An Intriguing Experiment
Detroit's newspapers cut back on home delivery rather than diminish their journalism.
By John Morton
John Morton (email@example.com), a former newspaper reporter, is president of a consulting firm that analyzes newspapers and other media properties.
When newspapers confront falling revenue in a recession, their typical response is to start laying off employees. Unfortunately, the brunt of this usually falls on newsrooms where, as a cynical Wall Street analyst once remarked to me, "You have a lot of non-revenue-producing workers like reporters."
Of course, reporters' work is fundamental to attracting readers, who in turn are fundamental to attracting advertisers, but never mind. The fact is in the short run, cutting
news staff, often accompanied by reducing news space and features, benefits a newspaper's finances right away. Cutting advertising sales staff, for example, only compounds the money problem.
These days taking much out of other departments' production, distribution and the like is difficult because you need a minimum number of employees to manage, print and distribute a newspaper seven days a week, and most newspapers are already at or close to the minimums.
If cutting news staff makes sense financially in the short term, in the long term it can be devastating to a newspaper's standing as the major source of local news and other information. Still, most newspapers, especially those in large cities that have been most grievously affected by the current recession, have chosen to cut back on their newsroom rosters and their journalism.
To some, including me, this seems like a clear path to eventual doom, especially in an era in which the Internet is increasingly capturing eyeballs and advertising once securely held by newspapers.
So what else might newspapers do? Well, comes now Detroit's joint operating agency, which publishes the Detroit Free Press and the Detroit News, with a startling new approach to cost-cutting. Instead of diminishing the journalism, the agency will eliminate home-delivery of the newspapers on Monday, Tuesday, Wednesday and Saturday.
Here's why this could save a lot of money. Most seven-day dailies are fattest in pages and advertising on Thursday, Friday and Sunday, with Sunday alone often accounting for 40 percent or more of weekly revenue. Even profitable newspapers, which the Detroit agency says its dailies are not, often lose money on thin publishing days. But it is traditional that daily newspapers publish, well, daily. There's also a sense of civic obligation to do so.
The Detroit newspapers will still print daily editions (the News does not print on Sunday), but on non-delivery days they will be available only at newsstands, stores and coin boxes. Subscribers with Internet access also will be able to read complete versions of the papers online.
Detroit executives say that by halting home delivery four days a week, the agency will save 12,000 metric tons of newsprint annually, which is worth more than $8 million a year at current prices. Other major savings will come from lower distribution costs�"trucks, drivers, fuel. The agency expects the plan to allow it to reduce its 2,100-member work force by 9 percent, which I estimate is worth about $9 million a year. The two newsrooms, which are independent of the agency, will not be affected.
As Dave Hunke, chief executive of the agency and publisher of the Free Press, has said: "We need to spend less money on paper, fuel and ink and spend more on journalism."
Dropping home delivery four days a week disrupts readers' habits in unsettling ways and might accelerate the two dailies' circulation decline, which has been considerable. The Free Press, with 298,000 circulation weekdays and 605,000 Sunday, is the twentieth- and sixth-largest in the nation respectively, but has lost more than 15 percent in both editions over the last five years. The News, at 188,000, ranks forty-ninth weekdays and is down almost 22 percent. Michigan's woeful, automobile-dependent economy has been a major factor in the circulation drop, as has the allure of the Internet.
The Internet looms large in the Detroit agency's plans for the future, with executives promising expanded Web offerings. Indeed, Detroit may prove to be a laboratory for determining whether a large metropolitan newspaper can meld print and online into a successful business model, or eventually become online-only.
It's still not clear that a wholly online daily newspaper will ever be able to generate enough advertising and profit to support a newspaper's traditional and costly newsgathering operation. One Wall Street analyst, Craig Moffett of Bernstein Research, said in a report that the idea that newspapers would be able to support the enormous cost of newsgathering with "display advertising down the side of the page, or by the revenue share from having a Google search box in the corner of the page, or even by a 15-second teaser from Geico prior to a news clip, is idiotic on its face."
Still, at least while print remains vital to the existence of newspapers, the new approach by the Detroit newspapers may offer an answer to how to cut costs without trashing journalism.