Year of the Niche

Last week in this space we posed the question of whether 2004 would be a year of robust ad recovery and, if so, where the money will go at newspaper companies. The answer from their presentations in New York to investors was equivocal on how much new money we’re talking about — but surprisingly consistent on at least one priority.


What’s hot, hot, hot right now is niche publications — especially those directed at youth, Spanish-speaking audiences, and other immigrant groups.


Belo’s Dallas Morning News is a representative example. After starting a fully zoned edition in suburban Plano early in the year (circulation equal to metros in Norfolk or Louisville), the company launched five-day-a-week Al Dia in September, dispatching one of the Morning News‘ top editors, Gilbert Bailon, to direct the effort. No time for rest though. Getting wind that a former Belo executive was starting a free youth-oriented daily, the company dusted off a prototype of its own and was on the street with Quick in October, ahead of the competition.


Neither publication is flush with advertising yet. And editorial purists may choke on the cover and first three pages of Quick — entirely devoted to MTV, Beyoncé and all that — before the paper settles down into a short-format march through more standard news and sports.


Tribune, which kicked off this mini-movement 18 months ago with Red Eye in Chicago, is now distributing 170,000 copies of amNewYork daily as well. Tribune also launched a Chicago edition of its New York Spanish-language daily, Hoy.


Knight-Ridder flashed slides of a half-dozen related publications in each of seven markets. Gannett piloted youth weeklies in Boise and Lansing, started new ones in Cincinnati, Indianapolis, and Louisville this fall and has at least four more in the pipeline for 2004. It has launched 300 non-daily products in the last 18 months.


Nor is this just the province of big papers. Pulitzer said its 12,000 circulation daily in Santa Maria, Calif., is launching a Spanish-language weekly supplement this week.


The business appeal of this kind of publication is pretty straightforward. Within an established newspaper, they don’t cost much to produce, and they give the ad sales force something more to offer. In another year of soft ad sales overall, dragged down again by help-wanted classifieds, nearly all of the companies could boast of very healthy gains at their online subsidiaries, much of that an upsell from a newspaper buy.


A rude question that didn’t get posed by the financial crowd is whether such publications drain focus and resources from improving the core newspaper. Management would doubtless say it can do both. My Poynter colleague, Aly Colón, also suggests that it is worth watching whether giving these tough-to-attract groups their own papers builds better coverage within the mother edition or excuses continued neglect.


* * *


What, if anything did the companies have to say about quality journalism? Iconoclastic Washington Post CEO Donald Graham once observed that this isn’t an audience that wants to hear in any great detail about what goes into creating outstanding journalism. Taking that as a given, credit nearly every company with at least a mention of journalism as a business asset.


Even Journal Register, whose management once boasted to a financial publication about checking reporters’ odometers to make sure they weren’t padding expense vouchers, showed a couple of slides on editorial prizes its mid-sized suburban dailies have won.


A livelier case is E.W. Scripps, which is not coy about shooting for 40 percent operating margins at its newspapers and using those and broadcast profits to underwrite startup losses for its two newest lifestyle cable networks, currently running to $40 to $45 million a year. Still, Scripps’ Rocky Mountain News has won two Pulitzer Prizes (both for photography) in three years, which is two more than a number of well-regarded papers can claim. Its stable includes solid mid-sized dailies in Naples (Fla.) and Ventura (Calif.), and it has the nation’s fasted-growing 50,000-plus-circulation paper over the last 10 years, the Stuart (Fla.) News.


Knight-Rider and Gannett each talked about company-wide editorial improvement programs, targeting more content that tests as especially satisfying and relevant with readers.


Leave it to The New York Times, though, again to take the prize for putting journalistic quality square in the middle of its business plan. The Times folks pursue what they euphemistically call a “premium pricing strategy” –- i.e. charging an arm and a leg but capturing an ample national audience (well-heeled, coincidentally) who think the daily and Sunday editions are worth it. Although not altogether forthcoming about what the company is spending on promotion or the rate at which it converts discount introductory offers, the Times laps the field in circulation revenue and keeps growing national advertising as well.


(As for the youth-paper strategy, “companies are making less of themselves” with the publications, Times chairman Arthur Sulzberger Jr. told Newsday in an interview last week. His company prefers to promote the paper itself — and the brand — by distributing 100,000 copies of the actual New York Times daily on college campuses).


The great majority of top newspaper company executives are from business rather than news backgrounds. Every now and then, though, you scratch and find some journalistic passion. Karen Eliot House, the Wall Street Journal publisher and a rather stiff presenter of her scripted remarks, grew animated when a questioner challenged the claim that the average reader spends 54 minutes with the paper (“Are all these people retirees?”). It’s because Journal pieces are so well-organized and well-written that even the longer ones are easy to read all the way through, House replied. The right questions get asked and answered so “as a reader, you don’t get halfway up the mountain and lose your footing.”


* * *


You may have forgotten, but the executives haven’t. They remember that the last quarter of 2002 and the first months of 2003 showed encouraging advertising improvements before business tanked again during the Iraq war.


So bold promises were not the order of the day. Companies that chose to forecast ad revenues at all were suggesting a hedgy mid-single-digit growth rate for 2004. The cost pressures of health and benefit costs and higher newsprint prices (up 15 percent, some said) will temper increases in profitability.


Knight-Ridder CEO Tony Ridder repeated his commitment to reaching 25 percent margins -– but sometime, not necessarily next year. Asked if Dow Jones could ever hit its old target of $3 a share in yearly earnings per share (currently a bit under $2), management said maybe, but only if business-to-business advertising grows back 40 percent to 1997-98 levels.


On the other hand, the old air of faint apology in these pitches to the financial community is pretty near gone. It wasn’t so many years ago that Gannett’s Doug McCorkindale expressed frustration that newspapers had a great story to tell but were having trouble getting investors to listen and buy in. During the down market, however, despite their own troubles, all the newspaper companies — with the possible exception of Dow Jones — outperformed the pack. Belo’s Robert Decherd boasted his company’s stock has risen 83 percent since the start of 2000 while the S & P fell 17 percent.


So the emphasis for the newspaper companies has turned to making a case to Wall Street for continued growth on multiple platforms and maintaining or modestly growing margins. That would let these steady-Eddie tortoises retain their high esteem compared to the hares who were the toast of the 90s.

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