Trying Harder to Become Number 2   

The Rocky Mountain News drops home delivery in much of Colorado, jeopardizing its circulation lead over the Denver Post.

The Rocky Mountain News apparently wants to become the number two newspaper in its fight with the Denver Post.

The News has been battling the ascendant Post for circulation in the most intensely competitive newspaper market in the nation – the most intense because unlike in other competitive markets, the circulations of the two newspapers are relatively even (see "Showdown in the Rockies," October 1995). The News lost the Sunday lead last year, and recent trends suggest losing the weekday lead was not far off.

Then in January

the News made the startling announcement that it would abandon home delivery in all but 13 counties around Denver, counties that the newspaper defines as its core market (see page 12). This will almost certainly mean the Post's circulation will overtake the News on weekdays, by 10,000 or so, and could mean an expansion of its Sunday lead from 29,000 to as much as 60,000. These figures assume most abandoned subscribers and a significant number of newsrack customers will switch to the Post.

To my knowledge, no other newspaper in the history of head-to-head newspaper wars has deliberately decided to seek the second position against its competitor. Why would a newspaper do this in a battle that in the long run probably will leave only one combatant alive?

There could be several answers, but I will concentrate on the two most rational ones: the cost of doing business and management's conception of where profits really come from.

ýhe News is not unique in deciding to cut back on distant circulation (often called "country circulation") in this era of rising newsprint costs. Many newspapers have made similar cuts, but an important difference is that those newspapers were not involved in a potential fight to the death.

The rationale for cutting country circulation is that it is too far from the core market to be of interest to local advertisers, and the circulation revenue is too low to cover the cost of newsprint and distribution. The News' publisher was quoted as saying it cost the News $35 a month to serve a country subscriber who might be paying only $4.75 a month thanks to discounts.

The News' announcement was hailed by Wall Street analysts (though not this one) who follow the newspaper's parent, the publicly traded E.W. Scripps Company. They predicted the move would quickly add to the paper's profitability and have a positive effect on Scripps' stock price.

The analysts accepted management's assertions that while the News might become second in total circulation, the newspaper's advertising revenue base would not be affected because the News will continue to lead the Post in circulation in the Denver core market.

In the most recent numbers from the Audit Bureau of Circulations, the News led the Post in the six-county core market 283,000 to 241,000 on weekdays and 331,000 to 303,000 on Sunday. The Post has substantial circulation not only in the Colorado counties ´hat the News is jettisoning, but also in Kansas, Nebraska, New Mexico, South Dakota and Wyoming – especially on Sunday, when the Post sells 29,000 copies outside of its home state.

But there are some likely problems in the News' cost-saving strategy. The most serious one concerns momentum. The Post has it, and the News does not.

Over the last five years, the Post's total circulation has risen nearly 25 percent on weekdays and 12 percent on Sunday, while the News' has declined 6 percent weekdays and has grown only 7 percent Sunday. This trend has enormous psychological impact on a market – its readers, its advertisers and, importantly, on the morale of newspaper employees. It even affects advertisers who draw all of their customers from the core market.

I have seen this phenomenon in action too many times not to believe in its importance, most recently in Little Rock, where the Democrat overtook and eventually vanquished the Arkansas Gazette. Whatever else it might do, the News' action will fuel the Post's momentum.

Nor is this momentum restricted to total circulation. The Post may trail the News in the core market, but even there the numbers are moving in the Post's direction. Over the past five years, the Post's circulation in Denver and its contiguous suburbs has gained nearly 39 percent weekdays and 20 percent Sunday to the News' gains of 1 percent and 15 percent respectively.

Moreover, the emphasis on the core market may not mean as much in Denver as elsewhere, surrounded as it is by wide-open spaces and smaller towns and fed by high-speed highways. I once had relatives in western Kansas who thought nothing of driving 250 miles to shop in Denver. Where else was there?

What the Rocky Mountain News has done can be justified on financial grounds. It will add profits in the short term, and it will please Wall Street. But this may be another instance of cost-cutting that makes financial sense but isn't very smart. l