of sellers, which drives down the price, and it's not effective, so people don't want to pay for it."
Many Arkansas newspapers, including the Democrat-Gazette, continue to develop their Web site in hopes that the Internet one day will produce revenue comparable to their print products. That day is a long way off; even profitable ArkansasBusiness.com doesn't make enough money to be a stand-alone business plan, Hankins said.
The Batesville Daily Guard recently unveiled an Internet feature that allows residents to follow the local high school's football team in real time, providing scores, possession and updates after plays.
"This is just a way for anyone to go to our Web site on Friday night and then read about it in the print publication for the scrapbooks and such," said Pat Jones, the Daily Guard's general manager and co-owner. Jones said the feature has already attracted a few advertisers.
The print publication remains Jones' focus, though. Likewise, Hussman has made clear that his company's focus remains on the print publication.
Hussman is not going to give up completely on newspaper Web sites, though.
"We are going to continue to really develop our Web site, because we hope there is going to be a business model there with that much traffic," Hussman said.
The Internet Model
Elizabeth Bowles, president of Aristotle Inc. of Little Rock, thinks newspapers have not grasped the Internet's advertising model. Aristotle is a full-service marketing firm.
Internet advertising works best when an advertiser pays per lead or sale generated by an ad, Bowles said. Instead, newspaper Web sites have tried to use the same advertising model developed by print editions, which stresses display advertisements. Print publications provide advertisers with an audience of a certain size, of which a percentage is likely to view an ad.
The interactivity of Internet ads allow an advertiser to get sales leads if a visitor fills out a form, or, in a best-case scenario, actually makes a transaction by clicking through to the advertiser's site.
"To some extent, I think newspapers are injured by the breadth of readership they have," Bowles said. "And in order to make sure my online dollars are being spent as effectively as possible, I want to target my market."
The key is to connect the Internet user with the content they desire, and connect advertisers with the consumers with the greatest interest in a product.
The newspaper industry has some catching up to do, she said.
"Newspapers are going to have to fight for the viability as advertising venues on the Web, because they are a little late to the game," she said.