A Consultancy Warns Of 'A Terrible Outlook For Ad Revenues' As The Detroit Newspapers Announce Retrenching To Three Days A Week Home Delivery Because 'The Economics Of The Newspaper Business Demand Change To Survive'

Philip M. Stone December 17, 2008

Newspapers this year have steadily cut back distribution areas to save delivery costs and the like, but now the Detroit newspapers have taken it one step further by eliminating total home delivery four days a week although digital versions and newsstand copies will be published seven days a week. Well, that’s certainly one way to save on newsprint!

One has to figure the Detroit Media Partnership that prints the Detroit Free Press (Gannett) and the Detroit News (MediaNews) has done its math and figured this is the way forward (what their PR announcement didn’t say is that they’re also asking the unions for a 9% reduction in the workforce). These are major newspapers we’re talking about – The Free Press has a circulation of 298,000 while The News has a circulation of 178,000.

Detroit obviously is a market that is hurting. Does the auto industry get saved? If it does, at what employment cost? Already unemployment is more than 10% -- the highest for any metropolitan US area, while the national average is around 6%. The truth is that market cannot now support two large metropolitan newspapers yet obviously for reasons best known to themselves neither Gannett or MediaNews are quitting, so it’s onto Plan B.

Since everyone seems to agree that the newspaper business must have new ideas and practices to continue print for the years ahead the idea of publishing just for the newsstand and not for home delivery already has the industry buzzing – after all home delivery subscriptions are the life’s blood of most newspapers and yet here are major metropolitan newspapers giving up on delivery on weak print days and telling its customers to either go buy the newspaper at the newsstand or access the digital web editions.

Publishers will watch very closely what happens in Detroit. Is this a sustainable solution?  Will those people who were used to picking up the newspaper off their porch now be willing to make a stop somewhere to buy it instead? Or will they adapt to being just digital subscribers? Or will they just give up on Detroit newspapers?

One always hates to shoot down new ideas before they have a chance to grow, but one can’t help but remember what an old newshound once told this writer, “You cannot be a little bit pregnant; you either are pregnant or you are not pregnant!” And that thought comes to mind here. Why publish just for the newsstand but not send those papers home, too? If Monday, Tuesday, Wednesday and Saturday are such losers that they’re not worth home delivery then why bother with print editions for just the newsstand? Why not just issue those newspapers only digitally online and call a spade a spade and admit that you’re a thrice-weekly print publication, but with issues for all days available online?

One cannot argue with the reasoning given by Dave Hunke, CEO of the Detroit Media Partnership. “The dynamics of delivering information to audiences has changed forever due to technology. Today, consumers are more empowered than ever before. That means we have to change the way we deliver that news – not just in subtle ways, but in fundamental ways.”

So why not go the route of The Christian Science Monitor and just plain give up on print and become an online only publication? Maybe at the end of the day that is the plan, but it’s going to be implemented in stages as readers are weaned off print.

The Detroit changes, to start taking effect in Q1, 2009,  come as Kubas Consultants have issued a truly bleak newspaper  outlook for 2009, forecasting that for the first half newspaper advertising will be down 12%, recovering to just 6% down in the second half, making for an average 9% downturn.

The survey, conducted with more than 400 daily newspaper executives and managers in November after most had their 2009 budgets in place, concluded, “Not only do newspaper executives and managers project weakness, the severity of expected declines is remarkable. The outlook has very much deteriorated compared to a year ago.”

The only advertising sector expected to grow is online but, “Even so, recent trends indicate that this may be a challenge.”

As for next year, “Developing online, in terms of both content and advertising programs, is still very high on the list of strategic initiatives,” while a third of newspapers say they have already undergone format changes most of the rest say they have definite plans to do the same. And the bad news for printers is that one in five newspapers say they are considering outsourcing their print activities and closing their own print plants.

That newspapers are playing ever increasing hardball can be seen in comparing what Scripps is threatening to do in Denver with what the Newhouse-owned Newark Star-Ledger and Trenton Times did in September. The Newhouse newspapers threatened that unless they got some serious union concessions that the newspapers would close by January and, sure enough, the unions delivered.

But a couple of months later E.W. Scripps says that unless it can find a buyer for its Rocky Mountain News in Denver and its 50% of the newspaper agency there, then it will could well close the newspaper. No talking with the unions about give-backs – either the paper gets sold or it gets closed. Different  mentality.

And while Dean Singleton may be gloating because finally he may have the Denver market to himself via his Denver Post he also has his problems, so he’s asking the Denver unions to reopen their contracts so they can negotiate giving back some $20 million in savings. Moodys says that MediaNews is very close to violating the terms of its loan agreements but Singleton says he’s not worried  because Hearst is his biggest lender and also happens to be a shareholder so he doesn’t expect any nasty surprises.

Even so, with newspapers across the country seeking to reopen union contracts for more savings, when a class company like Copley that is trying to sell its San Diego Union-Tribune says it's is going to stop all contributions to employee pension plans on January 31 or before if the paper is sold, then these are just examples of how publishers are tightening the screws.

And with the Kubas outlook echoing forecasts by others that 2009 will be much worse than 2008, and with so many newspapers already the shell of their former selves because of the job cuts and other savings, then maybe one has to look at what is going on in Detroit and ask if that is not the future, then what is?