Placing a bet on USA Today

Gannett has long felt the television model could translate into print. Now it's using its flagship paper to double down on that idea.
March 3, 2014

The business model of network television–plugging the power of a national broadcast operation into a grid of local stations–is coming to newspapers, and Gannett, at least, is pinning its future on it.

The McLean, VA, newspaper and broadcast chain has begun inserting national and international news sections carrying the USA Today brand into some of its local dailies. The move, designed to emulate the audience-and-revenue building power of network TV, has already dramatically boosted circulation at Gannett’s flagship paper (albeit under new, looser accounting rules), while giving the local papers a polished new look and better, more uniform national and international coverage.

Gannett officials, buoyed by its success, see the experiment as having the potential to grow the business, and strengthen the USA Today brand, at a time when most print newspapers, Gannett’s included, are simply trying to hang on. Gannett’s most recent quarterly report saw the company post its second consecutive quarterly revenue decline in its publishing division amid signs that its digital subscription strategy had hit a wall. The latest effort, they hope, will provide a nice boost to USA Today revenues and significantly ramp up the paper’s visibility, particularly since the new local-national network would be combined with the company’s 43 television stations.

In a sense, it is fitting that Gannett would try to emulate television’s business model. Its seminal executive, Al Neuharth, was long fascinated with the medium and launched USA Today in 1982 as an explicit attempt to copy its aesthetic. The paper’s splashy color graphics were meant to stand out from the grayness of traditional newspapers, and they did. Its short, punchy stories copied TV’s immediacy and faster pace. Even USA Today‘s vending boxes were made to resemble TV sets. For years, USA Today ran items well past the news cycle so that journalists could write from, and sometimes advance, stories others others had reported earlier, giving them the polished presentation associated with TV.

The national-local model is designed to free up, and generate, resources for more and better local news reporting and is part of a larger move underway at Gannett to invest in the quality of its journalism. This would represent a fundamental shift for a chain long known less for the quality of its news than for its ruthless focus on the bottom line. During the company’s rise in the 1980s and 1990s, critics accused it of anti-competitive business practices–charges that received wide attention in Richard McCord’s 1996 The Chain Gang: One Newspaper versus the Gannett Empire–and of draining local newsrooms of resources. Gannett denied the allegations but made no apologies for its bottom-line focus. Once asked on which syllable to place emphasis and thus properly pronounce the company’s name, Neuharth famously replied “It’s pronounced Gan-NETT–with the accent on the NET.”

My local daily, the Rochester Democrat and Chronicle, for instance, was Gannett’s flagship paper pre-USA Today. But when I first subscribed as a new resident of Rochester in 1993, it had sunk to a dreadful state: dreary, missing big stories and with little enterprise reporting . In many radio and TV appearances, I mocked it in the most scathing terms. Not anymore.

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The quality push began about seven years ago. Michael Kane, the D&C‘s publisher and the executive in charge of Gannett’s eastern U.S. newspapers, says the improved journalism was a response to falling circulation across the Gannett empire. Market research was showing that subscribers were quitting simply because they felt nothing in their paper justified a continuously rising subscription price.

When businesses raise prices they generally try to conceal it (that slightly smaller candy bar in the same wrapper) or they inform customers that they provided an improved service, say, better shampoo at a hotel. Not so for American newspapers, which cut staff, cut news columns and the size of the pages while asking subscribers and advertisers to pay more and more.

Kane acknowledges that the company will increasingly rely on subscription revenues, but adds, “you can’t just raise the price and not do anything else.”

The quality push was noticeable. At the D&C, Neill Borowski, an award-winning Philadelphia Inquirer veteran, became managing editor, recruited by executive editor Karen Magnuson, who then hired some excellent reporters. Some other Gannett papers (and television stations) also made aggressive hires.

The folly of the more-for-less strategy was further driven home to Gannett executives, like many around the industry, by the rude shock of plummeting market values. In 2009, Gannett shares plunged to a bit more than $2 a share from a peak of more than $90 as recently as 2004. It now trades at about $27.

Today, the D&C is much improved and has at times excelled. Among other things, it has uncovered extensive corruption in local county government, massive waste of New York State taxpayer funds, and mismanagement of the city schools including tons of new textbooks still in the publisher’s wrappings sent to shredders. These days, when I speak about the paper publicly, it’s usually to applaud it.

The company has also responded by rolling back price increases. Last fall the D&C inside masthead briefly listed the monthly subscription price as $42, a 79 percent increase from $23.50. Since then it has listed various prices, including the $42. Kane says only that “we have many different subscription prices.”

The latest changes hit my front door with a heavy thud on October 7, a Monday.

I noticed the paper’s page-count increased by about a third. The A section was devoted entirely to local news, with national and international news packaged in the USA Today section. There was even a page of state news, an important feature because state government affects people’s lives more than Washington. USA Today also provided lifestyle, fashion, business, money, and sports pages that supplemented the local coverage with a national perspective.

Lately, I’ve talked to dozens of readers about the changes, and from wealthy manufacturers and physicians to autoworkers and my barber, the reaction has been entirely positive. Readers especially liked the emphasis on local news, not by press release, but by digging into how government operations affects their lives and taxes.

Kane says the recent changes eliminated the need for at least one editor, whose job had been to pick and edit wire copy for the national and world news that USA Today now provides. Yet, he emphasized, no one lost a job over the change and the wire editor was freed for other work.

At the same time, Gannett extended the strategy to three other newspapers: the Indianapolis Star, the Ft. Myers, FL, News-Press and the Appleton, WI, Post-Crescent. On Dec. 15, USA Today sections were added to the Palm Springs Desert Sun and Lafayette, LA, Advertiser. By April 1, 35 of the 81 Gannett newspapers will include branded USA Today sections.

Under new rules adopted in 2010, the Alliance for Audited Media (née the Audit Bureau of Circulation) began to count both these branded local editions as well as free digital circulation in the American newspapers. The inclusion of digital has already propelled USA Today from the third-largest circulation newspaper in the country, at about 1.7 million, back to its former position of number one, with 2.9 million for the six-month period ending last September, ahead of The Wall Street Journal (2.4 million) and The New York Times (1.9 million daily/2.4 million Sunday). In April, when more Gannett papers include the branded editions, it will widen USA Today‘s lead by as much as 1.5 million.

The use of “branded editions” is the key under the Alliance rules. By contrast, The Wall Street Journal Sunday, an insert of original material in 68 newspapers, does not qualify under Alliance rules. Paula Keve, the chief communications officer at Dow-Jones, declined to answer any questions.

USA Today Publisher Larry Kramer says that, in time, the chain may offer the same package to non-Gannett papers and that potential newspaper customers had already approached him.

Kramer, long ago a San Francisco Examiner and Washington Post reporter, has been behind a series of journalism innovations. He started CBS MarketWatch, remade various CBS websites, created SporTrax for sports gamblers, and has long pushed other publishers–with mixed success–on the need for dramatic change.

When Kramer was brought in to rev up USA Today his plan was to adapt the business model of network television to chain newspapers.

As it happens, the idea of including USA Today in a local paper isn’t new. More than 30 years ago, the week USA Today debuted, Gannett did essentially the same thing with Today, the daily in Cocoa Beach, FL, where Neuharth lived on weekends. The experiment flopped.

“Part of the problem,” Kramer says, “was local readers felt that USA Today kind of overwhelmed the local paper because they changed the local to look like USA Today.” The company learned from that mistake.

Including the circulation of branded sections in local papers and counting the local papers on their own may seem like double counting, but Kramer argues that “it is very close to the television model. In network television NBC News and Channel 4 in New York are counted” the same way.

Another plus: Distribution costs for the sections are tiny. USA Today (and the Sunday Journal) produce high-resolution digital documents which are downloaded electronically to produce the sections.

Kramer said his experience at CBS, after it bought MarketWatch and hired him to create digital offerings for CBS, made him think of a network affiliate model for newspapers: “How to bring a national news brand to local print the way television has always done for local stations.”

It is a model that could propel Gannett profits by making USA Today more attractive to national advertisers while retaining and perhaps even building the circulation of its local papers. Whether it could even threaten national rivals WSJ and the Times remains to be seen.

David Cay Johnston covers fiscal and budget matters for CJR’s United States Project. He is a reporter with 46 years of experience, including 13 at The New York Times; a columnist for Tax Analysts; teaches tax and regulatory law at Syracuse University Law School; and is president of Investigative Reporters & Editors (IRE). Follow him on Twitter @DavidCayJ.