How The Democrat Beat The Gazette   

The publisher's plan to save his Little Rock paper included giving away classified ads.

Four years ago I predicted that Little Rock's Arkansas Gazette could not long survive its battle with the rival Arkansas Democrat unless a new owner with deep financial pockets took over. I was half right.

How the Gannett Company lost the battle in Little Rock and sold the Gazette to its competitor is an illuminating display of the financial forces that shape journalism. The sad fate of the Gazette, which now lives only as a name appended to its rival's masthead, demonstrates that smaller newspapers can overtake their larger competitors. But it also presents a cautionary tale for those observers who, like myself, forecast the fate of the media.

To understand the factors that killed the Gazette, one must go back to the mid-1970s, when the family that then owned the paper rejected a proposal from the Democrat to consider a joint operating agreement (JOA). At that time, the Gazette was widely respected for its fearless coverage decades earlier of civil rights protests and integration – a position that had once caused it financial distress from advertising and reader boycotts. But when the Democrat first suggested a JOA, the Gazette had climbed back into prosperity. The Democrat, meanwhile, was losing money and had half the circulation of its rival and about a fifth of the advertising revenues.

Near death, the Democrat was purchased in 1974 by Wehco Media, Inc., an Arkansas-based company headed by Walter Hussman Sr. that owned broadcasting systems and published five profitable small-town dailies. It was Hussman's son, Walter Jr., who approached the Gazette owners about a JOA, offering them more than 90 percent of the profits in the venture. When rebuffed, Hussman Jr. realized that he would need a fresh strategy to save his new acquisition. He studied how another newspaper, the Chattanooga News-Free Press, had decades earlier swallowed the rival Chattanooga Times.

Hussman Jr. came up with a plan that involved switching the Democrat from an afternoon to morning schedule, offering inexpensive advertising to department stores, giving away want ads to individuals, distributing 70,000 copies once a week to households to attract ad inserts, and guaranteeing that the Democrat contained more pages than the Gazette regardless of ad lineage. The strategy immediately forced the Democrat further into deficit spending; in time, however, added competition had a noticeable effect on the Gazette as well.

In December 1984, the Gazette charged in a lawsuit that the Democrat's pricing policies violated federal antitrust laws. I testified on behalf of the Gazette at the March 1986 trial, arguing that since the newspaper was locally owned and the universe of advertising sales was limited, it could not afford to battle the Democrat's price-cutting for long. The alternatives, I said, were either bankruptcy or selling out to a larger company. The jury wasn't persuaded.

The Gazette was sold a few months later to Gannett, and the conventional wisdom at the time was that Gannett's financial resources would enable the newspaper to match the Democrat's discounts. Eventually, perhaps, that could leave the field clear for the Gazette.

It didn't work that way. One reason was that the Democrat had momentum; even though it still had a smaller circulation than the Gazette, its free and paid ad lineage had grown faster. Moreover, the Democrat regularly reminded its readers that it was owned by Arkansas residents, while Gannett was a chain based in Virginia.

The Democrat's lively editorial style, which emphasized local news, had growing appeal among Little Rock residents. The Gazette, as befitted its tradition, was a sober newspaper before Gannett arrived and revamped it. Whatever the merits of modernization, Gannett's changes alienated many of the paper's longtime readers.

By last April, according to recent audit reports, the Gazette still had the edge in average weekday circulation, with 137,000 copies to the Democrat's 131,000. But it had fallen behind on Sundays, selling 218,000 copies to the Democrat's 230,000. These numbers, however, overstate the Gazette's strength, because many copies were sold in areas far outside of Little Rock that held little interest to city advertisers.

What attracts advertisers is city and suburban circulation. This "city zone" was the ground on which Gannett lost the battle. In 1986, the Gazette had an average weekday city circulation of 54,000 and 68,000 Sundays to the Democrat's 41,000 weekdays and 61,000 Sundays. By this year, the Gazette had slipped to 53,000 daily and 72,000 Sunday to the Democrat's 62,000 daily and 83,000 Sunday.

Gannett has never shown much interest in properties it can't manage, and it was clear to Hussman Jr. that the financial rewards of owning the only press in town were greater than those offered by a JOA or keeping the Gazette alive. Thus ended the paper's 172 years of service. l