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Big Profits in Small Packages
Little Newspapers Prosper With Narrow Focus on Very Local News

By Frank Ahrens
Washington Post Staff Writer
Thursday, March 8, 2007

If there's any good news about the businesses of newspapering these days, it can be found at the industry's littlest papers, which are doing well even as their bigger brothers founder.

The average daily circulation of all U.S. newspapers has declined since 1987. The smallest papers, however -- community weeklies and dailies with circulation of less than 50,000 -- have been a bright spot in a darkened industry. As the Internet dramatically transforms the largest papers in the business -- siphoning classified advertising and commoditizing national news -- many small papers are weathering the decline with relative ease, and some are even prospering.

Why? Small papers face less competition from other media outlets, are insulated from ad slumps that have hammered big papers, employ smaller staffs of lower-salaried journalists and have a zealous devotion to local news, both in print and online, industry experts agree. Also, there is less competition on the Web for local news.

"There is no question that newspapers under 50,000 have performed much better than large newspapers," said William Dean Singleton, chief executive of MediaNews Group, which owns about 100 papers, large and small.

The combined circulation of all U.S. newspapers in the six months ended Sept. 30 was down 2.8 percent from the comparable period in 2005, according to the Newspaper Association of America. By comparison, the combined circulation in the small-newspaper group was down 2.1 percent.

If that seems like cold comfort at best, consider this: Of the 413 papers in the small-newspaper group, 105 of them -- 25 percent -- gained circulation over the year, faring better than any other circulation group.

Lee Enterprises, based in Davenport, Iowa, for example, owns 56 daily papers and more than 300 small weeklies and other publications. Three of its papers have a circulation of more than 100,000 -- including the St. Louis Post-Dispatch -- but the rest of its dailies are much smaller, averaging about 26,000 each.

Over the past five years, the circulation gains at Lee papers have outpaced the industry average; some of the gains came from acquisitions, but much came from the growth of the group's existing papers. Over the past two decades, the company's stock price has likewise gone in the opposite direction of large-newspaper stock, climbing steadily from less than $10 a share in 1988 to more than $30 a share today.

"We're largely in markets . . . that have pretty good local economies, a strong sense of place and strong newspaper readership," said Mary E. Junck, Lee's chairman and chief executive. Another advantage: "Many of our markets are pretty homogenous and tightknit," she said, making it easier to pin down and target readership.

The small-newspaper division of Freedom Communications generated a 30 percent profit in 2006, up 5 percent from 2005. By comparison, a very successful large newspaper typically returns about 20 percent annually.

"In many of our smaller communities, we are the only game in town if you want to reach targeted households," said Freedom chief executive Scott N. Flanders.

Singleton said smaller papers are less vulnerable to the current declines in national and help-wanted advertising "because they don't have any." What small papers do have, he said, are a higher market penetration than most large papers, close relations with their advertisers and fewer labor issues.

Further, in survey after survey, local news and information often tops the list of what readers want.

For instance, Lee's La Crosse (Wis.) Tribune Web site lets hunters post pictures of their prize bucks; hundreds have done so. Fish, too. And Lee's biggest paper, the Post-Dispatch, is learning the block-by-block coverage lessons of community papers: The paper's Web site posted a map that showed neighborhood power outages during a recent storm.

But not all readers want their small newspapers to be all local. In September, Randell Beck -- editor of the Sioux Falls (S.D.) Argus Leader -- dumped most of his national and foreign coverage for local stories. He got so many angry e-mails from readers saying they depended on the Argus-Leader for a view outside their community that he restored some of the nonlocal wire-service coverage he had cut, he said.

Further, small newspapers must deliver the right kind of local news, said Davis Kennedy, owner of the District's four Current Newspapers and the Voice of the Hill, which he said are posting 12 to 15 percent annual ad growth.

In 1979, Kennedy -- a former Baltimore Sun marketing manager -- bought the suburban Washington Gazette papers. The Gazettes covered Montgomery County communities, including Bethesda, Gaithersburg and Damascus, with neighborhood news on their covers and news from the rest of the county inside. The very-local approach of the Gazettes contributed to the demise of Montgomery County's other local paper, the Journal, which covered the entire county.

"The Journal made a tremendous mistake in trying to go countywide," Kennedy said. "People in Chevy Chase have heard of Damascus, Syria, but not Damascus, Maryland."

Kennedy's strategy worked. In 1992, he sold the Gazettes to The Washington Post Co. for an undisclosed sum and a year later bought the Current Newspapers, he said.

In addition to having the economic edge, small papers have another leg up on their bigger brethren. Small staffs can move nimbly to innovate, as they try to keep up with the information demands of 21st century consumers. And, if their experiments don't work, the stakes are lower.

Freedom has made the Shelby (N.C.) Star the chain's laboratory paper, and the 15,000-circulation daily has run with the mandate.

Under editor Skip Foster, the Star last spring began abandoning the paragraph story form for a barebones rundown that simply lists who, what, when, where and why an event happened. The Star's front page on the morning after November's midterm elections, for example, displayed only one succinct headline, "Dems Dominate," and no stories. Instead, the page explained three local races in bite-size info-nuggets.

"For many readers," Foster has said, "the paragraph is a dinosaur."

The paper also began giving away some copies, though that has meant withdrawing from industry audits that tell advertisers how many copies a paper sells. "We're trying to get papers in people's hands," Foster said. For example, Shelby residents get a free Star with their order at the drive-through of the local Chick-fil-A.

Foster, who became the Star's publisher this month, cannot yet quantify whether his paper's radical changes have bolstered circulation or ad revenue, though his Web viewership has grown by 80 percent over the past year, he said.

"These are the things I know," Foster said. "Our product, from a content standpoint, is much more respectful of readers. . . . If we keep readers happy, that's good for our advertisers."

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