A chain of small newspapers hits on a formula for growth

Second-generation newsman Joe Smyth quietly did something extraordinary 25 years ago–he essentially gave away his family’s chain of small community newspapers.

Smyth, now 75, tells CJR he was trying to protect the newspapers from the prevailing winds of large corporate ownership–as well as from the future decisions of his six children. So he set up a nonprofit to own the chain, guaranteeing the dividend demands of shareholders or high profit-margin expectations of hedge funds would never crimp the journalism.

The nonprofit structure of his company, Independent Newsmedia Inc, allows the company to operate 25 newspapers in smaller communities in Florida, Arizona, Delaware, and Maryland, where it focuses on local news, eschews editorials, and doesn’t endorse political candidates. The formula is working: INI is aggressively expanding, buying four new papers and starting another new one in the last three years, and Smyth expects to take advantage of the fact that venture capital companies, having bought up newspapers to squeeze out profits, will be looking to unload them cheaply in the future. As metro dailies have trimmed their footprints to cut costs, many have abandoned coverage of small towns far from their core circulation. It is in those towns where INI keeps delivering the news.

“What we did is essentially we created a public trust, taking ownership away from the family,” Smyth, says. “The idea came to me when the big, publicly-held companies started buying newspapers. I thought that in the long term that wouldn’t be good for news or the communities they served.”

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The nonprofit structure of INI is different from the Poynter Institute-owned Tampa Bay Times, though Smyth said he considered that model as well. Ultimately he worried an institute like Poynter would still have a fiduciary responsibility to its mission and could conceivably decide selling the newspaper would be the best financial decision. Back when Smyth was first considering nonprofit models, he talked to Nelson Poynter, the owner of the Tampa Bay Times who turned it over to the institute.

“I didn’t want there to be any beneficiary,” Smyth explains.

INI is also different from nonprofit news operations like ProPublica, which survive on grants, endowments, and donations. Journalism still has to pay for itself at INI, it just doesn’t have to pay very much to stay afloat. In fact, INI has operated newspapers at a loss when company leaders felt like there was an opportunity to make money down the line.

Smyth says he was also concerned about passing the company his father had started on to his children.

“One of the thoughts I had, with six children, was that it would be very difficult to have a successful family company for another generation,” he says. “Some of them might be competent. Some might not be. Some might want to get their money out. Some might want to continue running the company.”

Smyth says that over the years several families that owned newspapers and were concerned about succession planning had approached him to inquire about his unique business model, but that in the end, none had pursued it because the families would lose control of the company.


One of the things with a company where we have this public trust philosophy is we can operate with lower margins.”

 

INI newspapers have continued to serve communities where larger metro dailies used to compete but have now pulled out, places like Okeechobee, Florida. The Palm Beach Post, where I worked in the 1990s, used to periodically send me to Okeechobee to cover big news there, and years earlier the newspaper maintained a bureau in the largely rural county.

When I was there, I was competing with Katrina Elsken, who now runs the Okeechobee News and INI’s other Florida papers, which are all in small towns on the edge of Lake Okeechobee, places the Post has largely abandoned.

“We say we will give the community the best newspaper it will support, and that’s true,” Elsken tells me. “We don’t need as big a profit as some other media.”

Everyone I spoke to at INI was careful to point out that the newspapers do need to turn a profit–without profits, there’s no money to replace equipment, upgrade websites, or invest for the future.  And when the papers aren’t profitable, cuts have to be made. The Okeechobee News was a daily from 1992 to 2008, but when the economy tanked, the News had to cut its distribution to three times a week. And everyone in the company took a 10 percent pay cut that year.

“We saw newspapers across the country folding,” Elsken says. “But by the time we had to drop down to three times a week, we had a website where we could put out important news. If there’s a big fire, and there’s going to be a lot of smoke on your way home from work, you need to know that right away.”

The News also decided it no longer needed to subscribe to international wire services.

“Our readers can get national and international news elsewhere,” she says. “There are some things we cover that no one else covers. The larger media don’t have reporters in every school board meeting, every county commission meeting here.”

Elsken is somewhat of an authority on one of the big issues facing the communities on the edge of the lake: water pollution. She’s been covering efforts to clean up the lake for 30 years, and her stories reflect that long memory. While communities on the coast often blame releases of water from the lake for pollution of their own waterways, Elsken is quick to point out that the lake, which is polluted with agricultural runoff, is not the only source of downstream pollution. Leaky septic tanks and fertilizer runoff from lawn care in coastal towns is also impacting the waterways. And while legislators have been arguing over where to spend money to control the pollution–which caused an apocalyptic looking algae bloom in a waterway on the coast this year–Elsken pointed out that the millions of dollars already spent haven’t reduced the pollution going into the lake.

Both Smyth and INI CEO Ed Dulin point to Elsken’s work on the water pollution issue as the kind of journalism their papers are able to provide the mostly small communities they serve.

“I watch what other media companies are doing and I just shake my head,” Dulin says. “Our mission is totally different from a Gatehouse or a Gannett. Our mission is journalism. Their mission is all about the bottom line.”

And INI is growing. The company bought four papers in Arizona this year and two and a half years ago started a brand new newspaper, The Salisbury Independent, in Maryland. The weekly made its first profit in September, according to Darel La Prade, INI’s senior vice president. The Salisbury paper competes with Gannett’s Daily Times and DelmarvaNow.com.

“The community was ready for a new newspaper,” La Prade said. “Gannett has a certain brand of journalism that they kind of pride themselves on. We have a different brand of journalism.”

For INI, that means a lot of what La Prade calls “refrigerator news,” stories about the things people in the community are proud of, whether it’s a Habitat for Humanity building blitz or a Jaycees fundraising drive. But The Independent is also tackling tough issues. The paper won a regional public service award this year for its coverage of the opiate epidemic.


Gannett has a certain brand of journalism that they kind of pride themselves on. We have a different brand of journalism.”

 

Dulin figures the Salisbury Independent has benefited from cuts by the competition, including layoffs at Gannett last month.

Another way the INI papers are unusual is that none of them have editorial boards or run staff-written editorials. Smyth said the decision to eschew what many papers see as one of their core duties was actually mostly a financial one.

“Our papers have small staffs with limited resources,” he said. “We just don’t have the staff to do editorials well and be out there reporting.”

INI’s tolerance of smaller profit margins–generally between five to 10 percent–means the newspapers aren’t forced to chase every penny. That was one of the reasons the company decided against running some of the more annoying digital ads. In 2014, INI updated all of its websites, dumping an out-of-date and visually confusing web portal in favor of clean and clearly branded sites.

“We didn’t want any of those takeover ads or animated GIFs,” La Prade explained. “We also didn’t go out and seek a lot of syndicated copy. We could have done that with entertainment news or astrology.”

La Prade, who led the redesign, decided INI’s readers could get that kind of content elsewhere. He also dumped the forums aspect of the old portal, instead allowing comments with Facebook logins. The old forums had become pretty awful.

“It was like a shoot-out for trolls,” he said. “It was bloody.”

With lower profit needs, La Prade felt comfortable not pursuing the “reader engagement” that some comment sections have become, the flashiest, and most annoying digital advertisements, or the click-baity syndicated content.

Tom Byrd, publisher of Delaware State News, the chain’s original newspaper, said prioritizing what’s good for the communities INI serves over short-term profits permeates the company.

“One of the things with a company where we have this public trust philosophy is we can operate with lower margins,” he said. “That means there’s a stewardship. What it gives you is a longer term aspect, rather than having to push for short-term results that might be detrimental to the community.”

Smyth said fellow newspaper owners have approached him in the past, asking to be bought by INI, but the company only considers deals like that in its core geographic areas.

Smyth expects the company to continue long after he’s gone. Though he chairs the board, he said he reminds the rest of the board at each yearly meeting that they can vote him off if they want to. He even expects the company to keep growing.

“Our industry is consolidating but our ownership structure should allow us to survive,” he says. “Some of the venture capitalists are trying to get their money out and we’re going to be there buying.”

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Susannah Nesmith is CJR’s correspondent for Florida, Georgia, and Alabama. She is a freelance writer based in Miami with more than 25 years working for regional and national outlets. Follow her on Twitter @susannahnesmith.