Finding The Right Niche p. 14

By: Ron Chepesiuk

Newspapers seek alternative sources of revenue
but the profits are not always there right away sp.

STEVE LOWERY, PUBLISHER of the Bardstown Kentucky Standard (circulation 8,400), vividly remembers the huge tour buses that began showing up at the restaurant next door to his newspaper in 1990.
"The stinky buses belched diesel fuel and took up too much parking space," he recalled. But after talking to the restaurateur and learning how much money he was making from the steady stream of tourists who patronized his business, Lowery began to see the tour buses in a different light.
"I investigated and found that nobody in Kentucky was publishing any kind of promotional literature that publicized the state as a tourist destination," he said. "So we decided to make a run at it."
Using a mailing list compiled by the restaurateur, the Standard produced a 30-page tabloid-size publication, which advertised travel destinations in Kentucky, and sent it to tour group leaders throughout the United States.
From that modest beginning, the newspaper has branched out to produce publications not only for the tour group market but for the entire state, especially for families vacationing there. In four years, gross revenues from its niche publishing operation have jumped from $10,000 to $360,000.
"We've found a niche and a lot of new customers," Lowery said enthusiastically. "The revenue has come mostly from people who don't read our newspaper."
The Standard is just one of many newspapers that have turned to niche publishing ? the production of publications aimed at a particular group ? to revive a declining readership and sagging profits.
"Tough economic times are forcing the newspaper industry to try out new ideas," said Carol Ann Riordan, associate director of the Reston, Va.-based American Press Institute, which was established in 1947 and serves as a training and development arm of the newspaper industry. "That makes sense because newspapers need to carve out new profit areas and attract people who aren't reading newspapers."
This development reflects a strong trend in the publishing industry.
"Publishing is becoming increasingly specialized," Riordan said. "For example, each year, 500 new specialized magazines start up. Many of them die, but the point is that many people who read have specialized interests and want to buy a publication tailored to their interests, and it's not necessarily going to be a newspaper."
The 96,000-circulation Winston-Salem (N.C.) Journal was forced to adapt and specialize in 1989, when it faced tough competition from two local real estate publications: one distributed independently and the other distributed by the Greensboro (N.C.) News & Record, which got the endorsement of the local Board of Realtors.
"We were put on the defensive and forced to fight to hold on to our market share," said Jeff Green, who until recently was advertising director at the Journal and now holds a similar post at the Tampa Tribune.
What Green described as an "18-month protracted zone war" followed before the News & Record withdrew from the market. Realizing the opportunities that existed in niche publishing, the Journal bought the financially troubled Senior Scene soon after the "zone war" and has turned it into a thriving niche publication. Today, Green said, he is amused by media critics who say the newspaper industry lacks competition.
"Sure, not many big metros are going head to head," he said, "but since the advent of desktop publishing, just about any entrepreneur with $10,000 can set themselves up to be a publisher. He can sell advertising, get it printed somewhere, distribute it himself and he is in business. So a lot of little people are nibbling on the newspaper market, making it potentially smaller for everyone."
Niche publishing in the newspaper industry has taken many forms. Publications either can be distributed separately or as inserts in newspapers. They can be books, magazines, newsletters, or daily, weekly or irregularly published newspapers targeted at a wide array of markets, including women, ethnic groups, the elderly, shoppers, tourists, sports enthusiasts and even children.
In the late 1980s, the Chicago Tribune began to consider seriously how to increase readership.
"We concluded that people in their twenties were no longer reading newspapers, so we decided to try and get the next generation into the habit of reading newspapers," said Steve Cvengros, editor of Kid News, which the Tribune has published as an insert since August 1992. Targeted at students in junior high and high school, Kid News is a 12- to 16-page weekly published Tuesdays, with an additional 10,000 copies distributed free at Chicago-area schools during the school year.
Cvengros said Kid News has taken "heat" from parents because the newspaper has not shied away from controversial stories and has published articles about sex, abortion and murder.
"We recognize that kids are people, and we don't write down to them," he said. "That's why the kids have grabbed the paper as their own."
Kid News, Cvengros said, has attracted new advertising that the Tribune would not have gotten if the section did not exist.
Although innovative niche publications such as Kid News have attracted advertisers, newspaper executives said they don't really have a way of measuring the profit potential of niche publishing.
In fact, when it comes to making money, the Standard's operation is the exception, not the rule.
For many of the newspapers surveyed, niche publishing has yet to turn a profit; for others, it's a small part of their revenue picture, although they expect it to get bigger.
"Newspapers will be disappointed if they expect to open up shop and immediately start making money from niche publishing," said James Smith, vice president and director of marketing at the Fort Lauderdale Sun-Sentinel. "But the newspaper franchise offers an excellent base from which to explore opportunities for generating additional revenues."
The Sun-Sentinel's niche publications include two weeklies: XS, an alternative entertainment and features publication aimed at young readers in Broward County, and Exito, a 60,000-circulation Spanish-language tabloid. Both weeklies are distributed free from distinctively colored street racks and at newsstands and retail outlets.
The newspaper's third niche publication, iCE, is similar in style to XS and is marketed in nearby Palm Beach County.
As the Sun-Sentinel's niche publishing operation shows, costs can be held down because newspapers have most of the expertise and information they need in one centralized location.
The newspaper's Deerfield, Fla., facility, which opened in 1989, contains state-of-the-art features in industry technology, including high-speed presses with good quality color.
Such newspapers as the Sun-Sentinel and Standard have used their sales staffs to sell ads, newsrooms to write and layout editorial copy, and circulation departments to distribute niche publications.
"By using our existing building and equipment, we have been able to build a second business within our core business," Lowery explained. "The costs involving manpower and selling the publications have been the only real overhead we've had."
Deciding where to locate the niche operation ? under the wing of the franchise or as a separate, independent unit ? is important, newspaper executives said. The answer will vary from paper to paper, depending a lot on how the newspaper is structured.
Creating a whole new environment for the niche publishing operation has advantages as well. "I won't say a newspaper can't be successful in niche publishing if it uses staff that is doing something else, but I think it will take longer and be much more difficult," said Jan Heintz, managing editor of Moline (Ill.) Dispatch Publishing Co.'s Gold Book magazine, an upscale general-interest magazine with a circulation of 20,000. "You need a staff that is dedicated to the publication."
Heintz was lifestyle editor at the company's Daily Dispatch and edited the Gold Book in her spare time, but she found that the niche product needed more attention.
"We started to see something happen with the Gold Book when they loosened the reins and allowed me to focus on the publication," she said.
The company hired two salespeople to sell the Gold Book, and Heintz attributed the niche publication's success to that move.
"We found that a newspaper's regular sales staff doesn't appreciate selling a publication like the Gold Book and won't do it the way it should be done," she said.
One big metro has found a niche in an activity that some newspapers might be wary of: joint publishing. Five years ago, the Orlando Sentinel signed a deal with the Orlando Magic basketball team of the National Basketball Association to publish Magic Magazine, a 15,000-circulation monthly fan magazine that is given free to season-ticket holders. The magazine costs about $2 on the newsstand.
In 1991, the Sentinel published Stampede, a coffee-table book about the Chicago Bulls' championship basketball season. The sports staff of the Chicago Tribune, which like the Sentinel is owned by Tribune Co., wrote the book. Two other books were done to commemorate the Bulls' second and third consecutive championship seasons, including the latest, 3-Peat.
"The newspaper has the resources and creative talent, so why not turn to someone else who can package the book for you?" said George Biggers, editorial director of Tribune Publishing and new publication development manager at the Sentinel. "Why try to create a whole new business?"
The Sentinel's co-publishing of Magic Magazine, however, has brought it criticism from some observers, who see a potential conflict of interest and question whether a newspaper should go into business with an organization it covers on the sports page.
Biggers said he understands the criticism and noted that the magazine now is put out by an independent non-newsroom staff.
"Our niche publication operation has an editorial department that has no connection with the Sentinel," he said. "So I don't see how one can say there is a conflict of interest."
In addition to the growing niche book publishing co-venture, the Tribune, which has six people working on niche publishing, also publishes U.S. Express, a niche magazine marketed to other newspapers that buy the editorial content on computer disks and then publish it as a tabloid or broadsheet with locally sold ads.
Biggers, like other newspaper executives and editors involved in niche publishing, freely gives advice to newspapers that might want to test-market publications.
"Newspapers are going to have to find alternative publishing opportunities, but they have to be ones that make sense for that newspaper and that particular market," he said. "What works in one market is not necessarily going to work for another."
Green agreed, adding that it is important to let the market drive the content of niche publications rather than the perspectives of the newspaper's management or editorial staff.
"Niche publishing has different standards, and if you aren't prepared to be a truly alternative publication, don't get into the business," he said. "If you do, put someone in charge who has an entrepreneurial bent, someone who can look at the venture through a different lens."
Lowery said, "I like to think of our core business as a communications center. Once a newspaper starts thinking of itself as being in the communications business, the opportunities become numerous."