(FORTUNE Small Business) – Al Neuharth's first eureka moment coincided with his birth--in Eureka, S.D., in 1924--and he's had newsprint in his blood from the beginning. As a boy he delivered copies of the local Alpena Journal, and after college he worked as a reporter for the Associated Press, then launched a statewide sports weekly called SoDak Sports. When that publication went belly-up, Neuharth, then in his 20s, left South Dakota, and he's never looked back. "I didn't want to hang around that environment as a failure," he says.

Neuharth moved to Miami, where he wrote for the Miami Herald and, with ambitions to run a big company some day, eventually switched to the publishing side. "I wanted to make a lot more money," he explains simply. When he concluded that his CEO chances were slim at the Herald's parent, Knight (now Knight Ridder), he jumped to Gannett. From the time Neuharth became president in 1970 until he retired as president, CEO, and chairman in 1989, Gannett's revenue rose 1,450%, to $3.1 billion, encompassing 85 straight quarters of earnings gains.

We recognize him here, though, for his daring launch in 1982 of USA Today. Currently with the largest circulation of any U.S. daily--more than 2.2 million--USA Today survived initial indifference from Madison Avenue, derision from competitors, and years of heavy losses. But ultimately readers, especially business travelers, were seduced by the very innovations the establishment scorned: snappy writing, colorful graphics, and over-the-top coverage of weather and sports.

"I think of it as an entrepreneurial new venture that for better or worse--and you can argue either way--made more people read newspapers," Neuharth, 78, told FSB during an interview at Pumpkin Beach, his waterfront hideaway in Coca Beach, Fla. "And I think that's a nice legacy for it to have." --David Whitford

"The idea of a national newspaper evolved over a period of two to three years. The planning took another two to three years. So it was a fairly long process. From 1978 to 1980, I was chairman of what used to be called ANPA [American Newspaper Publishers Association]. Now it's NAA [Newspaper Association of America]. During that time I visited all 50 states and spoke to press groups. And wherever I went, I loaded up our little airplane with all the local newspapers I could get and studied them--trying to figure out what seemed to be pretty hot and what wasn't. By then we owned about 80 newspapers in some 30 states. They were all conventional newspapers, and I became convinced that not just Gannett's but others were not as good as we thought they were, and that conventional newspapers, unless they changed, would die. I didn't know exactly how to reverse the trend--how to hold the readers we had and grab new readers--but I was quite sure the conventional way wouldn't work.

We did a lot of research to test the prototypes of USA Today. The magnitude of this was fairly significant for our company. And I felt that the idea had to be developed before a plan could be developed. We weren't out to make a quick kill. We weren't trying to go from the minor leagues to the major leagues overnight. But I really wanted to get there. So we moved pretty carefully. I think a lot of the critics were unaware of that. You know, it was 'Neuharth's nonsense' and 'He's got this goddamn idea--he wants to get into the big leagues and doesn't know what he's doing.' Didn't surprise me at all, by the way. You have to be thick-skinned.

One of our young Turks, the guy who is now the publisher of USA Today, Tom Curley, initially wanted to make it an all-sports daily newspaper. I felt that that was too limited, both in circulation and advertising. In the end, a lot of what we came up with was based on research that [pollster] Lou Harris did for us. We were trying to give readers what they'd already learned to love on television--color, a lot of pizzazz, graphs, maximum information in minimum time, all that stuff. Really, it all came from the tube. The weather map, for example, is a direct steal.

USA Today is a much better newspaper today than it was when I was there. There are days, many days, when there are in-depth stories and special series that I think can hold their own with the New York Times and the Washington Post and the Boston Globe. And I think the readership of USA Today is now ready for that. But that evolved gradually. In the beginning I felt we had to have a hook. Sports, No. 1; quick and easy stuff, No. 2. Once we had people hooked, then we could inform and educate them.

In terms of readership, we were aiming for what I'd call the upper middle ground. Not quite like the New York Times or the Wall Street Journal, but we didn't want to be like the National Enquirer either, selling in supermarkets. Gannett at the time had been getting A's on Wall Street and C's and D's [in the profession]. We were not quite as appreciated as we should have been, so that was part of the motivation. But I had no interest in doing something that would lose money and raise our report cards. It was primarily that I saw an opportunity, financial and otherwise.

Our chief financial officer at the time, who is now the CEO of Gannett, Doug McCorkindale, was not a fan of USA Today. Once we started, he was always with me. But he did not think it was the best use we could make of our money. And he wasn't wrong. We could have taken the same amount and bought a bunch of shit-kicking newspapers around the country and made more money during those first five or six years. But he was wrong in terms of the ultimate payout.

When we launched, I told Wall Street we were going to continue Gannett's uninterrupted string of quarterly earnings gains despite this investment. And we did. We still had 85 straight quarters of earnings gains, including the period when USA Today was in the red. The plain fact was that we were such a huge cash cow, we weren't betting the company on USA Today. We were taking a chance on reducing our level of earnings growth, but we never had a down quarter.

We felt from the beginning that we couldn't just put it on street corners and expect people to buy it. We had to get to the mobile society because that's who we were after. We knew how many people stayed in hotel rooms every night and how many were on airplanes. We had to introduce it to them in a way that they didn't have to go put a quarter in the machine. So we developed this wholesale plan of half-price for hotels and airlines to distribute to their customers. And I think without that, it's doubtful we would have gotten off the ground.

We made a deal that the first hotel that would distribute to all its customers would be the Capitol Hilton. I lived there, just two blocks from the Washington Post. So on the morning of Sept. 15, 1982--the first day we published--everybody at the Capitol Hilton had this new rag at the door. And they took it down to the hotel coffee shop. Ben Bradlee walked into the coffee shop for breakfast, and he looked around the room and everybody was reading the thing. He left. He went into Kay's [Graham, publisher of the Washington Post] office, and he said, 'Kay, you won't believe this. Everybody over at the Capitol Hilton is reading that fucking rag!' She called me immediately. She said, 'Boy, you really lit Ben's fuse, you know.' He didn't know we were just giving it away!

I was very involved early on. The newspeople will tell you I was too involved. I sat with the copy editors on what we called the rim every night, and I rewrote headlines and read the major stories. Pissed off a lot of reporters, including the ones we borrowed from other Gannett papers. Fifteen percent of our newsroom staff quit in the early months. They thought their articles were too heavily edited and too short.

I remember at the ANPA convention in New York when we announced that we had a million circulation. That's when advertisers have to pay attention. But they said, 'You're lying.' And I thought, For Chrissake, you know? I ain't too smart, but I'm not dumb enough to go out on a limb with a figure that I can't support. ABC [the Audit Bureau of Circulation] required you to be in business for one year before it would audit you. So we hired Price Waterhouse, then a fairly reputable company, to audit the circulation and release the findings. But they still didn't believe us! Advertisers were not going to book schedules with us until we had ABC circulation.

And so the bleeding continued--we ended up losing about $400 million, and back then that was fairly good money--but really the game was over and we'd already won. We knew that we had a million circulation, it was growing every month, and it was just a matter of time until we got the advertising. That's when we started having fun. Once we had that million circulation we knew this baby was going to fly. And we would laugh at the critics. We'd laugh at Ben Bradlee. We cooperated with the people at Harvard when they did their Harvard Lampoon on us because we thought, you know, great!

The business plan called for us to be profitable after the third year. I told the board it would take twice as long and cost twice as much. It doesn't matter how good the people are who developed the business plan, it's always going to cost more and take longer. The only questions are, How much more will it cost, and How much longer will it take? I conditioned the board to be prepared for it to take twice as long, which it basically did. In the beginning, the advertisers peed on it just as much as Wall Street did. The guys on Madison Avenue are more conservative than anybody. They don't want to invest in new ideas, because they think they're going to fail and above all else they don't want to be identified with a failure. I think the slowness of the advertising community to accept us was the closest thing to a surprise during the launch. We were giving away ads at first--we had to. That's why I hired Cathy Black [as president, later publisher, of USA Today], who now runs Hearst magazines. She'd been publisher of New York magazine, and she knew Madison Avenue.

But we made $1 million in the month of May in '87, and we were close to breaking even for the year. And from '88 on, the red ink was gone. So five years of red ink, but really only two years of heavy red ink. And then the profitability picked up. The level of profitability from the eighth year to the 18th year was obscene. It's still profitable, but it's flattened out a little since then.

Now if USA Today had still been in the red after five years, I probably would have recommended getting out. But the thing that outsiders didn't recognize was that once we hit one million circulation, the game was over! And we did that in April of '83, seven months after we started

USA Today did move Gannett up a notch. And that wasn't just important for me. That was important for everybody in the organization. Because we had this farm system where we would promote people from Freemont, Neb., to Sioux Falls, to Des Moines, and after they got to Des Moines and Detroit and Cincinnati, that was the end of the road. After that they left us and went to the Washington Post and the New York Times. But with USA Today, we were able to promote them to something that gave them some real satisfaction in terms of their goals and the profession.

And it's even started working the other way--instead of a constant drain on our talent, for quite a number of years now we've been able to bring in people from the Washington Post and other major newspapers, even a couple from the New York Times. So it wasn't just a matter of being a CEO and being able to say, 'Well, I can sit around the table with Punch [Sulzberger, publisher of the New York Times] and Kay [Graham], and I'm more their equal.' It was a matter of all the employees being able to say, 'Well, shit. I'd rather work here than across the river at the Washington Post.'