A year after cutting home delivery, Detroit newspapers say the move helped keep them afloat

By Michael Liedtke, AP
Sunday, July 4, 2010

Home delivery cuts working for Detroit newspapers

Detroit’s two daily newspapers knew they were shoving some readers overboard in an effort to stay afloat when they decided to limit home delivery to just three days a week.

It was only a question of how many subscribers would abandon the Detroit Free Press and The Detroit News once their print editions were no longer hitting doorsteps and driveways each Monday, Tuesday, Wednesday and Saturday.

More than a year later, Detroit newspaper executives are convinced they made the right call. If that holds up, other newspapers could follow as they look for ways to save money to offset a three-year slump in advertising, the industry’s main source of revenue. About 100 U.S. newspapers already have reduced the number of days they publish or have shifted exclusively to Web editions, but Detroit is the biggest market to try a version of either move.

The Detroit newspapers won’t release detailed financial figures, but they say they have saved millions of dollars by reducing the use of delivery trucks, paper and ink. Yet revenue hasn’t fallen as much because the remaining three days — Thursday, Friday and Sunday — had already garnered most of the advertising anyway. Many readers have bailed on the newspapers, as anticipated, but the exodus hasn’t been has dramatic as at several other large dailies that alienated subscribers by raising their prices while maintaining daily home delivery.

That suggests many readers are more willing to tolerate limited home delivery than significantly higher prices for newspapers in an era of high unemployment and free news online.

Besides covering the same metropolitan area, the Detroit newspapers are tied together by a business partnership known as a joint operating agreement. The News, which is owned by MediaNews Inc., and the Free Press, owned by Gannett Co., rely on the partnership to handle advertising, distribution and administrative tasks.

The financial benefits from joint-operating agreements haven’t been enough to keep two newspapers afloat in other cities, such as Seattle and Denver. The Seattle Post-Intelligencer went online only last year and the Rocky Mountain News shut down entirely. A similar fate likely awaited one of the Detroit dailies if they hadn’t sacrificed some of their readership or found some other way to lower their costs. While the newspaper industry has been slumping for the past three years, the Free Press and the News were among the worst off because Detroit’s manufacturing-driven economy had been struggling even before the Great Recession began in December 2007.

When Detroit newspaper executives did the math on their plan last year, they said they could have cut their costs about 40 percent by dropping print entirely. But they said that would have erased the more than 85 percent of their revenue that comes from subscriptions, newsstand sales and ads in the printed newspapers. Less than 15 percent of the newspapers’ revenue had come from online ads.

Instead, the publications said, cutting back home delivery to three days would reduce the newspapers’ joint costs by about 20 percent while giving them the chance to keep most of their revenue.

Executives at the newspapers won’t discuss how close they came to meeting those projections. Rather, they say that more than 90 percent of the newspapers’ advertisers have stuck with the dailies. The publications won’t give detailed revenue figures, other than to say that Thursdays, Fridays and Sundays now account for 93 percent of the newspapers’ print ad revenue. Even before the home-delivery cutback, those three days accounted for about 80 percent of the print ad revenue.

And the publications say the savings on newsprint and distribution costs have helped to minimize newsroom layoffs. The two newspapers have retained about 400 reporters, editors and photographers. That’s down from roughly 600 newsroom workers five years ago, but still a much larger staff than would have otherwise been possible, said Rich Harshbarger, vice president of marketing for the Detroit Media Partnership.

Avoiding additional layoffs has allowed the remaining reporters to work on more projects, produce more engaging online coverage of Detroit touchstones such as automobile trade shows and provide early morning news reports from the Free Press for a local TV program.

“We have accomplished most of what we set out to do,” said Susie Ellwood, CEO of the Detroit Media Partnership, which manages the business side of the two newspapers.

The average combined weekday circulation of the News and Free Press fell 12 percent to 401,889 during the six months ended March 31. That amounted to nearly 56,000 fewer copies than last year and was worse than the industry’s total circulation decline of 9 percent. It also marked an acceleration from the decline in the first six months of the reduction in home delivery, when the combined Free Press and News circulation fell 8 percent. (In that same span the overall industry dropped 11 percent.)

However, Detroit’s latest decline wasn’t as severe as the drop-offs at newspapers in Los Angeles, Boston, San Francisco, Atlanta and Dallas, which all have raised delivery prices during the past 18 months while still delivering daily. Weekday circulation at those big-city newspapers plunged about 15 percent to 25 percent during the October-March measurement period. Getting more money from fewer subscribers has helped some of these newspapers increase their circulation revenue, although the gains have not been nearly enough to offset the declines in their ad revenue.

The Detroit newspapers are still printing on non-delivery days. But those editions generally have about a dozen fewer pages than on other weekdays, and they are sold on the street and in stores. The publications sold more than 122,000 copies on newsstands on non-delivery days during the October-March period, accounting for a little more than one-quarter of the average circulation. That compared to about 99,000 copies on Thursdays and Fridays, when readers can still get the print edition dropped on their doorsteps.

Buying the thinner newspapers on non-delivery days has been less appealing since October, when the Detroit dailies doubled their newsstand price to $1 for weekday editions. Newsstand sales in the latest measurement period were down by an average of more than 51,000 copies, or 30 percent, on non-delivery days compared with the six months before the price increase. The three-day home delivery rate for either of the newspapers has remained unchanged at $12 per month since the cutbacks. That price is $1 to $2 less than what many subscribers had been paying for seven-day delivery.

Going without daily delivery hasn’t been easy for some longtime readers.

Bill and Karen Foster are among the loyal Free Press subscribers who have stuck with the newspaper, even though they don’t like having to turn to the Web on non-delivery days. Before the home-delivery cutback, the Fosters got a course in Web training from the newspaper in an effort to ease the transition.

“I still would prefer getting the paper on the porch,” said Karen Foster, 70. “I find it very difficult to read on the computer. My eyes blur.”

Don Nauss, managing editor of The Detroit News, empathizes. He, too, would prefer being able to walk out his front door to pick up the newspaper instead of heading into his den to sit down at his computer.

“It’s hard to break a habit that some people have had for 40 or 50 years,” Nauss said. “And I don’t think anyone likes the idea of not being able to deliver your product to your customers. But we had to do what we had to do to survive.”

Unwilling to give up their daily fix, more than 4,000 of the Detroit newspapers’ subscribers have been paying an additional $30 per month to have the print editions mailed to their homes on the four days a week that carriers don’t deliver, Harshbarger said.

In other instances, independent contractors buy the newspapers at retail outlets on non-delivery days and bring them to subscribers willing to pay an extra $4 to $12 per week to have a newspaper dropped on their porch or driveway. The Detroit newspapers recently began to encourage more of this entrepreneurial system of daily home delivery by offering independent carriers an opportunity to buy the Monday, Tuesday, Wednesday and Saturday newspapers at a discount. It’s still up to the independent carriers to negotiate the delivery price with subscribers. About 2,000 subscribers are going this route, Harshbarger said.

Some alienated readers already may have defected to neighboring publications that still provide daily home delivery. For instance, weekday circulation of The Oakland Press in nearby Pontiac rose 3 percent to 68,770 in the October-March period.

But the management of the Detroit newspapers suspects the circulation losses would have been even worse if not for the hard times that their readers have experienced through years of factory closures, home foreclosures and unemployment rates well above most of the country. The adversity made it easier for people to understand why the newspapers took such drastic measures, Nauss said.

And it may be one reason that limited home delivery may not be as well received elsewhere.

“No other market has made such a risky move like this and we would not at all endorse it for everyone,” Harshbarger said. “Just because it has worked in Detroit doesn’t mean it will work in Des Moines.”

Associated Press Writer Jeff Karoub in Detroit contributed to this report.

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