PROPOSED DENVER JOA WILL SIMPLY POSTPONE A DEATH

Good intentions aren't going to salvage a failing News over time

Initially called the "Failing Newspaper Act," the professional communicators in the U.S. newspaper industry decided after a tricky start at passing the legislation that a law to allow publishers to skirt antitrust rules would be better named the Newspaper Preservation Act.

Regardless of the nomenclature, the requirement of the law remained the same – one of two newspapers in a community had to be failing.

After years of telegraphing its displeasure with losses accumulated in the Denver market with its Denver Rocky Mountain News, earlier this month Cincinnati-based E.W. Scripps Co. said that it had agreed with MediaNews Group Inc. – publisher of the Denver Post in MediaNews' headquarters city – that they would merge non-editorial functions of the two papers under an agency-type joint operating agreement (JOA).

Despite Herculean efforts on the part of Scripps – circulation experiments, efficiency exercises, even an attempt to combine the back-office functions of the Rocky and the Daily Camera in nearby Boulder – the company was not making money in Denver.

Well, let's be clear: The sums that Scripps says it was losing in Denver just happen to be almost exactly what it was charging to depreciation for the operation. So, to be precise: The Denver Rocky Mountain News was not making enough money. And that's where the intent of the Newspaper Preservation Act and the practice come into conflict: In most instances, the issue is not that one of the papers is actually "failing," but that the profit margins of neither competing paper is what its publishers would like.

When we look at two JOAs that are disintegrating – the shutdowns that have been proposed in Honolulu and San Francisco to close the Star-Bulletin and Examiner, respectively – the issue seems to be, again, not that the JOA is losing money, but that it is, in fact, merely not making as much money as the owners would like.

In the instance of San Francisco, where a local politico has brought an antitrust suit against, well, pretty much everyone (see NewsInc., May 8, 2000), testimony was heard earlier this month indicating that the Examiner was, in fact, losing money, while the Chronicle was profitable.

Let me explain this one more time: Since 1965, both papers have pooled their advertising and circulation income and non-editorial expenses, then divided the net 50-50. The Chronicle -- with a circulation north of 470,000 – paid for its newsroom staff of more than 350 out of its 50 percent share. The Examiner -- with a circulation south of 110,000 – paid for its newsroom crew of fewer than 200 out of its 50 percent share.

Tell me again, who was losing money?

JOAs have momentum. In the beginning, the efficiencies of combining non-editorial functions raises profits to previously unheralded heights. But as time progresses, one of the papers becomes dominant. Traditionally, this has been the paper which has the prized morning field – a problem that won't raise its ugly head in Denver, where both papers are remaining on the morning cycle. But as one paper in a JOA dominates, its owners begin to think, "Hell, you know, if we weren't carrying that other paper on our backs, we'd make a bucket more money."

And both sides begin to drag their feet over things like capital improvements (never a newspaper publisher's favorite topic), one of the papers begins to really lose circulation, then they kill the weaker of the two papers and fold the JOA.

There are exceptions to the rule. Hearst Corp. and the Seattle Times have carved out a new deal that appears able to keep the Post-Intelligencer in business for a long time.

So, JOAs don't prevent the failure of a newspaper, they only postpone it. The Newspaper Preservation Act is radical surgery to keep two editorial voices in a community, but not forever. The residents of Denver should realize that the Denver Rocky Mountain News may not be dead, but it is in intensive care.

– David M. Cole

Inside ...

• Denver JOA may cool the toughest fight in the West
• Task force offers three-tiered way to measure paid circulation
• FAS-FAX reveals trends: changes in cycle, new weekend entries
• Community experts offer reasons non-dailies have much to relish
• Street's gyrations hint at need for new way
• Persons

From NEWSINC., May 22, 2000, Copyright © 2000, The Cole Group. All Rights Reserved.