The last daily edition of the Arkansas Democrat-Gazette will be printed and distributed on Saturday, Jan. 25. But Little Rock’s daily newspaper is not folding — far from it.
In one of the boldest moves in American newspaper history, Publisher Walter E. Hussman Jr. will continue to produce a daily and Sunday newspaper in the traditional format, but only print and deliver a newspaper on Sundays.
He’s bought 27,000 iPads — at a cost approaching $12 million — and given them to subscribers who agree to pay $34 a month for a subscription to receive the Monday through Saturday editions electronically. They get the Sunday paper in print (and electronically).
Readers have to agree in writing that if they quit their subscriptions, the newspaper will charge their credit cards for the cost of the iPad.
He hopes readers will use their iPads for all kinds of purposes — to scroll the World Wide Web, download books, watch movies, etc.
“We want them hooked on their iPads because we think they also will be hooked on reading our newspaper. Somebody might say, ‘You know, I don’t read the paper as much as I used to. I think I’ll just drop it.’ And we’ll say, ‘Have you returned that iPad?’ Then they’ll say, ‘Return the iPad? I don’t want to return that iPad!’”
The project started almost two years ago, in March 2018, when Hussman and his team determined that the traditional model of printing and delivering the daily newspaper had become unprofitable — and would continue to decline.
“After years of making money, we began losing money,” he said. “We had to do something or face the possibility of going out of business.”
Hussman, a journalist by training and education, likes to say “every town needs a police department. Every town needs a fire department. Every town needs a water department. And every town needs a newspaper. But it has to be a good newspaper.”
His family has owned the Democrat — predecessor to the Democrat-Gazette — since 1974. The Gazette has been publishing for 200 years under various owners. Hussman combined the two papers after a five-year newspaper war between his Democrat and the Gazette, then owned by Gannett. Gannett sold out to Hussman in 1991 — the same year the World Wide Web of the internet was born.
The web changed the world
The problem, he said, is that the changing advertising world — with most dollars moving to Google and Facebook — won’t support the traditional ink on paper journalism product.
Before the internet, Hussman says, there were three or four companies selling advertising in Little Rock. Now, the number of companies selling ads has exploded exponentially, with most advertising budgets going to Google, Facebook and Amazon.
The Great Recession of the late 2000s accelerated the decline of newspaper revenue.
The Democrat-Gazette went from highly profitable to facing an uncertain future.
“We had to do something. We had to reduce our costs, but I didn’t want to reduce costs by cutting the newsroom staff,” Hussman said. So instead of cutting reporters and editors, he cut materials.
“The costs we could cut were in printing and more especially in delivery,” he said. “We wanted a product that was keeping up with the times.”
The replica e-edition works better than a traditional website, he said, because the newspaper is a proven, accepted model with a beginning and an end. His newsroom continues to build pages much as ever, but the pages don’t go to plate burners and printing presses.
With advertising no longer being the backbone of revenues, Hussman said the survival of newspapers will depend on the support of subscribers. (He said the Democrat-Gazette has maintained its legal advertising and obituary revenues.)
“We need to have a critical mass of subscribers, and they have to be willing to pay a monthly charge that keeps us profitable.”
For the Democrat-Gazette, the price point is $34 a month — basically the same price readers were paying to receive the daily and Sunday print product.
To nudge subscribers into switching, Hussman’s team found that readers needed an incentive. That’s when Hussman agreed to furnish an iPad to any and all readers who switched.
That’s where the $12 million upfront cost came — for the branded iPads. (Hussman said the total spent to date is closer to $11 million, while the budget was $12 million.)
Another problem existed. Many readers needed training on how to operate an iPad. Hussman said the training costs average $90 per subscriber. “We hope that’s a one-time cost, but we still plan to smother our people (subscribers) with customer service.”
Hussman personally traveled throughout Arkansas to explain and sell the program, with special emphasis on luncheon speeches to Rotary Clubs.
“People generally understand that there’s a great need for newspapers — and that newspapers have to be profitable,” he said.
The conversion rate was 70 percent, with parts of Little Rock and North Little Rock nearing 90 percent. In some cases, the conversion rate was, by Hussman’s calculations, 115 percent — because some Sunday-only customers in Little Rock switched to daily and Sunday in order to get an iPad.
“They were paying $32 a month for a Sunday-only subscription,” he said. “For just $2 more, they got an iPad.”
“We met some resistance at first, but lots of folks — after they used the iPad — said they preferred the electronic replica edition,” he added. The electronic edition is enhanced with videos and slide shows that the print product couldn’t have.
He’s been able to avoid cutting staff in the newsroom, and says he’s added a few staff members who create digital products — videos and slide shows — for the replica edition.
Quality is paramount. For the project to be successful, the Democrat-Gazette’s content “must be stellar and unique. You can't expect people to pay $34 a month for an inferior product,” he added.
Hussman says he tells readers “We might be able to still deliver a print edition to you but it’s not the kind of paper you’re going to want to read, it’s not the kind of paper I’m going to want to publish. It’s going to have a whole lot fewer reporters and editors. That’s what a lot of newspapers are doing, but in my opinion, there’s no future in that.”
He said many newspapers he sees around the country have trimmed their editorial staffs so severely that the product won’t be supported by subscribers.
He says publishers can’t offer subscriptions below the cost of production. “Not only do you have to have a substantial monthly price, you have to have a mass of subscribers” to make the new business model work.
Hussman hasn’t yet taken the iPad program to his other papers, including the Chattanooga Times Free Press, the Jefferson City News Tribune, his smaller Arkansas dailies and the Northwest Arkansas Democrat-Gazette.
He said those newspapers are still profitable but declining, so he’s not going to do anything immediately but likely will in the future.
Of particular interest, he said, is the Northwest Arkansas DemocratGazette. Because of a long — now over — newspaper war, subscription rates average between $17 and $19 a month.
“It’s going to be hard to move subscribers from $19 to $34 (the point of profitability) very fast,” he said. He’s offering to give subscribers of that paper iPads if they will agree to raise their rates by $1 a month until they reach $34.
Advertising will be just a secondary revenue stream, he said. Traditional ROP advertising has declined as “advertisers only want targeted advertising.”
He noted that Dillard’s has run interactive ads in the replica editions with success. “You can click on the ad, look at the product in different colors and sizes, then even order the product right then and there,” he said.
Printing a Sunday paper remains profitable because of pre-printed advertising, “but that’s declining every year, too.” The day likely will come, he says, when he won’t print and deliver a Sunday edition.
For now, the Democrat-Gazette includes a printed special section every Sunday that includes all the obituaries of the week. “Readers like the section, and the funeral homes all advertise,” Hussman said.
Hussman said the iPad experiment “has been risky. But we decided that doing nothing was even riskier.”
“We think we are going to make money in 2020,” he said, “after losing money in 2018 and 2019.”
As he “stops the press,” Hussman said he feels “a lot better about the future. Now we have a future.”