AJR  Columns
From AJR,   June/July 2010

Challenging the Incumbent   

Itís very tough to go up against an established newspaper on its home turf.

By John Morton
John Morton (mortoninc@msn.com), a former newspaper reporter, is president of a consulting firm that analyzes newspapers and other media properties.     

A truism of the newspaper business is that it is unwise and financially hazardous to try to encroach on a market already well-served by an established newspaper. So why is Rupert Murdoch's Wall Street Journal trying to do just that against the New York Times?

The answer may lie more in psychology than business strategy. But before exploring that possibility, let's examine past efforts that either came to naught, wound up costing the aggressor a fortune--or both.

Coming to naught and costing a fortune followed the most recent invasion of another newspaper's home turf, the one launched by the New York Sun in 2002. Its chief executive said he planned "to seize the local beat" from the New York Times with a serious, well-staffed newspaper with a conservative orientation.

The Sun lasted more than six years, a long run for this kind of venture, thanks to hefty investments by its financial backers and the widely acknowledged high quality of its journalism. When the paper closed in 2008, after the onset of the recession, Sun executives claimed circulation of 96,000, of which 14,000 was said to be paid. It had never earned a profit.

A previous incursion into a newspaper's market, a 1989 challenge to the St. Louis Post-Dispatch, lasted only seven months. Ralph Ingersoll II, then chief of a chain of mostly small dailies in several states as well as free weeklies in the St. Louis suburbs, modeled his tabloid St. Louis Sun on Canada's Sun Publishing, which had created successful tabloids to go up against established dailies in three Canadian cities. But Canada's newspaper readership was still divided along class and language lines, which provided running room for the new tabloids. That kind of readership division largely disappeared in the United States long ago, and it certainly had in St. Louis.

Two startup dailies that continue to publish are the Washington Times, established in 1982, whose substantial losses were long underwritten by business interests of the Unification Church; and, also in D.C., the Examiner, which converted a collection of weekly publications into a free daily in 2005. The Examiner's financial performance is unknown, but an attempt to create a replica in Baltimore went under during the recession. In addition, numerous free dailies have been created in recent years, mostly in small markets, but they come and go with such frequency that it's difficult to keep track of them.

That pretty much covers significant attempts over the last 30 years to create new competitive dailies. Some existing papers have made forays into at least portions of their neighbors' territory, for example in Dallas-Fort Worth, Minneapolis-St. Paul and Tampa-St. Petersburg. These attempts have waxed and waned, and invariably have been costly and usually without permanent benefit. Competition, wherever it occurs, is always expensive.

Some No. 2 papers in two-newspaper markets have successfully challenged the dominant daily, but the result has simply meant that a different newspaper got into trouble. McClatchy took over the nearly moribund Anchorage Daily News in 1979 and, after spending years and tens of millions for a new plant, larger staff and promotion, finally overtook the senior Anchorage Times, which ultimately shut down. Similarly, Wehco Media, owner of several small dailies and broadcast outlets, bought the nearly failed Arkansas Democrat in Little Rock for a pittance in 1974 and, after heavy investments in product and promotion, overtook the competing Arkansas Gazette and bought it in 1991.

Which brings us back to the Wall Street Journal's incursion into the Times' terrain. Rupert Murdoch, chief of the Journal's parent company, News Corp., has sought to broaden the Journal's national appeal since acquiring it in 2007, adding substantial coverage of politics and other general-interest news. Thus, the Journal is among the few dailies to show circulation growth in recent reporting periods. A clear target of this strategy is the Times' standing as the leading national daily of general interest appealing to readers with high incomes and education. (USA Today, the other leading national daily, aims a bit lower.)

So it might seem a natural extension of this strategy to go after the New York market and the Times' dominant hold there on high-end retail advertising, despite the dismal results of similar efforts elsewhere. According to comments from insiders, the Journal will invest about $15 million in the effort, which will include a local staff of 35, including some new hires.

But it's likely that what really is at work here is Murdoch's love of newspapers and newspaper battles, regardless of the financial consequences. He's certainly shown that in his ownership of the money-losing New York Post. So give him credit for investing in newspapers while others hold back. And a likely benefit for readers is that the Times probably will be forced to pump up its local news coverage, a reminder of the often-forgotten glories of competition.