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paidContent - Out of Little Rock: A Model for Murdoch

This story was written by MediaGuardian.

[by Andrew Clark] Tucking into a pulled pork platter in a Little Rock barbecue restaurant, the publisher of Arkansas’s largest newspaper appears an unlikely pioneer for the global media industry. Bald, bespectacled and with a penchant for panama hats, he is about as old-school as they come.

But Walter Hussman of the Arkansas Democrat-Gazette has aroused the curiosity of press barons across the US and beyond. The 62-year-old newspaperman has refused to give ground in a battle between newsprint and digital media. He has stubbornly declined to give away journalism for free on the internet - and, as a result, his paper has prospered.

“People in any industry, including the newspaper industry, are always going to be guided by conventional wisdom,” says Hussman in an interview with the Observer (Ed’s note: owned by Guardian News and Media, our parent as well). “Sometimes conventional wisdom is spot-on; it’s what you ought to be doing. But sometimes it’s wrong.”

Almost alone among sizeable general interest papers, the Democrat-Gazette has charged for access to its website since 2002. It imposes a $5.95 (3.60) monthly “fee wall” on its digital content - not, Hussman stresses, to make money online, but simply to protect its sales on newsstands.

The strategy seems to have worked. While rivals saw double-digit plunges, the Democrat-Gazette’s weekday circulation rose 1.7% in the 10 years to 2008. The paper has no bank debt and made a profit last year. About 63% of Little Rock households receive its Sunday edition - a higher market penetration than any other major US newspaper. As the recession bit, advertising revenue fell 13.2% in the first quarter, but less than the industry-wide drop of 16.6%.

The bigwigs of the industry want to know how he does it. Gesturing at the Whole Hog Cafe, a canteen-like lunching spot in a suburban shopping centre, Hussman remarks that he brought Sam Zell here when the billionaire owner of the Los Angeles Times and the Chicago Tribune made a trip to Little Rock to pick his brains. This month, Rupert Murdoch announced that he was ending an era of free news on the web, and the New York Times (NYSE: NYT) is considering following suit.

With courtly southern manners and a broad smile, Hussman outlines his philosophy. He decided, after a short period in the early years of the web, that he would not tolerate online freeloaders.

“I would go to civic club meetings and dinner parties here in Little Rock and people would say, ‘I really appreciate you putting your newspaper on the internet. I used to subscribe to your paper but I don’t need to any more’,” he recalls.

Hussman was appointed publisher at the age of 27 when his father bought the paper, then the Arkansas Democrat, in 1974. His outlook was shaped by a circulation war lasting nearly two decades with a larger rival, the Arkansas Gazette, over which he triumphed in 1992 when the Gazette’s owner, the media group Gannett (NYSE: GCI), sold up.

“I spent 17 years in newspaper competition here trying to get one subscriber at a time, trying to pass the other paper,” says Hussman. “I thought, ‘Wow, I spent all those years expending blood, sweat and tears, trying to get subscribers - now I’m losing them to the internet’.”

Only 3,400 peopl pay to read the Democrat-Gazette’s website, generating little more than $200,000 in annual revenue. But on newsstands, its circulation statistics are striking in comparison with its neighbours: in the decade to 2008, the Dallas Morning News suffered a 29% slump in sales; the St Louis Post-Dispatch dropped by 27%; the Houston Chronicle slipped by 19%; and the Kansas City Star declined 15%. But the Democrat-Gazette’s sales rose by 1.7% to 176,275.

Readers mean dollars from advertisers - and print subscribers are far more valuable than online visitors. Hussman points to the US electronics retailer Best Buy, which pays a rate of about $40 per thousand print readers but, sceptical of the attention span of internet users, will pay only $8 to $11 on the internet.

“Most newspapers can’t begin to sell even half the [advertising] inventory on their sites,” says Hussman. “You not only can’t make a profit, you can’t make enough to pay reporters, news editors, copy editors, or pay for travel for your sports reporters.”

Not everybody is convinced. Sceptics say that Arkansas is a predominantly older, rural, conservative and not particularly internet-savvy market. As the Democrat-Gazette is the only state-wide paper, it has a powerful franchise in local news and in coverage of the widely followed college American football team, the University of Arkansas Razorbacks. Experts are divided on whether its model could work for national papers.

“Charging is much easier for a local or a specialist newspaper where they may be the only source,” says Tom Rosenstiel of the Pew research centre’s project for excellence in journalism. “The key is going to be whether the industry moves in this direction en masse. As long as there are some for free, it’s going to be very difficult for one to go behind a pay wall.”

Others say that across the newspaper industry, digital advertising is still in its early stages. Some online ads are thrown in free with print advertisements. Simple “banner” ads on websites can be ineffective but local targeting, tailored to specific readers, could be more lucrative. Mark Potts, a co-founder of the Washington Post’s digital division, who writes a blog called Recovering Journalist, says: “It’s almost impossible to describe how little has been done to sell advertisements on the web by newspapers.”

In Arkansas, Hussman has bucked industry practice in another way: classified ads in his paper are free, so long as they are placed by individuals and not companies. That has spiked the guns of listings websites such as Craigslist, which has a lower penetration in Little Rock than in comparable US cities.

A conservative at heart, Hussman describes his editorial line as “free enterprise, free markets and free trade”. The paper opposes abortion and campaigned against a state lottery. As for Arkansas’s best-known politician, a mention of Bill Clinton sends Hussman into a lengthy monologue, ranging from mercantile Florence to modern-day Hong Kong, about the dangers of “big government”.

“I have never endorsed Clinton for any office he’s ever run for,” he says proudly, adding that his favourite son of Arkansas is the founder of the Wal-Mart (NYSE: WMT) retail empire, Sam Walton.

Although he professes to have an open mind, Hussman’s scepticism about online journalism is evident. Back at the Democrat-Gazette’s downtown head office, it becomes clear that he does not know which floor his website editor’s office is on. And he is casually disdainful of “new media” types.

“In other newspapers, you’ve got people in the new media department, the internetdepartment, whatever you want to call it, who think that newspapers are dead,” he says. “Why are they going to make much effort to ensure that a newspaper survives if that’s what they think?”

By MediaGuardian

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