NEWSPAPERS GET COZY THE NEW YORK TIMES CHARMS THE COMPETITION
(FORTUNE Magazine) – Local newspapers don't have it easy. Readership is down, and costs are climbing. So what's a publisher to do? Some have arrived at an improbable solution--deliver the New York Times to their customers.
The idea is this: The local dailies earn extra cash for helping the Times attract new readers to its expanding national edition; the Times national edition, in turn, which has a lot of the national, foreign, and financial news many dailies have cut back on, is supposed to fit nicely with the hometown paper's local news and sports section.
All this sounds uncharacteristically cozy for the newspaper business, but Times executives argue it's actually quite sensible. "I don't think there's really much of a dilemma here for most newspapers," says William L. Pollak, executive vice president for circulation at the Times. "Every newspaper in America is running around with half-filled trucks or cars. There's not a publisher out there who isn't looking for a new way to eke a few points of gross margins out of their operations. We're a complementary product, not a competitor."
The all-of-our-news-that-fits-on-your-trucks pitch is winning converts. The Times has signed up more than 25 delivery vendors in the past year--not just midsize dailies like the Reno Gazette Journal and Waco Herald Tribune but also major regional papers like the Chicago Tribune and Denver Post. Typically, the Times pays the local paper 25 cents to 30 cents for each daily home delivery and 40 cents to 50 cents for dropping off the heavier Sunday package. "The more you can spread your fixed costs across more businesses, the better off you're going to be," says Denver Post publisher and CEO Ryan McKibben. Some papers have gone further: In western Washington, the Tacoma News Tribune prints, delivers, promotes, and signs up new customers for the Times in its own pages. "I don't know of a single customer that we have lost because they are now taking the New York Times," says News Tribune circulation director Ron Mladenich, whose operation also delivers the Investor's News Daily and Barrons.
So far, the Times' biggest push has been on the East Coast. In February the Boston Globe, which is owned by the New York Times Co., began printing and delivering a New England edition of the Times, which includes local weather, TV listings, and an arts calendar. The Times also began printing a new zoned edition for the Washington, D.C., region.
Some local papers have spurned the Times' overtures. Delivery in D.C., for example, was established without help from the Washington Post. The Providence Journal Bulletin also opted not to deliver the Times because "the focus has to be on doing what's best for your own franchise," said Mike Dooley, vice president for circulation. One concern is customer service: Adding out-of-town papers to delivery routes could mean that the hometown daily would arrive later at the doorstep, a sure way to upset customers. There's also the likelihood that out-of-town subscribers to the Times will spend less time with their local dailies--reading only local news, sports, or movie listings--which would ultimately turn off advertisers. The risk of losing readership is greatest on Sundays, when readers already cast aside entire sections of their Sunday paper.
On Wall Street, analysts generally applaud the Times' drive to build revenues outside of New York. The Times desperately needs to expand its national distribution to make up for sagging local readership. (Over the past four years, overall circulation of the paper has declined by 100,000 on weekdays, to about 1.1 million, and by about 80,000 on Sundays, to about 1.7 million. Meanwhile, circulation of the money-making national edition has grown to 279,000 on weekdays and 389,000 on Sundays since its launch in 1980.) Analysts tend to agree that the Times is a complement to rather than a competitor with local dailies, although James Marsh, an analyst at Prudential Securities, says the Times could skim off some newspapers' best customers, their high-income, well-educated readers. "I don't think people are quite ready to get rid of their local newspaper," says Marsh. "Not yet."