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MILSTEAD: Media meltdown tests two-newspaper town

By David Milstead, Rocky Mountain News (Contact)

Published July 1, 2008 at 9:05 p.m.

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It's been a wonderful run, Denver, but it's time to admit that we can no longer be a two-newspaper town.

It was just eight years ago that The Denver Post and the Rocky Mountain News hung up the gloves and went to the federal government for permission to combine business operations. The resulting "joint operating agreement," which ended competition in advertising and subscription prices, was intended to restore the papers to financial health and preserve two distinct editorial voices.

The papers never succeeded in making significant price increases stick, whether because of Colorado's recession of 2002 to 2004, or because the people of Denver had been conditioned to newspaper bargains. Then the American newspaper industry began a swift and shockingly rapid decline.

Today, the Denver papers are in all likelihood losing money, when the depreciation of their new printing plant, opened in 2007, is considered. (We don't know for sure, because Rocky owner E.W. Scripps and Post owner MediaNews Group have consistently cut back on the amount of financial information they release about Denver.)

In essence, all the financial promise of the JOA is gone. The best way to make Denver a profitable market for the two companies is to close one of the newspapers.

I could be wrong about what's next. It's possible the two partners will continue in Denver for reasons of pride, and not money, although the financial position of Media News, in danger of a debt default, makes that seem unlikely.

Or, perhaps, the newspaper industry's sharp declines in circulation, advertising revenue and profits will suddenly halt, and even reverse themselves. No one in the industry seems to be betting on that, however, based on hundreds of job reductions announced recently.

So the Denver solution seems to rest in similar cost-cutting. The only problem is choosing which paper to close.

When Scripps and MediaNews negotiated the JOA in 2000, they had to tell the Justice Department that one paper was likely to fail. They picked the Rocky, which posted significant operating losses at the height of the newspaper war.

That "failing paper" tag has hung on the Rocky ever since, obscuring the fact that it's been the stronger seller for much of the JOA.

Circulation-reporting rules allow the Denver Newspaper Agency, the manager of the papers' business operations, to sell enough discounted Post papers to report that it, not the Rocky, moves the most copies each day. Strip out the discounts, and the Rocky consistently sells at least 10,000 copies a day more than the Post. If you're going to sell newspapers in Denver, the brand to do it with is the Rocky.

Conversely, The Denver Post seems to be the stronger online brand, perhaps owing in part to having Denver in its name. If the future is online, the traffic seems to be heading to the Post site. The problem is that revenue per Web reader remains a fraction of print revenue, and it's not clear that a local Internet site can ever support a newspaper-size editorial staff.

The two companies could bet it all on one of the brands. Or, oddly enough, the two partners' best position for the future might be a newspaper called the Rocky Mountain News and a Web site called The Denver Post.

The best cost position would be to staff them with one, but not both, of the newsrooms. This may be the most difficult choice Scripps and MediaNews face. Each newsroom is represented by a union, and the contracts make closing one newsroom "the simplest solution from management's point of view," Colorado State University labor law professor Ray Hogler tells me, based on his look at the language.

The biggest obstacle to this scenario is the Justice Department, which blessed the JOA in the first place. In the past, government antitrust attorneys have made it difficult to end one of these partnerships early.

Perhaps they will be persuaded that a Rocky paper and a Post Web site are still two voices, produced by a single newsroom. Or perhaps they would block any substantive change, forcing Scripps and MediaNews to pile up more losses in the name of editorial independence.

If the Justice Department recognizes the gravity of the problem, the end result would be a dramatically different media diet for Denver news consumers. We have been blessed with two newspapers when most cities this size have just one. But as the newspaper industry continues its decline, a two-newspaper town is a luxury that the owners of the papers simply can't afford.

David Milstead and James Paton take turns writing Up and Down 17th Street. Contact Milstead at 303-954-2648 or milstead@RockyMountainNews.com.

Comments

  • July 2, 2008

    8:14 a.m.

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    MrHappy writes:

    You let your loyalty to the Rocky get in the way of clear thinking. The most important number isn't circulation, it's advertising revenue, and the Rocky has been losing that battle in Denver for a long time. Scripps saw the Rocky for the loser that it is when it spun off the company's newspaper properties into a new second-tier company. (First-tier company was TV properties). Milstead writes better on subjects that aren't so close to home.

  • July 2, 2008

    9:43 a.m.

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    edwardallen writes:

    I think you misunderstand what is happening. The days of newspapers in print are gone. Print newspapers are dead, dead, dead. Put a fork in it, and you will see. The problem the RMN-DP have now is that the powers that be invested all that money into a printing plant that was redundant the moment ground was broken. Printing presses are yesterday, and today your advertisers and readers have migrated to the Web. So the future of the RMN-DP JOA is an academic one. I personally believe that Billy Dean Singleton's Media News is unraveling before our eyes for the migration to the Web reasons I just stated. I forecast bankruptcy within weeks, which would permit the RM to pick up the DP in a bankruptcy sale. But only if Scripps wants to, and is in a position to do it. You see what happened to SSP stock when the parent split off the networks this week. Wall Street has no expectations for the future of SSP any more than I have in the future of Media News. The bottom line is that the RMN could very well win this battle, but it will be a pyrric victory because your readers have already left you and gone to the Internet.

  • July 2, 2008

    10:01 a.m.

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    primafacie writes:

    The dirty little secret about the Denver Newspaper Agency in the joint-operating agreement is that the resulting monopoly for circulation sales and print advertising has allowed rates for both to creep up.

    As the two newsrooms work each day to beat the other guys, DNA works to keep the circulation numbers balanced so it can continue to sell advertising space in both papers, rather than one or the other.

    Eventually, those editorial staffs will figure out they'll never win the circulation battle and wonder: What's the point?

  • July 2, 2008

    10:43 a.m.

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    hockeyhockeyhockey writes:

    Newspapers will always be the bastion of people who want in-depth information, whether it be local, national or international. You can't get the depth of experience that exists in newspapers today, although the Web is catching up, mostly from people leaving the print field.

    And Sasquatch, you had me until you mentioned Fox News. Please.

  • July 2, 2008

    11:42 a.m.

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    mediajunkie writes:

    I must be the rare bird that rolls out of bed and picks up both newspapers in my yard and reads them before I go to work. The loss of competing newspapers would be profound. The problem with getting your news off the internet? You read only what interests you. Newspapers expose you to a wide array of news, and you read what is happening, not just what interests you. I fear that those who get their news on the internet are going to have a very narrow perspective on the world.

  • July 2, 2008

    11:54 a.m.

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    jackwoehr writes:

    Excellent article.

  • July 2, 2008

    12:28 p.m.

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    hockeyhockeyhockey writes:

    Mediajunkie, I couldn't have said it better. Very, very well said.

    I hate the Post. I'll say that up front. But I, like you, thoroughly enjoy reading two papers in the morning -- the Rocky and the NY Times. And just to add to what you said about the narrowness of Internet news: A vast majority of what you find on the Internet -- at least the stuff worth reading -- is culled directly from newspaper Web sites.

    I pray that newspapers have a future in this country. God save us if they don't. Newspapers are the last bastion of democracy in what can, at times, be an increasingly undemocratic society.

  • July 2, 2008

    12:38 p.m.

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    jeffdragon writes:

    The Rocky sells more papers in Denver? Not on Sundays it doesn't. And it doesn't make nearly as much in ad dollars as the Post. Oh, and another thing: the terms of the JOA make it so that Singleton decides which paper will fold. That will be the Rocky. The Rocky paid $60 million to the Post to agree to the JOA - otherwise they would have pulled the plug long ago.
    Those facts were conveniently missing from Milstead's one-sided piece.

  • July 2, 2008

    1:02 p.m.

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    Bubbilou writes:

    I can't imagine starting my day without a REAL time newspaper in my hands (preferably the Rocky)--while slouched in my favorite reading chair or perched at the kitchen table it's no big deal if I drop a few crumbs or spill something wet or sticky on words printed on PAPER. But try doing that while reading electronic words on your PC screen and you'll discover it's a PLENTY big deal! The little electronic keyboard that sits below that magic screen simply does not absorb crumbs and spills like paper does!

  • July 2, 2008

    1:06 p.m.

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    Frank25 writes:

    After reading prior posts, will add my opinion. Both papers report political for downtown Denver lawyers and unions, and no longer write with rest of Colorado in mind. Have written this to editors before and asked them to write for Republicans, Democrats, Independents, minority parties in non-partisan and non-biased manner. I also take both papers, and read with my morning coffee about 6-7:30 AM. Not to find out what is happening, but what subjects Ineed to browse internet to find accurate and expanded information. Have worked as volunteer with Veterans Organizations for past 15 years, retiring in 1976, after 26 years 18 days of Honorable Air Force Service. Both papers write more like the verbal "Air America" that had no listeners, except people like me who needed to know where negative crap was coming from and by whom. When called by organization members, I could give them correct info, and document where they could check for themselves. Newspapers across country now have taken on gossib, running between candidates to ask what they are doing. CNN does have some balance reporting with Lou Dobbs and Wolf Blitzer (although he tends to liberal), but FOX NEWS always has pro and con (example Hannity and Colmes - 2 exact opposites in thinking). I don't know where advertising will go, but newspapers are too expensive, unless they get most income from advertising. Subscriptions or street sales will never keep them going, since they are 24 to 48 hours behind cable 24/7 channels.

  • July 5, 2008

    10:41 a.m.

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    davebarnes writes:

    I find the death of newspapers to be very sad. As someone who gets 3 papers delivered every morning and peruses all of them, I love being informed and surprised.
    That said, I think both Denver majors are doomed.

    For international news, I visit the BBC's website. And the FT, IHT, Le Monde. But, I don't get any from either the News or the Post as they no longer have foreign correspondents.
    For political news, I visit Politico, Andrew Sullivan, FiveThirtyEight and Real Clear Politics. Way more information in one day than the Post and News have in a week.
    I don't read the sports section as it gets tossed--along with the ridiculous classifieds--immediately upon receipt.

    I only subscribe to the Post and Rocky for three reasons:
    1. comics (Post only)
    2. local news (both)
    3. that I can read whilst sitting on the toilet

    Soon, Greg Moore and John Temple will make one more cut that will be "the straw" and I will drop these papers. So sad.