Press Monopoly Getting Mixed Reviews in Detroit

It was supposed to be a marriage of profitable convenience, a newspaper merger that only an accountant could love.

But so far, last November’s partial merger of the Detroit Free Press and the Detroit News hasn’t really made the accountants--or the advertising salespeople, for that matter--all that happy.

The historic newspaper war between the Free Press and the News, two of the nation’s largest and most tradition-rich metropolitan dailies, came to an abrupt end with their merger under a joint operating agreement. The JOA--the largest ever in the newspaper industry--was finally approved by the U.S. Supreme Court last year after more than three years of legal challenges. It allowed the papers to merge their business operations under a special exemption from antitrust laws granted the newspaper industry by the federal government.

In return for the right to form what amounts to a newspaper monopoly, the two papers, now managed by the new Detroit Newspaper Agency, must retain separate editorial voices. They now publish separate editions during the week and a joint paper on Saturdays and Sundays.

Yet, during the first few months of the joint agreement, newspaper executives here have found that running a monopoly isn’t always what it is cracked up to be.

“Creating a JOA is not a marriage made in heaven,” noted newspaper industry analyst John Morton.

Indeed, the initial projections by Wall Street analysts that Gannett and Knight-Ridder--the media giants that are the parent companies of the News and the Free Press, respectively--would immediately begin to reap huge profits from their Detroit merger have proven quite premature.

“I think they are making money, but not a lot,” observed Morton.

“We will do a little better than break even this year,” agreed Robert Hall, the publisher of the Free Press and the executive vice president of the Detroit Newspaper Agency.

But the merged papers have been successful in one regard--they have managed to anger just about everyone in town.

Circulation complaints from readers skyrocketed as the two papers struggled to merge their distinct distribution networks. For several weeks after the merger, the letters to the editor columns of both papers were filled with angry missives from longtime readers threatening to cancel their subscriptions.

Reporters and editors, meanwhile, have complained that the papers are losing their identities, since the staffs of both papers must now contribute to a single, merged weekend edition.

At the Detroit News, especially, the joint agreement has brought traumatic change.

To eliminate direct competition between the News and the Free Press, the News’ morning edition was dropped by the newspaper agency, sending the News back to its traditional afternoon delivery system.

The loss of the morning edition has cost the News its longtime circulation lead over the Free Press, sapping newsroom morale. Although official circulation figures won’t be released until later this spring, the News’ daily circulation has declined by roughly 200,000 since the joint agreement began, according to newspaper sources.

But spirits are equally low at the Free Press. After enduring lengthy wage freezes during the legal battle required to win court approval for the joint agreement, newsroom staffers were disgusted to find that the company was willing to raise wages by only $30 per week after the merger went into effect. Many staffers feel as if the Free Press, which was scheduled to close if the joint agreement had been rejected, is still operating on a shoestring budget.

“We went for three years without raises, with news space cutbacks,” said Luther Jackson, a Free Press reporter and unit chairman for Local 22 of the Newspaper Guild, which represents Free Press editorial employees. “And then, people thought the JOA would solve everything. It didn’t.”

In an effort to buck up spirits at the Free Press, editors and reporters recently held staff “retreats” away from the newsroom to hash out their complaints, but problems remain.

“Morale is at a very low point, not just here but at both papers,” said another Free Press reporter.

But worst of all, local advertisers became furious over the huge advertising rate hikes imposed by the Detroit Newspaper Agency for both papers. As a result, at least some advertisers scaled back their ad purchases in the metropolitan dailies and poured more money into local television and radio as well as into the smaller suburban newspapers that ring Detroit. The biggest blow came when Sears pulled $1 million worth of advertising out of the Free Press and News and put it into a string of suburban papers.

“I think their advertising linage is significantly down,” said Tom Reynolds, advertising director of a string of suburban papers owned by Adams Communications.

As a result, the suburban papers--many of which had initially opposed the joint agreement--sensed an opportunity almost immediately. “We’ve seen a nice increase in business since the JOA was announced,” noted Richard Aginian, president of Suburban Communications, which publishes the Observer and Eccentric Newspapers in suburban Oakland County, Mich.

Adams Communications took advantage of the situation in February by launching its first Sunday edition, called Suburban Sunday. It’s a vehicle designed to soak up some of the readers and advertisers turned off by the joint weekend edition of the Detroit papers.

“It’s a baby of the JOA,” said Ben Burns, editor and publisher of Adams’ Michigan papers. “We started planning before (the joint agreement) went into effect, and we found that if there was only one Sunday paper, rather than two, then there would be room for another one.”

But now, the Detroit dailies are finally starting to fight back. In early March, they began to offer new “zoned” advertising packages at discounted prices. Zoned advertising allows advertisers to place ads only in newspapers delivered in certain sections of the metropolitan area, while paying much lower rates.

Even the Detroit Newspaper Agency’s competitors concede that the zoned advertising will help attract many of the smaller advertisers who fled when the Detroit papers’ higher rates went into effect. And the suburban papers are still mindful that the Detroit dailies will remain the dominant media in town.

“They are still the most sizable print medium around,” said Reynolds.

“Nothing is going to replace them.”

Meanwhile, after their rocky start, executives at the Detroit papers are now increasingly optimistic.

“Advertising is picking up,” Hall said. “And I think personally, for the JOA and the Detroit Newspaper Agency, each week is better than the previous week.”