Valassis Drops Freedom Community Papers

By: Lucia Moses Updated at 2:55 p.m. Eastern Standard Time

Freedom Communications Inc. is looking to replace clipped coupon revenue next year following coupon giant Valassis's decision to drop Freedom's 25 community dailies from its 2004 market list. Valassis opted to cut the papers rather than continue paying a surcharge for placing certain types of advertisements in its free-standing inserts (FSIs), Freedom executives said.

"Based on the rates and conditions for distribution that you provided, we will not be including the Freedom Community papers on our 2004 market list," William H. Blackmer, director of strategic sourcing for Valassis, wrote in a July 25 letter to Freedom.

Valassis spent $259.8 million in newspapers in 2002, making it the industry's 10th biggest customer among parent companies.

As revenue pressures have led Valassis to branch out from its traditional packaged-goods and direct-response advertising categories, it's become common for papers that distribute its FSIs to demand a surcharge for placing those ads. The idea is to make up for the difference between the paper's rate-card rate and lower rate it charges Valassis.

Over time, though, executives from several newspaper companies said, Valassis has increasingly balked at paying such surcharges while trying to broker newspaper advertising to retailers.

Karen Hanes, a regional vice president overseeing Freedom's two Florida papers, said she's been "forced to police" Valassis after it recently ran two pages in its FSI from grocer Albertsons Inc., a longstanding customer of the papers there.

"I just think that when a company attempts to sell space for your advertisers at rates less than you can charge them, this is an unfortunate situation ... for the newspapers who are in fact delivering the product," Hanes said. "We used to have a great relationship, but there's a real lack of trust at this point."

Stephen Buckley, who as publisher of the Times-News in Burlington, N.C., and one of four Freedom community newspaper vice presidents was involved in the recent failed contract talks with Valassis, said he grew concerned when he saw the couponer pursuing traditional newspaper advertisers such as telecommunications and apparel companies to run in his market.

"Our position is, getting into clothing and telecommunications, that really is not the business of the coupon business," he said.

Freedom execs said the company nevertheless offered to hold its 2004 rates at 2002 levels and let Valassis pursue certain accounts, but the company refused.

In a telephone interview, Blackmer said he wouldn't discuss negotiations with specific companies. But he said that while his company remains a big supporter of newspapers, "Newspapers that aren't showing us a compelling value aren't going to be on the market list in 2004."

The Freedom decision impacts the Irvine, Calif.-based company's 25 community dailies with a combined circulation of roughly 500,000 across 10 states. (It doesn't affect Freedom's Metro Division, which takes in the Santa Ana, Calif., Orange County Register; East Valley Tribune and Scottsdale Tribune in Mesa, Ariz.; and The Gazette in Colorado Springs, Colo. Metro is "very happy" with its relationship with Valassis, division President N. Christian Anderson III said.)

Freedom execs wouldn't give out a dollar figure for Valassis' spending at the community papers. But Hanes said losing Valassis will cost the Florida papers at least 40 solo and FSI inserts per year. And at two of Freedom's four California community papers that carry Valassis' FSI each week, the revenue impact "would be fairly significant," said Maureen Saltzer, a vice president with responsibility for those papers.

Dawn Kusick-Paduganan, vice president of sales and market development for the community division, said she's talking to other coupon companies in hopes of making up for the future lost ad dollars. She said while her markets are small and may be perceived as less valuable to Valassis' advertisers, household size and coupon redemption rates are above-average.

"Here's the challenge: In the newspaper market, we have pretty finite number of advertisers to go after," she said. Referring to Valassis, she said, "The last place you would expect to have that competition is from a newspaper partner."