Tougher Times for Small Town Dailies   

They're no longer the money machines they were.

Small town daily newspapers are no longer quite the reliable money machines they once were, a fact underscored by the recent decisions of Thomson Newspaper Corp. and the New York Times Co. to unload several acquired over the years. Earlier this year, Park Communications sold off some of its tinier newspapers.

Most small dailies make money, but these days perhaps not enough to make the effort worthwhile for large companies. A newspaper executive I talked with recently remarked that it takes just as much management expertise to run a 10,000 circulation paper as one three times that size – and maybe more if local conditions are difficult – yet the payoff to the corporate parent is relatively small.

One way out of this dilemma for a company like Thomson, which still owns numerous small newspapers, is to create regional management for several small papers. This would allow the company to consolidate accounting and other administrative costs and to enlarge revenue through regional marketing. But the 25 newspapers Thomson put up for sale are relatively isolated and do not fit into what the company calls its new "strategic marketing groups."

Why has life become more difficult for small dailies? The answer can be found in the economic changes that have altered how business is done in small towns almost everywhere. In rural markets that are dependent on agriculture, the increasing consolidation of small family farms into large, heavily mechanized agribusinesses has sharply reduced farm population. Fewer people come in town to buy groceries, clothes, insurance, feed and seed, farm implements and the other goods and services that drive the local economy – including, of course, the local newspaper's advertising revenue.

Moreover, these markets and those not crucially dependent on agriculture also have gone through changes in retailing that have adversely affected newspaper revenue. The best known of these changes is called the Wal-Mart effect.

The Wal-Mart effect takes place when a big discount retail store moves into a market, advertises in the newspaper heavily at first, then withdraws advertising as small local retailers either give up or become so financially hard-pressed that they slash their ad budgets. With little significant competition left, the discount store no longer needs to advertise to pull in customers.

Even in those markets large enough to support more than one discount store and in which some advertising competition remains, newspapers are hurt by the trend toward regional or national ownership of retail stores. Before, locally owned advertisers and local stores of chains like Sears or Montgomery Ward made advertising spending decisions. Now these decisions are made at regional or national offices. A small daily operating independently, which has been the standard management practice even for papers owned by large chains, is in danger of dropping off the map when advertising decisions are made this way.

The owners of some dailies may be forced to abandon a daily printing schedule. Even if a market's population has not declined, the economic base the newspaper depends on may have. Switching to weekly, or two or three times weekly publication, which dramatically reduces newsprint, production and distribution expenses, could be an economically rational decision.

It's a difficult one, though, for a locally owned newspaper, since in the newspaper business there is a wide gulf in stature between being the owner of a daily and the owner of a weekly. In 1993 – the last year for which a tally is available – six papers decided to stop publishing daily.

Indeed, the pressure on small-city dailies in the future may not be restricted to relatively isolated markets. Most big-city newspapers now have the production capability to establish regional, or even small-city, editions to compete directly for local advertising with small newspapers 50 to 100 or more miles away.

Baltimore's Sun is among the metropolitan dailies that have started up regional sections to compete in markets far away from their home cities. A while back I shared a speaking platform with John Carroll, the Sun's editor, and he explained at some length the paper's plans to compete in local markets that before had received only cursory attention for news, and essentially none for advertising.

After he spoke, a member of the audience said she worked for a newspaper in Western Maryland that was among those targeted by the Sun, and asked rather plaintively if Mr. Carroll intended to drive her newspaper out of business.

He answered no, but added that if the only alternative to presiding over a newspaper with a declining penetration of an urban market – in other words, a declining newspaper – was to take business away from a small newspaper in a distant market, he had no choice but to go ahead. l