D-G Turns NWA Profit, Prompts CPI Purchase

After losing money in Northwest Arkansas for five years in a row, the Arkansas Democrat-Gazette’s northwest edition began turning a profit in April.

So D-G owner Walter Hussman decided it was a good time to buy the Northwest Arkansas Times of Fayetteville, Benton County Daily Record of Bentonville and eight weekly newspapers from the Walton-owned Community Publishers Inc.

“We had loses for years,” Hussman said. “We’ve been profitable now for four consecutive months.”

Hussman’s company, Wehco Media Group, was in the fifth year of a 10-year lease agreement with CPI. Hussman had an option to buy at any time during that 10-year period, and CPI had a similar option to force him to buy.

The profitable months added up to the first profitable quarter — the one that ended June 30 — for the D-G’s Northwest Arkansas operation.

Hussman said he recently paid off debt from buying the Chattanooga Times Free Press in Tennessee in 1998, so that freed up money for more acquisitions.

“We’ve been looking at other newspaper opportunities,” he said. “Given the fact that we didn’t have any debt, and we were earning 2 to 3 percent on money, it seemed like a good time.”

Neither Hussman nor CPI would reveal the purchase price. Hussman also wouldn’t say how much money the northwest operation is now making or how much he was paying to lease the CPI dailies.

In addition to the two daily newspapers, the CPI sale included the Siloam Springs Herald Leader, the Gentry Courier Journal, the Gravette News Herald, the Decatur Herald, the Bella Vista Weekly Vista, the Rogers Hometown News, the Pea Ridge Times and the Elkins White River Journal.

CPI retained ownership of the Harrison Daily Times, a weekly newspaper in Jasper, eight weekly newspapers in Missouri and a commercial printing business in Harrison and Springfield, Mo.

As a rule of thumb, new publications don’t expect to make money for the first five years.

The Northwest Arkansas edition of the D-G, however, wasn’t exactly a new publication.

Alliance

The 2000 “alliance” between the D-G and CPI newspapers, which are owned by Wal-Mart heir Jim Walton, was unique in the newspaper industry because the papers appeared independent but were bundled together for circulation.

It was Hussman’s idea, said Paul Smith, general manager of the D-G. And it seemed to work. Hussman got five years to test the Northwest Arkansas market before making the commitment to buy.

Hussman said readers will see no difference after the CPI purchase. The Times will still be bundled and circulated with the D-G in Washington County, and the Daily Record will still be distributed with the D-G in Benton County. The Northwest Arkansas edition of the D-G, without the bundled Times or Daily Record, is circulated to another 10 counties.

CPI President Steve Trolinger said the company was “disappointed” that the D-G had exercised the option.

“I think the thing had been advantageous for them,” Hussman said. “It was all upside for them. I told them I understood their position. I hope they understood ours.”

Hussman said both sides “benefited” from the alliance, making the combined newspaper product circulated in Northwest Arkansas a more valuable commodity than it was five years ago when the contract was drafted.

“There have been no setbacks at all in the Northwest Arkansas economy,” Hussman said. “But you never know what will happen in a competitive market. That makes it volatile.”

Mike Brown, who is a CPI stockholder and executive vice president, will remain with the company but resigned as publisher of the Daily Record, CPI said.

Jeff Jeffus, publisher of the Times and vice president of the D-G’s northwest edition, is now responsible for all of Wehco’s Northwest Arkansas publications. Kent Marts, editor of the Daily Record, will assume additional duties as vice president and general manager of that newspaper.

Hussman said there will be no change in the number of staff at the newly acquired newspapers.

He said the CPI deal shouldn’t meet with any opposition from the Justice Department because his company and Stephens Media Group of Little Rock will be splitting the circulation in the Northwest Arkansas metropolitan market about 50/50.

In 1995, when Thompson Newspapers Inc. wanted to sell the Times, the D-G and CPI submitted a $14 million joint-ownership bid. NAT LLC, a new entity controlled by the Stephens family of Little Rock, bid $22 million, and an agreement to sell to Stephens was announced.

CPI then challenged the sale to Stephens in federal court, saying it would create a near monopoly in the market. Stephens had already consolidated the Springdale and Rogers newspapers into The Morning News, which had 54 percent of the market’s circulation. The rest was distributed between the Times, which had 22 percent, the Daily Record with 14 percent and the D-G with 10 percent.

Federal Judge H. Franklin Waters ruled in favor of CPI, so Thompson sold instead to American Publishing Co.

In 1999, American Publishing sold the Times to CPI alone. The D-G was surprised by the news. Unlike 1995, CPI had not tried to include the D-G in a joint venture to buy it. The next year, the alliance was announced.

Morning News

Stephens Media Group owns three daily newspapers in Arkansas: The Morning News of Springdale, the Southwest Times-Record of Fort Smith and the Pine Bluff Commercial.

Stephens also owns four area weeklies: the Lincoln Leader, Prairie Grove Enterprise, The Farmington Post and La Presna Del Noroeste de Arkansas (“The Press of Northwest Arkansas”), a Spanish-language newspaper based in Springdale that is distributed for free locally but has about 1,000 paying subscribers. Stephens owns six weekly newspapers in McDonald County, Mo., across the state line from Benton County.

According to numbers filed with the Audit Bureau of Circulations (see chart — requires Adobe Acrobat reader), The Morning News’ circulation has dropped by 12.8 percent daily (from 38,539 to 33,620) since June 30, 2004, and by 10.1 percent on Sundays (from 44,000 to 39,551).

But the decline may have happened earlier. ABC docked The Morning News in 2003 and again in 2004 for circulation irregularities.

Lewis Floyd, former circulation manager for The Morning News, said ABC subtracted about 150 in circulation for newspapers that were delivered to area Head Start programs in 2004, saying the children were too young to read.

Before that, the problem concerned newspapers that were distributed for less than 25 percent of full price, which can’t be counted as paid circulation.

Floyd has since retired and was replaced by Stephen Kelsey, who was circulation director for the Salt Lake Tribune and Deseret Morning News in Salt Lake City, Utah. The two newspapers, which are in a joint operating agreement, have a combined circulation of about 230,000. Kelsey is also serving as circulation director for the Times-Record, where he replaced Dennis Arnoldussen.

“He’s bringing some good experience from the metros that we’ll be able to use,” said Tom Stallbaumer, publisher of The Morning News.

Stallbaumer wouldn’t elaborate, saying Kelsey is still “trying to get his feet on the ground” here. He started working for The Morning News on Aug. 1.

Upgrading Technology

In the meantime, Hector Cueva, circulation director for the D-G in Northwest Arkansas, said that newspaper is in the process of implementing a new $1 million circulation system that will allow it to better track subscribers and data.

The D-G’s existing system, manufactured by a now-defunct company called Collier Jackson, is about 20 years old and was used to handle the newspaper’s statewide circulation of almost 300,000. It had less power than the average desktop computer, Cueva said. “But it worked so well, we just kept on using it.”

The new system consists of technology and hardware designed by Data Services Inc. of Baltimore.

“It’s a more powerful system, more modern,” Cueva said. “We’ll be able to analyze data better.”