In Palo Alto, a Dead-Tree Medium Rises

By: Mark Fitzgerald Brooding over the dismal industry news of the day -- Gannett's gold-plated credit rating downgraded, the Newspaper Association of America's dog-and-pony show to Wall Street canceled for a seeming lack of interest, and Tribune Co. becoming one of those annoying neighbors who hold a garage sale every weekend -- the last thing I expected was to be cheered up by phone call from a newspaper owner in California, of all places.

Yes, the California with the ad revenue-destroying housing slump that seemingly "has no bottom," in the words of McClatchy Co. Chairman and CEO Gary Pruitt earlier this year. The California that inspires wailing and gnashing of teeth in the executive suites of MediaNews Group Inc., Tribune, Freedom Communications, and just about any company that publishes in the once -- and hopefully, future -- Golden State.

But the voice on the other end of the line was indeed a newspaper owner (co-owner, actually) in Palo Alto -- and he was geeked, if that made-in-California word still means "very excited."

"We're selling ads, we've got advertiser interest," said David Price, 36 hours after launching the Palo Alto Daily Post with a minimum of hoopla. And yet, he said, "I was at Pete's Coffee downtown, and people were waiting around the rack for the paper to be delivered."

Price and James Pavelich are back in Palo Alto newspapers, three years after selling their free-distribution Palo Alto Daily News to Knight Ridder for what they can now say -- with their non-compete expired -- was an eyebrow-raising price of $25 million.

"We're pleased as punch to have that number out," Price said. "It shows you how valuable a free paper, which many in this industry have dismissed, can be." Knight Ridder paid a premium price for the Daily News for any number of reasons, he argues, including a realization that there's money to be made in free papers.

Not only are the pair back in town, they're publishing out of the same building they left three years ago. The Daily News, which covers several other Silicon Valley towns in addition to Palo Alto, several months ago decamped to nearby Menlo Park.

Price plays down the rivalry with the Daily News, which MediaNews acquired in one of the side deals that followed McClatchy's acquisition of Knight Ridder. "We're not here to run them out of business," he said. "Whether they succeed or fail, there's plenty of room for both of us." (Daily News General Manager Michael Gelbman did not return a message seeking comment.)

And the new owners, who publish a San Francisco neighborhood daily, aren't daunted by the state of other California dailies. Palo Alto, Price said, is not like Sacramento or Orange County, where the free-fall in housing values has decimated classified ad revenue. Homes that once sold in seven days may linger on the market for three weeks, but all things considered, that's not bad.

"In a recession you can find smart advertisers who understand if they are busy marketing during bad times, they can improve their business," he added.

The Daily Post launched with 28 pages, and an advertising percentage of about 60% to 70%, Price said. He talked around the initial distribution figures, but says the paper expects to be distributing 15,000 copies within a couple of months and 20,000 copies soon after that.

One thing the Daily Post will not be doing is promoting print with a Web site. In the heart of Silicon Valley -- in a town famous for its Sand Hill Road offices full of venture capitals looking for the next big thing in digital -- the Daily Post appears only in print.

"We're not really big on the Web," he said. "We've been saying this for a long time: the minute a newspaper figures out a way to make money on the Web, we'll copy them. That's our game plan."

Readers and advertisers, Price is convinced, still want print. He's never had an advertiser tell him that a banner ad drove traffic, he adds, but the smallest coupon for a T-bone steak dinner can overwhelm a restaurant with business.

"I'm a contrarian when it comes to this bull that newspapers are contracting, that people don't want print," he said. "Smart advertisers who know what they're doing, who track their ads, and design them around what people want, want print. And we have a ton of smart people in Palo Alto."

The Palo Alto Daily News is out to prove that print, mocked as the dead-tree medium, can thrive in a town whose name is Spanish for "tall tree."