Against the Grain
Whether its charging for online content, giving away classifieds, engaging inand winninga brutally expensive newspaper war with Gannett or doubling down on print when others are fleeing, Walter E. Hussman Jr. has never shied away from the contrarian approach. And that has paid off for him, big time.
By Bret Schulte
Bret Schulte (firstname.lastname@example.org)is an assistant professor of journalism at the University of Arkansas. He profiled Gingrich for U.S. News & World Report in 2005.
On a cold January Thursday, an unusual scene unfolded with no great fanfare at the Arkansas Democrat-Gazette. A man and woman, she in a pink sweat suit and he in jeans and a brown jacket, stepped into the lobby and asked to meet with a representative of the paper. The reason: They wanted to place a classified ad seeking a missing person. And they wanted it to run on Sunday, in the print edition.
Their decision made sense because people in Little Rock read the Sunday paper. (I am one of them, and I worked for the Democrat-Gazette from 1999 to 2001.) While the industry has seen readers leave in droves in markets all over the country the nearby Dallas Morning News' readership dropped a third from 1998 to 2008 the Arkansas Democrat-Gazette has stayed steady. Over the same period, the paper lost a mere 1 percent of its circulation now about 196,000 on weekdays and 281,000 on Sunday. In fact, the Democrat-Gazette's city edition has the highest Sunday penetration of any major newspaper in the country, at 63 percent. And by offering free want ads years ago, this paper beat craigslist at its own game before craigslist even had a game.
The Democrat-Gazette has always been considered a perfectly fine regional news outlet. Now the paper, or more specifically, its owner and publisher, Walter E. Hussman Jr., is being hailed as a visionary and as an industry leader. In November, the Atlantic slotted him at No. 14 on its list of 25 "Brave Thinkers." In 2008, Editor & Publisher named him "Publisher of the Year."
His brave thought is simple: Protect the value of your product. When his paper launched its Web site, it followed the industry lead and gave everything away online. "People started coming up to me saying, 'I really appreciate you putting up that content for free. I don't have to subscribe to your newspaper anymore,' " Hussman says. "I thought this was crazy. We're teaching them they don't have to subscribe to the paper." So in 2002, he erected a pay wall around the site. Print subscribers get free access; everyone else has to pony up $5.95 a month. And for the next several years, when most other news organizations were dreaming up ways to monetize the new platform, Hussman focused on expanding the circulation of the retro old print product. "I think for a long time there people kind of laughed at us and thought we were kind of stupid for what we were doing," Hussman says.
Nowadays, Hussman is looking pretty smart, and not just because his notion of charging for online content is now in vogue. He's the owner of a sizable media empire a newspaper chain that includes the Little Rock paper and the Chattanooga Times Free Press as well as several small dailies and weeklies in Arkansas and nearby states all under the umbrella of Wehco Media. And he's ready to expand his print holdings: Hussman recently attempted to buy the Austin American-Statesman, but the effort collapsed when the owner, Cox, decided not to sell the paper.
He considers himself equal parts businessman and newspaperman a handy hybrid for these troubled times. And while his paper is suffering like everyone else's, his defiantly print-centric focus in the Internet Age has buffered the blows.
For the past few years, the Democrat-Gazette has consistently performed better than its peers. In the third quarter of 2009, the industry average for ad revenue was down 28 percent. The Democrat-Gazette was down about half that. Because it is privately owned, the paper doesn't have to disclose its profit margin and it doesn't. Asked about it, Paul Smith, president of Wehco Newspapers, replied, "Profits decreased significantly over the last couple years, but we are still profitable." He added that 2009 turned out to be a better year than executives had expected the company provided Christmas bonuses, which had been in doubt and he expects 2010 to be pretty similar, with the wild card being the price of newsprint.
The Democrat-Gazette has trimmed its staff the newsroom roster is now 167, 10 of them part time but the carnage has not been as severe as at some other newspapers. Hussman has sliced 10 percent of the Democrat-Gazette's editorial staff since the big newspaper shakeout began in 2007. Other papers have shed 30 percent and more. Some have shut down.
The Web strategy was not the first time Hussman defied conventional wisdom and came out on top. The Arkansas native and scion of one of the state's oldest newspaper families has a famous contrarian streak one that lurks under a huge grin, a modest personality and an old-fashioned courtesy. "He's so darned polite. He's so darned nice," Smith says. "There are a lot of aggressive people. Walter is the most dangerous kind, because you never know he's very aggressive."
Hussman showed just how aggressive he can be in 1991, when he stunned the news industry by bringing the mighty Gannett empire to its knees in a fabled newspaper war in Little Rock. Gannett ended the bloody battle by selling Hussman the beloved Arkansas Gazette, which he then merged with his own paper, the Democrat. Later that decade, he moved into Chattanooga, which also had a competitive market, snatched up one of the papers, and then pushed enough money at his rivals to persuade them to sell as well. Those rivals, by the way, were hardly cash-strapped. They were members of the Ochs family, of New York Times fame. Hussman recently ended another newspaper war in northwest Arkansas after gobbling up two local papers and merging on his own terms with a third paper, the Morning News, owned by the Stephens family, one of the few Arkansas families with more money than Hussman. Put simply, Hussman doesn't lose. His aggression has a lot to do with it, but so does his restraint.
At lunch, eagerly sopping up salad dressing with Melba toast, Hussman hardly seems fierce. He looks more like an English professor than a hard-charging executive, preferring corduroy pants and a tweed blazer to a power suit. But make no mistake, Hussman is very wealthy. In 2001 the weekly Arkansas Business estimated his net worth at $890 million; Hussman says the actual figure is much lower today. He drives a snazzy Mercedes, and he lunches at the Little Rock Club, a private establishment that is 30 floors in the air and offers stunning vistas to the city's elite.
In an age of razzle-dazzle executives, corporate shareholders and global media, he is an anachronism: an old-money, local publisher who believes in traditional news values. He keeps his office at the Democrat-Gazette, a squat box of a building that used to be a YMCA. He is notoriously frugal: His office is large but filled with worn furniture, including a '60s vintage couch that serves as an open-air, horizontal filing cabinet. The best part of his day, he says, is proofing the paper's stridently conservative editorial page. Hussman is also invested in his community, and while he's hardly universally beloved, he is active in civic groups and is a crusader for education reform in the state.
Because Hussman owns 100 percent of the company's voting stock, he answers to no one. He takes staggering risks and has absorbed equally staggering losses to prevail in his business endeavors. "Walter has succeeded because people always underestimated him," says Griffin Smith, the Democrat-Gazette's executive editor. At 63, Hussman remains a dangerous, and perhaps still underestimated, foe. Even as the industry seems to be collapsing, Hussman wants more newspapers. That has left many people wondering what he knows that they don't.
This is what Hussman knows: The Democrat-Gazette works because "we've always had a really large newshole. We've always had a larger than normal staff. It sounds simple but the reason people buy and read newspapers is there's news in it. And if you have more news in it, more interesting news, more relevant news, news with more context, news with more details, people are going to feel a greater affinity for the paper and they're going to be more likely to renew their subscription and your circulation will be greater."
Hussman keeps it simple. He believes in investing money in his Web site, but it's not his primary focus. Circulation is key, he argues, because it allows you to charge more and make more from print advertising, which is still where most of the money is. Early on, Hussman saw the online model of advertising offering at most $6 to $8 per thousand readers, often half that. On the other hand, there is print.
"Every single Sunday, Best Buy is going to have an ad in the Sunday paper, and they're going to pay somewhere around $40 a thousand," Hussman says. "Why wouldn't they take those ads and run them online? The fact is they get results from that print ad they run in the paper." So Hussman pushed print, partly by opening a theater of battle in northwest Arkansas. His company president, Paul Smith, says, "I think one of the biggest problems in newspaper companies today is people in those companies have decided that newspapers are dying." Obviously, he and Hussman have decided differently. And today, their paper in Little Rock has a bigger circulation than dailies in Memphis, Cincinnati and Miami.
It's tempting to dismiss Hussman as simply out of step or intractable. But people who know him say he'll try anything to see what works, which has been his formula for success. At the request of editors at the Chattanooga Times Free Press, he's letting them experiment with free access to their Web site to see if they can find other ways of generating revenue online. Hussman is toying with the idea of allowing readers to donate to his reporters essentially an online tip jar, an idea the Miami Herald recently tried and quickly scrapped to motivate his staff.
Early in his war with the Gazette, he did the unthinkable by risking the loss of millions in revenue by giving away classifieds. He gambled that the boost in circulation would be worth it. He was right. Even after he merged the Democrat and the Gazette, he still offered free classifieds but in limited number. That means spots quickly fill up. If you're too impatient to wait, you can pay to get the ad in immediately. The "free" want ads policy is now earning his paper $2 million a year.
Hussman also eschews national aggregators like Cars.com and Apartments.com, which he argues have trained readers to turn away from local newspaper classifieds and drains them as a source of revenue. Hussman has instead been an outspoken advocate of newspaper collaboration. But despite the bully
pulpit of the Associated Press board of directors, on which he long served, his pleas went largely unheeded. So he's moved forward on his own. Recently, the Democrat-Gazette joined forces with the Oklahoman in Oklahoma City to combine their classifieds and offer greater choices to regional readers.
Even with Hussman's myriad ideas, his basic business plan still comes down to people's willingness to buy and read news printed on paper. And that model has plenty of doubters. Hussman's strategy "cannot save the Arkansas paper if print volume and print advertising continue to decline at the pace it is now," says Ed Atorino, a media analyst at The Benchmark Company. Naysayers argue that Hussman is able to rely on an old business model because Arkansas is behind the times. Hussman counters that Little Rock is a typical midsize American city in terms of per capita income and household sales. But the fact remains that for all the buzz about Hussman, few papers have followed the same path when it comes to charging for news online (the Wall Street Journal is a notable exception). In the past year, however, pay walls have attracted a great deal of interest as a way to help save newspapers, and the New York Times announced in January that it would start charging for online content in 2011.
Hussman won't go so far as to say he's sure he's right. After lunch, it's not too long after he laid out his analysis of the industry's woes and his pay wall solution that he blurts out, "This may be wrong, though! I mean, we got to keep an open mind! Maybe we're all going to be free [on the Web] at some time!"
The decorous Hussman grew up in the conservative, tightly knit Southern town of Camden, Arkansas, about a hundred miles south of Little Rock. The Presbyterian Church was a focal point of community life, and Hussman's family, particularly his mother, Betty, were active members. Walter was the youngest of three children and the only boy. People who knew him as a youngster say he was smart, reserved and serious.
Walter's maternal grandfather, Clyde Palmer, was a newspaper pioneer in south Arkansas and a local legend. While honeymooning with his bride in 1909, Palmer stopped in Texarkana for a night, decided to stay and purchased a newspaper. In what would become a family trait, Palmer bested his Texarkana competitors and consolidated them. Over the next few decades, he expanded his holdings to several towns in the region.
Walter's father took over and expanded the family business in 1957. Considered a no-nonsense businessman, Walter Hussman Sr. also exhibited the family's characteristic good manners. On one occasion, he agreed to allow an upstart competitor who had launched a weekly newspaper to use the services of his Camden newspaper's press. The new rival was a young man named David Pryor, whose mother was a close friend of Walter Hussman Sr.'s wife. Even with Hussman Sr.'s help, the paper didn't last long.
"Mr. Hussman was smart enough to know that with a daily newspaper in town, 95 percent of all ads would go to him every time," Pryor says. "And that was the case. It was just a matter of time." But favors from the Hussman family only went so far. When Pryor, a Democrat, launched his political career, which eventually took him to the Arkansas governor's office and the U.S. Senate, he got little help from Hussman's papers. Pryor posits this was because his politics were more liberal than the Hussmans'. "I don't know if any of their papers ever endorsed me," he says. "At that time I felt like I was not getting a proper shake. In retrospect they could have been a lot rougher on me, if they had wanted to."
Young Walter attended an elite prep school, Lawrenceville, in New Jersey, whose notable alumni include Michael Eisner, Randolph A. Hearst and Huey Lewis(!). Hussman's classmate Howard Kelsey recalls him as sociable and as someone who enjoyed competition. They both went to the University of North Carolina, where Hussman majored in journalism. Hussman "was always up to something," Kelsey says. "He didn't stay in his room." Back then, students were not allowed to have cars, and Hussman and Kelsey, who were suitemates, had a long walk to class. In a move that perhaps portended Hussman's knack for problem-solving, he bought himself a scooter and thereby swerved around the rules. "That [solution] became pretty popular," Kelsey says. "If there was a problem, he would fix it."
Hussman earned an MBA from Columbia University and worked briefly for Forbes magazine before coming back to the small towns of south Arkansas in 1970 to help out with the family business. Four years later, interested in a new opportunity and craving a metropolitan area, Hussman persuaded his reluctant father to buy the Arkansas Democrat, a conservative-minded afternoon daily in Little Rock that by most accounts was near death. Its liberal and somber rival was the Arkansas Gazette, owned by another local newspaper family, the Pattersons. It dominated advertising and had double the circulation of the Democrat. At age 27, Hussman became the Democrat's publisher. "I thought it would be an exciting challenge," Hussman says. "It turned out to be more of a challenge than we thought."
Hussman determined that for the Democrat to be successful it had to get down to basics: increasing circulation to increase advertising. He enlarged the newshole and hired more staff. But he didn't gain any readers. He then proposed a joint operating agreement with the Gazette that would guarantee his paper just enough revenue to keep breathing. The Gazette refused. So Hussman got creative.
He hired a bombastic and battle-hungry former AP Little Rock bureau chief named John Robert Starr to lead the newsroom and as it turned out, wage a nasty ideological war with the Gazette (among other targets) that lasted for years in a regular column. While his personality couldn't have been more different from Hussman's, it gave the paper a voice and persona it desperately needed to attract readers.
It was then that Hussman decided to offer free want ads an idea he borrowed from the Winnipeg Tribune recognizing they would be popular with readers. It did wonders to boost his paper's profile. He also allowed big advertisers to duplicate their Gazette ads in his paper for a nominal fee so that readers would see the same sales and specials advertised in the Democrat. Hussman was notoriously thrifty, and veterans of the paper in those days recall fights for office supplies and available telephones. In 1986, the Pattersons caved and sold the paper to Gannett, the largest newspaper chain in America. As everyone knew, Gannett didn't lose newspaper wars. "They had $40 to every $1 of ours," says Paul Smith.
Smith, who was with Hussman as a top executive throughout the war with the Gazette, says he's rarely seen his boss get mad. But one occasion stands out, and it demonstrates Hussman's knack for brinksmanship. Soon after Gannett came to Little Rock, the Democrat planned a promotion that asked readers to vote for their favorite radio disc jockey by buying a newspaper, filling out a ballot and sending it in. The winning DJ would get $10,000 donated to the charity of his or her choice.
A few days before the promotion was set to launch, the Gazette launched a similar promotion, offering the winning DJ a Pontiac Fiero. "They had stolen the idea," Smith says. Hussman summoned his executives to demand answers. He wadded up the Gazette, threw it against the wall and announced the Democrat was not going to roll over. He said, "We're going to give away a Porsche!" And a lucky reader would get a Mercedes. Both promotions went forward, but when DJs on the air lobbied for votes, they would say, "If you only have one quarter, buy a copy of the Democrat. I'd rather drive a Porsche than a Fiero!"
When Gannett offered free classifieds to rival the Democrat's, Hussman decided to make the war about service. He hired new operators, extended the hours of operation every day and opened the office on Saturday. He also had a secretary call the Gazette classifieds line hourly to time how long it took for someone to pick up. The secretary did the same for the Democrat. Before long, Hussman says, it took three or four seconds to get a response from his paper; the Gazette took three or four minutes. His relentlessness eventually convinced Gannett shareholders that the battle wasn't worth the Little Rock market. In 1991, the mighty newspaper chain surrendered and sold to Hussman. No one knows how much he spent winning that war; some local industry experts estimate $200 million to $250 million. Hussman doesn't talk about it. He talks about the fact that he won.
The Democrat-Gazette today is, like its owner, something of an anachronism. Hussman is succeeding by sticking with traditional newspaper values. Though it has cut its book review section and slashed other features pages, the Democrat-Gazette is still stuffed with news. On Sunday, it prints two news sections, the second focused primarily on international news. Hussman continues to subscribe to multiple wire services, and his wire editor regularly weaves together reports on national and international news from the New York Times, Washington Post, AP and other sources to give readers as many facts as possible in a single story. Hussman believes that this is the sort of thing that gives legacy media an advantage over the Internet and keeps readers coming back, as opposed to the prevailing wisdom that papers must go local, local, local.
The Democrat-Gazette's front page routinely features stories that readers could get online from other sources. "When newspapers get away from the traditional model and start having giant stories about the parks or something on the front page," Hussman says, "I think readers start to question what's going on with their news judgment."
The wounds from the newspaper war have not healed in Arkansas. The Gazette was the dominant paper for decades because it was beloved by many, particularly liberals. It won two Pulitzers for its coverage of and editorials on the Central High School desegregation crisis in 1957. Its editorial page was as unapologetically left-wing as the Democrat-Gazette's is now right-wing. Ernest Dumas, who was a reporter and editorial writer for the Gazette, was one of scores who lost their jobs when the paper folded. Today, he says, "I don't think much of the Democrat, but I think [Hussman] has spent money probably more generously than certainly Gannett would have to try to maintain a good paper."
Recently, Dumas took a trip to San Francisco, where he regularly read the Chronicle. "I suspect on a daily basis there is at least three times as much news in the Democrat-Gazette than there is in the Chronicle," he says, "and that's true across the country."
Joel Gambill, chairman of the journalism department at Arkansas State University in Jonesboro, watched the Democrat and the Gazette duke it out from his perch in the northeast corner of the state. He questions whether the Democrat-Gazette today can truly call itself a statewide paper, as it provides little coverage and has few subscribers in his region. "If you compare it to 10 years ago, it doesn't cover the state nearly as thoroughly," Gambill says. "But for what other papers are doing today, I think it still does a good job. It has more international and national news than almost any other paper I look at."
Hussman says the old-fashioned values extend to the proverbial wall that separates news coverage from business interests or political inclinations. He acknowledges that as a local owner, he gets leaned on by powerful interests in the community for favors. His response is that he doesn't control the news operation. Reporters say they respect him and are grateful to work for a local publisher who has sheltered their place of business from financial ruin. But while his top editors and executives have stood by his side for decades, Hussman doesn't seem to inspire the same devotion among the rank and file. In 2009, the paper implemented mandatory furloughs. The move no doubt saved jobs, but it also hurt reporters' incomes, already considered low.
Executive Editor Griffin Smith says Hussman is an ideal owner who is accessible but who stays out of newsroom affairs. Hussman will, however, suggest looking at stories from particular angles. Smith says that "when [Hussman] gets a hold of something, sometimes we have a hard time telling him there's nothing there."
Hussman's willfulness manifests itself in other ways, such as not allowing members of the news staff to have company credit cards. In 1996, the Democrat-Gazette planned to cover President Bill Clinton's reelection campaign, but all expenses had to be charged. Hussman wouldn't waver. Finally, Griffin Smith went to then-General Manager Paul Smith. After some time, Paul Smith came back with a credit card number and said, effectively, guard this with your life. "Years later, I found out Paul had just given me his own credit card number," Griffin Smith says. "The company hadn't relented."
After all these years of newspapering, Hussman sometimes thinks about retirement. He has children who are perhaps interested in getting into the business. A college-age daughter is now interning at the San Francisco Chronicle. His 26-year-old son is working for him in Little Rock. The top brass at Wehco, which has been with him for decades, has recently started to groom their replacements. But Hussman is hesitant to dwell much on the subject.
"I still love working," he says. "I really enjoy what I am doing." His right-hand man since the 1970s, Paul Smith, says, "I have no doubt Walter will buy more papers." He is one of the few who sees a reason to be buying.