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Backlash: Democrat-Gazette rates increase by up to 300 percent as Arkansas advertisers consider the alternatives.

When Arkansas Democrat Publisher Walter E. Hussman Jr. addressed a statewide television and radio audience Oct. 18 about his purchase of the assets of the Arkansas Gazette, he did his best to prevent what he knew could be a public relations and financial nightmare.

He told Arkansas he didn't win the newspaper war.

He merely survived, Hussman said.

He promised the best of both newspapers in his new Arkansas Democrat-Gazette.

He guaranteed that advertising rates would be fair, that they would be lower than newspapers of comparable size and that he would phase in the new rates.

But Hussman's planning and modesty didn't work.

There's a backlash among advertisers. And it's growing.

"I have marveled at Walter's ability to win the battle," says Ed Watkins "Watty" Wills of the Frank J. Wills Co., a Little Rock advertising agency. "I'm sorry to see the thing backlashing on him."

Wills represents Little Rock-based Harvest Foods Inc., which last week decided it would not sign a contract with or even advertise on a regular basis in the Democrat-Gazette.

The grocery chain traditionally had bought at least two to three pages per week in the Democrat.

The week before Harvest made its final decision, Wills attended the monthly meeting of the Pulaski County Automobile Dealers Association. The dealers listened as Hussman and Democrat-Gazette managers explained the new rate structure.

The dealers formed a subcommittee to explore other advertising options. But some dealers already have made up their minds.

"I am not going to sign the long-term contract with the Democrat," says Bob Russell of Russell Chevrolet-Geo at Sherwood. "I'm not going to spend that much money with just one newspaper to buy a lot less space."

Russell's reference to the Democrat-Gazette as simply "the Democrat" illustrates the feelings of many advertisers about the new newspaper. They see it as the same old Arkansas Democrat. And they don't feel there's a need to take money they were spending with the Gazette and give it to Hussman.

"They're basically asking you to guarantee you will spend the same amount of money with them as you did with both newspapers," Wills says. "That can be an awful lot of money and just not the same exposure levels."

True, Hussman is willing to phase in rates, but only if advertisers sign two- and three-year contracts. Otherwise, increased rates are effective immediately. It translates into a 200 to 300 percent increase for some.

Other publications and broadcast outlets are hoping to capture the advertising dollars that would have belonged to the Gazette.

"It's been wild out there, and there's still some more to come," says Julia "Bitty" Martin, sales manager at Little Rock's Spectrum Weekly. "You'll be seeing some more fallout, not necessarily to us, but fall out of the Democrat-Gazette."

Paul Smith, vice president and general manager at the Democrat-Gazette, denies there is a major backlash among advertisers.

"Certainly, some won't sign, and we expected that," Smith says.

Still, he estimates 95 percent of the previous Democrat and Gazette advertisers will sign by the Nov. 18 deadline.

Wills has heard Smith's estimates.

He says, however, "I can't find anybody who has signed their contract."

Of his other clients, Wills says, "Virtually every one of our accounts asked us to put together options."

Some of those options don't include the Democrat-Gazette.

Shock Waves

"In all fairness, we're not in any type of adversary situation with the newspaper," says Dennis Jungmeyer, who heads the Arkansas Automobile Dealers Association and the Pulaski County Automobile Dealers Association. "We don't want it to look like there is any kind of war going on between the dealers and the paper. Walter Hussman presented a very detailed and, I think, well-investigated report on the Arkansas media environment vs. those of cities of comparable size."

But Jungmeyer adds, "As near as we can tell, the amount of automobile advertising for this area is much greater than areas of similar size."

Low rates brought about by the newspaper war allowed automobile dealers to advertise with little money and, in some cases, with little thought.

Don Warden of Warden Motors Inc. in Little Rock says it was easy to advertise in both the Gazette and Democrat.

Warden admits he sometimes did it almost out of habit.

"I'm not convinced the newspaper was doing all that much for us," he says. "I know I'm not going to sign the contract."

Warden already had decided to cut back on his newspaper advertising. He says the Democrat-Gazette's contract proposal "made my decision a little easier."

Jungmeyer won't argue with the statistics Hussman provided, but the bottom line for advertisers is how much return they are getting on their investments. Jungmeyer expects ads to be smaller and less frequent. He predicts that eventually central Arkansas automobile advertising will be more in line with the type of advertising done in other cities.

"I'm sure I'll still advertise in the Democrat, but they will be smaller ads," Russell says. "... The main thing was probably the shock. We know that we had a sweetheart deal, but it was still kind of a shock."

Smith says six or seven area dealers already have signed new advertising contracts.

Out Of The Question

Regardless of what automobile dealers do, some business owners say a three-year contract is out of the question.

"What's going to happen in three years?" Wills asks. "Realistically, could you guarantee me what's going to happen? It's just unheard of."

Wills says advertisers are reacting as much to the length of the contract as they are to the actual rate increase.

"They want control, and this doesn't afford them the control they want," he says.

Harvest Foods' rates would increase from less than $13 per inch to $36 per inch without a contract.

Wills says he doesn't know what the Democrat-Gazette's circulation or product quality will be. So he's not entering into any long-term agreements.

"It's a bit premature to tell you I have a road map to follow," Wills says.

Harvest Foods, however, began making plans in late summer for existing in a one-newspaper town.

"Others weren't in a position to move as quickly as Harvest," Wills says. "But the other accounts don't need to be in the paper two to three times a week. Others are in-and-out buyers."

Harvest Foods buys its holiday inventory in August. That's when its advertising budget was developed as well. The company now must decide how to spend that money.

The only way Harvest Foods would consider using the Democrat-Gazette, according to Wills, is if there were something "drastically important" such as a product recall or a new campaign.

Otherwise, Harvest Foods will push its basket down another advertising aisle.

Wills suggests a cooperative direct-mail publication for automobile dealers, grocery stores and real estate firms.

Yet not every business is large enough to participate in such special advertising efforts. While advertisers know they'll have to seek other options, many aren't sure what those options will be.

"Obviously, we are putting plans together for 1992, but those plans are very fluid and very subject to change," says Ben Combs of the Little Rock advertising agency Combs & Heathcott Inc. "Little Rock has been living in advertising heaven for about the past five years."

Combs says market comparisons must be done before advertisers can choose what is best for them.

Forced Alternatives

For a few advertisers, long-term contracts were never an option.

"We are not, as a state agency, to enter into three-year contracts," says Suzanne Robertson, director of communications for the University of Arkansas at Little Rock.

Robertson was looking at advertising alternatives before the end of the newspaper war.

"We had begun to look at a diversification of advertising," Robertson says. "It just forced us to consider alternatives sooner."

More than 50 percent of UALR students hold jobs or commute long distances to school. Robertson believes many of them don't take the time to read a newspaper.

She's looking at radio as an outlet. She already has placed ads in Spectrum.

Spectrum had its first automobile ads recently from Richland Chrysler-Plymouth-Subaru-Volkswagen of North Little Rock and Jones Nissan-Isuzu of Sherwood.

The publication, though, remains plagued by the Speak Up For Decency organization, which calls new advertisers and warns them about the personal ads that appear in Spectrum.

Some advertisers feel they have no choice but to continue to advertise in the Democrat-Gazette.

"That's the only place we have to run our ads," says David Chadwick, advertising manager for the Kroger Co. "Our plans have not changed one bit."

Smith says large advertisers such as the J.C. Penney Co. and Haverty Furniture Co. are staying with the newspaper.

"They know what other newspapers our size charge," he says. "They're glad they're not paying normal rates.

"The people who were shocked the most are people who don't have stores in other markets."

Although the Democrat-Gazette is keeping several large advertisers in the fold, newspaper officials clearly are concerned about winning and keeping midsize and smaller advertisers.

The newspaper is running ads with headlines that say, "Network TV Viewing Drops To Lowest Level Ever!"

Statistics on how many people the Democrat-Gazette reaches are compared with the percentage of homes reached through television advertising.

Instead of running advertisements saying how its circulation tops the Gazette's each Sunday, the newspaper is fighting a new kind of advertising battle.

The chances are many angry advertisers will, over time, begin to use the Democrat-Gazette.

But how many?

Will Hussman win this advertising battle just as he won the newspaper war?

Or will the advertisers' backlash continue to grow?

The next several months could prove crucial in the fight for advertising dollars in central Arkansas.

Gannett's Detroit Nightmare

Is Walter Hussman Making The Same Mistakes In Little Rock?

Prior to its October 1986 purchase of the Arkansas Gazette, the Gannett Co. lived a seemingly charmed existence.

Gannett officials thought they could come to Little Rock and quickly force Arkansas Democrat Publisher Walter E. Hussman Jr. out of business or into a secondary position in a joint operating agreement.

Those same Gannett officials thought they could sweep into Detroit and immediately make money with the purchase of The Detroit News.

They were wrong on both counts.

In 1986, Gannett bought the News. The company later entered into a JOA with Knight-Ridder Inc.'s Detroit Free Press.

Analysts predicted the Detroit market soon would yield profits of between $100 million and $300 million annually, money that would be split between the two media giants.

But Gannett's Detroit News lost 240,000 readers in less than two years.

During the same period, circulation for Knight-Ridder's Detroit Free Press dropped by 30,000 readers.

Advertisers left with the readers.

Lou Mleczko, president of the Newspaper Guild of Detroit Local 22, has been a reporter at the News for more than 20 years.

"Gannett deserves everything that's happening," he told Arkansas Business in September.

Having beat Gannett in Little Rock, will Hussman now make the mistakes his foe made in Detroit?

Like Gannett in Detroit, Hussman is experiencing a backlash from advertisers who refuse to pay increased rates.

Gannett increased rates by 200 and 300 percent in some cases.

Mleczko says that out of 4 million people in the Detroit metropolitan area, "the idiots from Knight-Ridder and Gannett still can't make a profit."

Hussman's saving grace may be that he has done his homework and learned from Gannett's mistakes.

Before he presented the new advertising rates, Hussman researched what newspapers the size of his new Arkansas Democrat-Gazette charge.

Then, he established below-average rate scales.

But Arkansas advertisers are having a difficult time accepting the new rates.

It remains to be seen whether readers also will look elsewhere as they have done by the thousands in Detroit.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:newpapers Arkansas Democrat and Arkansas Gazette merger; includes related article
Author:Rengers, Carrie
Publication:Arkansas Business
Date:Nov 11, 1991
Previous Article:Let's make a deal.
Next Article:Taxing Texaco.

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