AJR  Columns
From AJR,   July/August 2000

Life After the War   

Denver's JOA allowing both papers to publish in the morning may ensure the health of each.

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.     

FINALLY THE NATION MAY GET a joint operating agreement between two newspapers that will honor fully from the beginning the intent of the Newspaper Preservation Act of 1970 and assure readers in Denver continued editorial competition.
The reason for this assertion is that both the Denver Post and the Denver Rocky Mountain News will continue to publish in the morning, meaning that neither newspaper will suffer from a sure death sentence by being forced into afternoon publication.
At one time or another 28 cities had joint operating agreements. Only 13 remain, and the cause for the reduction in almost every instance was the continuing decline of an afternoon paper.
Of the existing agreements, only in Seattle do the partners--the Times and the Post-Intelligencer--both publish in the morning, and only since March. When Seattle's JOA began in 1983, the Times remained an afternoon paper. Its owners, starting to feel the negative effects of the afternoon syndrome (chiefly traffic congestion hampering delivery), renegotiated the JOA to move to the morning--at considerable cost to the Times' profits.
In many other JOA cities, combining business and production operations to cut costs while maintaining competitive news operations only delayed the inevitable. The morning paper grew; the afternoon paper shrank. Of course, when many of these JOAs were created, from the 1930s through the 1960s, newspaper owners had no idea that evening newspapers in big cities would become endangered species.
By the 1970s the effects of the afternoon syndrome had become apparent, but still JOAs formed in seven cities from the mid-1970s through 1990 placed one paper in the morning and the other in the afternoon. If history continues to disfavor afternoon publication, at some point the JOAs in these markets, too, will wind up publishing just a morning paper.
It is no accident that the four most recent joint operating agreements have initial terms lasting 50 to 100 years, rather than the previously common 25. (The Denver agreement is for 50.) In effect, these long-term contracts assure the owner of the struggling paper a continuing share of profits from the successful paper.
Before Denver can get a JOA, of course, the U.S. Justice Department must approve the arrangement. The Preservation Act requires at least one of the two papers wanting a JOA to prove that, without help from a corporate parent, it is in probable danger of financial failure.
Statements from E.W. Scripps Co., owner of the Rocky Mountain News, expressed confidence that the JOA will be approved, owing to the News' past 10 years of operating losses totaling $123 million. The Post during that period had operating profits of $192 million, according to William Dean Singleton, chief executive officer of MediaNews Group Inc., the Post's parent.
No application for a JOA has ever been denied, although Justice has not always made the process easy. The Seattle Post-Intelligencer had a history of unprofitability similar to the News', and it and the Seattle Times had to weather a lengthy and expensive series of Justice Department hearings and opponents' lawsuits before prevailing. The Detroit Free Press and the Detroit News similarly endured a drawn-out and costly process before gaining approval.
If the JOA is approved for Denver, it will end a fierce battle, commercially at least, between two papers of nearly equal circulation. In the most recent preliminary circulation numbers, the News pulled slightly ahead of the Post weekdays and came close on Sunday.
But the News' circulation gains proved Pyrrhic rather than profitable. Scripps never alluded to the News' unprofitability until the recent announcement, but the classic signs of a paper in trouble were there to see. Whenever a newspaper engages in extraordinary discounts--at times one could subscribe to the News for a penny a day--it usually is a sign of desperation.
The goal of a discounting strategy is to drive up circulation in the hope that higher advertising revenue will follow. But that never happened, Scripps said, leaving the News with much lower circulation revenue, much greater newsprint expense from higher circulation, and not much of an increase in advertising.
The Denver JOA will be a 50-50 profit-splitting arrangement, with Scripps paying a one-time $60 million to MediaNews to make up for its relative weakness. In the long run, Denver readers will have to pay realistic prices to buy newspapers, and Denver advertisers no longer will see extraordinary discounts on ad rates. These seem small costs for the rare privilege these days of having two competitive newspapers in the same city.