Battle for Bentonville

By: Mark Fitzgerald

Wal-Mart has been very, very good for newspapers in its own neck of the woods, but not because the behemoth retailer headquartered in Bentonville, Ark., throws much advertising their way. Publishers in its Northwest Arkansas neighborhood say they get pretty much what newspapers anywhere get from Wal-Mart ? which is to say, practically nothing.

The Morning News in Springdale typically gets just one preprint a month, says Publisher Tom Stallbaumer. Being in Wal-Mart’s back-

yard, he adds, actually might be a disadvantage, in that so many people work for Wal-Mart or a vendor that the retailer “just knows they’re going to shop at Wal-Mart.”

What the retailer gives Northwest Arkansas newspapers instead of ad inches is a fast-growing audience of young and affluent corporate strivers, new to town and open to suggestions about which newspaper should land in their driveways. It’s a gift that is fueling a newspaper competition with tangled roots, and a fast-changing dynamic.

Wal-Mart does business with upwards of 50,000 vendors hoping to land their product on its shelves, “and the rule is, you’ve got to come to Bentonville to pitch if you’re going to sell razor blades or detergents or fish hooks or whatever,” says Gerald Jordan, an associate professor of journalism at the University of Arkansas in Fayetteville.

When the former Philadelphia Inquirer Washington correspondent was moving to the university, he and his wife wondered, “Who’s buying all these $300,000 and $400,000 houses?” Jordan soon learned they were people moved by their companies to work exclusively on the Wal-Mart account. “Fayetteville and all of Northwest Arkansas is becoming quite a bustling branch-office town,” he adds.

And it’s not just Wal-Mart. JB Hunt, the big trucking firm, is another worker magnet, while Tyson Foods almost single-handedly has changed the demographic profile of Northwest Arkansas by drawing Mexicans and other Latinos to its food-processing plants.

Newcomers arrive in a market that is home to a newspaper competition featuring two players with well-deserved reputations for shrewd operations. The latest numbers suggest they are presently at just about a dead heat in circulation.

For years, the competition included two local papers in an alliance with a daily headquartered more than 200 miles away in Little Rock. Beginning Sept. 30, however, the battle came down to just two players.



One publisher’s ‘alliance’

On one side in this local battle is the Morning News, a daily that dominated its corner of Northwest Arkansas for decades. It’s published by Stephens Media Group, a chain that these days is far more nimble and innovative than back in the years when its old name, Donrey, was considered by some a synonym for undistinguished newspapers.

On the other side is a daily that in its way is almost as much a newcomer to Northwest Arkansas as any East Coast transplant that’s come to join the other corporate remoras on the Wal-Mart shark. From its Little Rock headquarters, the Arkansas Democrat-Gazette has always been a statewide paper, but it didn’t seriously target Northwest Arkansas until about 10 years ago.

Walter E. Hussman Jr., the Democrat-Gazette publisher who owns parent company Wehco Media, is no stranger to competition. When his family bought the Arkansas Democrat in 1974, the afternoon paper was so weak that three years later he asked the morning Arkansas Gazette for a joint operating agreement. Rebuffed, he began a legendary newspaper war in Little Rock. At the height of its expansion under Al Neuharth, a swaggering Gannett Co. eventually bought the Gazette, but within a few years it too gave up. The Democrat bought the assets of the Gazette in 1991, appended the name to its flag, and Little Rock became a one-newspaper town.

Now Hussman is all but proclaiming victory in Northwest Arkansas, too, claiming at a local business luncheon in August that he owned “the dominant paper” in the region. Perhaps he should have said “papers.”

On Sept. 30, the Democrat-Gazette took over two intensely local dailies published by Community Publishers Inc. (CPI), the Benton County Daily Record, located in Bentonville, and the Northwest Arkansas Times, located in Fayetteville. CPI was started by Jim Walton, son of Wal-Mart founder Sam Walton.

But the Democrat-Gazette already had a strong, if twisting, connection with those two newspapers.

In 1995, Thomson Newspapers sold one of those two papers, the Northwest Arkansas Times, for $22 million to a company controlled by Stephens Media (then Donrey). CPI went to court to challenge the sale, alleging that since Donrey already owned the Morning News and several other papers, the sale would create an editorial and advertising monopoly in Northwest Arkansas. The court blocked the purchase. Hollinger International’s old American Publishing Co. unit then bought the paper, but a year later left the newspaper business, selling it to CPI.

Then, in 2000, CPI forged a joint venture with the Democrat-Gazette. Subscribers started automatically getting two papers delivered to their homes: the Democrat-Gazette’s Northwest Arkansas edition plus the Daily Record or Northwest Arkansas Times, depending on where they live. The Democrat-Gazette’s Northwest Arkansas edition turned its first profit last April, the publisher says, so it seemed like an opportune time for Hussman’s company, Wehco, to exercise its option to buy out CPI’s share of the alliance. (As part of the deal, the Democrat-Gazette will also own eight former alliance weeklies ranging from the Rogers Hometown News to the Pea Ridge Times.)

Wehco executives kept all the editors in their jobs, and insist the local dailies will not disappear now that they are the wholly owned property of the Democrat-Gazette.

“We kind of staggered into this model, I guess, but we’ve concluded that people much prefer to have the two papers, the Democrat-Gazette complete paper, and the Times or the Daily Record that are intensely local,” Wehco Media Vice President Paul R. Smith says from his Little Rock office. “That alliance helped us solidify our position in those markets.”



Which paper has the edge?

The Morning News, not surprisingly, does not agree that the Democrat-Gazette is king of its market.

“Probably one of our biggest frustrations is that everybody judges this newspaper competition on ABC (Audit Bureau of Circulations) numbers,” says Morning News Publisher Stallbaumer. The Morning News and Democrat-Gazette audit different markets, making direct comparisons confusing, he says.

According to ABC statements for the six months ended March 31, the Morning News, with 34,429 copies, had the daily circulation lead in Benton and Washington counties over the Democrat-Gazette, Daily Record, and Times, which had a combined circulation of 33,201. The combined three papers led the Morning News on Sundays 42,444 to 40,067. (Statewide, the Democrat-Gazette’s circulation is 184,659.)

Gerald Jordan, associate professor at the University of Arkansas’ Walter J. Lemke Department of Journalism, says it isn’t easy to gauge who’s ahead in the competition. “I do know there’s some to-and-froing between Wehco and Stephens Media as to who’s got the numbers,” he says. “It’s a little bit like the old days when I used to write the TV and radio column, and I could go to every station in the market when the Arbitron ratings came out, and out of 12 stations, 10 of them could show me how they were No. 1.” (Jordan notes that he’s occasionally done consulting work for the Morning News.)

Stallbaumer says Morning News research shows that readership is dropping for the Daily Record and Times. Claims by the Democrat-Gazette that it dominates the market don’t square with the growing ad share and page counts, he says: “We’re having a very good 2005.”

But the Democrat-Gazette has its own research, conducted by noted analyst Christine Urban, that shows its papers are capturing the younger and more affluent readers advertisers want, the paper claims. The only groups in which Morning News readership is higher than the alliance papers, according to Wehco Media’s Smith, is among retired people and those who have lived in the area longer than 10 years: “In every other area ? high income, newcomers, white-collar readers ? we have a big lead over the Morning News.”

In large part, Smith argues, that’s because the newcomers are “moving from bigger markets and perhaps they’re more comfortable with (the Democrat-Gazette) because it looks more like the paper they are coming from.” With 370 full-time employees working up in Northwest Arkansas, the Democrat-Gazette claims it has a bigger editorial and production workforce than the Morning News.

The Democrat-Gazette needs a big staff because the Northwest Arkansas Edition “really is a different paper,” Smith explains. “It’s not like most newspapers where you’ve got the basic paper and you just add in a zoned section. Almost every page of that paper is different than the paper in Little Rock.”

Smith also notes, though, that for a market this size, both papers are throwing big packages on their readers’ driveways.



Spending to get a leg up

The Morning News, in particular, has been aggressive in growing its market horizontally ? it added neighboring McDonald County in Missouri to its circulation area a couple of years ago ? and vertically, through the acquisition and creation of niche publications. The Morning News now publishes two free Spanish-language weeklies, La Prensa in Arkansas and El Tiempo in Missouri, that distribute about 16,000 copies combined. (For its part, the Democrat-Gazette says it will have a Spanish-language paper circulating in Northwest Arkansas early next year.)

In the last 18 months, the Morning News has bought two groups of weeklies, one in McDonald County and another in the southern part of Washington County.

And in a move that would have been hard to imagine happening in the old Donrey days, the Morning News bought the alternative Fayetteville Free Weekly. “The research showed that about 80% of their readers didn’t take either daily paper,” Stallbaumer says. “You know, they just listen to NPR, and read the alternative.”

The daily is also experimenting with an unusual circulation ploy to hook those alternative readers on the Morning News. It offers home delivery of the free-distribution weekly on Fridays ? for a charge that includes delivery of the Morning News on Sundays.

Morning News subscriptions in general are cheaper than the Democrat-Gazette’s, and they offer lower discounts, but Wehco’s Smith argues that may actually be an advantage for his paper. “These are pretty high-income families who are not too concerned about the cost of newspapers,” Smith notes. “They probably take both for a while and decide which one they want to continue taking. I think we’re winning a lot of those battles, although not all of them.”

In any case, the Democrat-Gazette isn’t going anywhere, and neither is its driven owner. In an interview, Wehco Media President and CEO Hussman scoffs at the idea that he, like many other family owners, will be gobbled up by big chains.

“Investment bankers love to drum up that kind of talk,” he says. “In terms of business, we do just fine, and in a lot of ways, we do better” than publicly traded companies. Hussman notes he has 100% voting control of the company, which is willing to pay the price of buying out family members to avoid disbursing shares among too many relatives.

Hussman prefers to let vice president Smith do the talking about the Northwest Arkansas competition, but he leaves no doubt he’s in it for the long-term: “Being private and not public gives us freedom to spend a little more money, and not worry about the swings and cyclicality of the newspaper business.”

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