Quality Key to Highest City Zone Penetration in U.S.

Newspaper Research Journal, Fall 2004 by Pardue, Mary Jane

Redmond and Trager described three approaches to enhance competitive position: cost leadership, differentiating from competitors or developing a niche within a product area.16 Hussman chose the second. After investigating strategies at other number two newspapers, the company began a free classified ad program, switched to morning delivery, added color to the front page daily, doubled the size of the newsroom and dramatically increased the newshole. At first the competition thought it was a joke, Hussman said.17 But it worked, and by 1980 the Democrat had become the fastest growing newspaper in the nation. Advertising and circulation revenues went from $5 million in 1974 to $18 million in 1984. Sunday circulation rose from 91,755 on March 31, 1974, to 143,690 on March 31, 1985. The Gazette's circulation was 141,989 on March 31, 1974, and 162,606 on March 31, 1985.18 In 1984, the Democrat claimed 37 percent of advertising and circulation revenues in the market, up from 27 percent in 1974.l9 In 1984, the joke was over, and the Gazette sued the Democrat in a federal antitrust case, claiming the Democrat was trying to drive the Gazette out of business. On March 26,1986, after a two-week trial and $1.25 million in legal fees, the judge ruled in favor of Hussman. "It must have been extremely disappointing to them," Hussman said, "because as recently as 1977 they could have had the whole thing. ... They looked the other way and turned it down."20

Lacy and Martin suggest that when faced with intense competition:

...many newspapers ... respond by increasing their newsroom budget to better differentiate their newspaper. This typically includes larger newsholes, more reporters ... and more local news.21

It worked for Hussman.

But the exuberance was short-lived. Five months later, Hussman learned that the war of the newspapers was far from over. His new opponent would be media giant Gannett, which bought the Gazette on Dec. 1,1986, for $51 million and a $9 million debt assumption. After a 13-year fight against Patterson, Hussman now faced a corporate giant claiming deep pockets and enough resources to bury the Democrat. Plus Gannett had the Democrat's financial reports made public during the antitrust trial. Then-Gannett CEO Al Neuharth thought Gannett would breeze into Little Rock, knock the Democrat down in a year or two and have a great market, Hussman said. "I was worried-a lot."22 But that wasn't what happened.

The Democrat had been competing against Patterson on advertising and building circulation logically. But in a circulation war, the goal is to win at all costs. Lacy and Martin say there are three ways to increase circulation:

...serve more people ... serve more information needs ... [and] serve a higher percent within individuals' information uses.23

So, in 1988, Gannett cut the home delivery price of the Gazette by more than half, costing $7 million a year. The Democrat, knowing it couldn't matching the cut and take that loss, put more sales people on the streets, costing about $2 million a year. The newspaper game was already being played differently at the Democrat. "We did a lot of innovative things that other newspapers had said were not very wise and wouldn't work," said Paul Smith, vice president and general manager.24 While other newspapers charged for want ads, the Democrat offered some free. While others billed subscribers after delivery, the Democrat sold subscriptions paid up front. Finally, while others tossed the newspaper into yards or driveways, the Democrat delivered to the front porches of subscribers. 'Torching the paper," it's called.25 So as the war with Gannett hit full speed, the Democrat continued free classifieds, subscriptions paid up front and porching the paper. They were also offering readers more news-much more.