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Better "Red" Than Dead?
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Maybe newspapers aren't in such bad shape after all, at least if you're willing to count their bastard offspring, the "mini-dailies." By Greg Lindsay, May 12, 2005
Here are the last three New York Times headlines on the subject of the newspaper industry's declining circulation: "Newspaper Circulation Continues Overall Decline" (May 2004), "Newspaper Circulation Continues to Decline" (November 2004), and "Newspapers' Circulation Still Going Down" (May 2005). See that new tinge of desperation in last week's headline? That's because newspapers have been the victim of a media prognostication pile-on ever since Dow Jones, publisher of the Wall Street Journal, bought MarketWatch and the New York Times Co. bought About.com. Media pundits, and more triumphalist bloggers, have been crowing about the rationale behind these purchases: A pair of slow-growth, dead-tree businesses were diversifying into sizzling digital ones. Sometime between Rupert Murdoch's speech to the American Society of Newspaper Editors last month (in which he quoted a similarly apocalyptic story written by former MSNBC.com honcho Merrill Brown for the Carnegie Reporter, titled "Abandoning the News") and the news last week of an industrywide circulation drop of 1.9 percent, the worst decline in nearly a decade, the panic set in. Now that's all the biggest newspaper chains can think about. The executives ask themselves, Why is circulation falling? And they quickly answer their own question: Because young readers don't read newspapers. What do they read instead? The Internet. The New York Times Co. and Dow Jones made its bets. Tribune Co. (owner of the Chicago Tribune, the Los Angeles Times, and Newsday), Gannett (USA Today), and Knight Ridder (the Miami Herald and the Philadelphia Inquirer) have teamed up to buy stakes in aggregator sites such as Topix.net. But the future of the newspaper business might still be in print after all, and what's ironic is that the newspaper chains themselves don't want to hear it. Last month a journalism professor presented the results of a quick and dirty unscientific study he'd conducted in 2003 of the readership of Red Eye and Red Streak, the young-skewing, commuter-distributed, weekday-only "mini-dailies" produced by, respectively, the Chicago Tribune and the Chicago Sun-Times. Drawing on a very selective sample of 112 journalism students from Chicago commuter schools, the study found that both papers had high brand awareness, were respected for their news content, and had decent reader penetration. Sixty-three percent of the students had read Red Eye at least once in the previous week, and 52 percent had read Red Streak. The study's little-known author is John K. Hartman, a professor at the totally unknown Central Michigan University. Hartman was one of the first members of the media academia to take USA Today seriously, and even now he chortles at his colleagues' collective failure to understand how newspaper-reading habits were already changing back then. He intends to embark this fall on a full-fledged random-sample study of mini-dailies. "No, I don't think the numbers will be that high," he says, "but I think the numbers will be there. Anyone who thinks that the mini-dailies are insignificant money losers that are going away is out of touch. And anyone who is so wedded to the paid circulation model is way, way, way out of touch. I would compare them to the people standing alongside the presses when the first issue of USA Today came out. They were alternately raising each of their arms to hold their noses." The mini-dailies and mini-weeklies (alternative weeklies started by daily papers, like the Toledo Free Press) have been the newspaper industry's experiment du jour since Red Eye and Red Streak launched on the same day back in 2002. Hartman is right about the stench. The mini-dailies have been trashed in media circles since the day they were born, written off as dumbed-down journalism with a frivolous editorial mix. But that hasn't stopped Tribune Co. from backing Red Eye or investing in AM New York. It hasn't prevented the Washington Post Co. from starting Express in its home city. Nor has it dissuaded the New York Times Co. from paying $16 million for a stake in Metro Boston, one of three U.S. papers started by the Swedish-owned Metro chain. Metro's Philly and Boston operations are in the black, but its efforts in New York helped contribute to a $12.5 million US loss last year. As for AM New York and Red Eye, they generated $15 million in revenue last year, according to Tribune president Scott Smith, but both are still in the red. All along, management at each company has described these investments as flanker brands or gateway drugs designed to turn young readers onto the real thing, the flagship dailies. But Hartman has an opposing theory: The young readers willing to accept a free copy of AM New York or Red Eye will never make that jump. And the reason newspaper circulation is taking a sudden turn for the worse is that those readers simply aren't being counted anymore. Newsday, the New York Daily News, and the New York Times all lost circulation in the metropolitan area this time around, while the New York Post's circulation was flat. "But AM New York and Metro are moving 600,000 copies per day, Monday through Friday," Hartman says. "Add those copies to the losses and what do you get ? You get a gain in total circulation in New York. Do that in Chicago
with Red Eye. Do it in Washington, D.C., with the Express and the Examiner [another free daily, backed by San Francisco Examiner owner Philip Anschutz]. If it's free and accessible, they will read it. Kind of like the Web. The rise of the mini-daily is not brain surgery. It's logic. [Young readers] will not read our flagship products. What you do with them doesn't matter." If Hartman's right, no one wants to hear it. If circulation revenue is beginning to collapse -- Tribune Co.'s fell 8.6 percent in the first quarter - well, at least advertising is stable. But watching one generation of readers slowly die off while the next refuses to pay for your product doesn't sound like much of a solution. Red Eye, for example, has a daily circulation that's roughly one-seventh of the Tribune's, but its advertising revenue doesn't approach one-seventh of the venerable flagship paper's ad dollars. There's also slight evidence that the mini-dailies are like kudzu or zebra mussels, choking out more interesting life-forms. The Chicago Reader (an alt weekly that's extremely threatened by the Reds) recently visited a newsstand at a city train stop where a hawker of the Tribune's Red Eye had taken up residence outside. The rush-hour presence of the hawker had caused newsstand sales to fall by as much as 70 percent, including sales of Tribunes. Not long after Red Eye and Red Streak launched, the publisher of the Chicago Sun-Times claimed that both papers were already cannibalizing his circulation. And maybe that's the plan. "It's my belief that Tribune started Red Eye more to put the Sun-Times out of business than to break new ground," Hartman says. If Red Eye's owner can't hold on to its own circulation, then no one will. For more on innovations in print journalism, read: Who Says Models Can't Read? Find this article at http://www.business2.com/b2/web/articles/0,17863,1060569,00.html. Try a Free Issue of Business 2.0: Call (800) 317-9704
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