HUSSMAN: "This is a lot of trial and error." DANIEL MOODY - ARKANSAS BUSINESS
We can’t just lose money year after year, and that’s the way it’s going. And I tell them, look, we might still be able to deliver a print edition to you but it’s not the kind of paper you’re going to want to read, it’s not the kind of paper I’m going to want to publish. It’s going to have a whole lot less news in it. It’s going to have a whole lot fewer reporters and editors covering things. There’s no future in that. That’s what a lot of newspapers are doing, but in my opinion, there’s no future in that.
“You know what’s going to happen if it doesn’t work?” Hussman told the Local News Initiative. “We’re going to eventually go out of business.”The over-all retention rate thus far is 78 percent. That represents a sweet spot in terms of profitability, according to Hussman. Lots of nuggets on the trial-and-error approach of implementing the plan and impressive figures in Pulaski County:

Next the Democrat-Gazette calculated whether it could make money if 70 percent of its subscribers elsewhere in the state switched to iPads, allowing it to dramatically cut its distribution costs. The answer was yes.

“We just kept moving around the state from town to town, mainly out on the fringes of the state, and went down to East Arkansas, to Jonesboro, to Helena, to Lake Village, those areas,” Hussman said. “… We were running pretty consistently at 70 percent. … Some areas were below that if they were rural areas with very poor internet service.”

The Democrat-Gazette tried a new approach in the town of Newport, northeast of Little Rock, asking subscribers to rent an iPad for $9.95 a month in addition to the subscription fee. It got 43 percent acceptance, not enough to be profitable.

“So I said, OK, write these people a note, call them and tell them, ‘Forget about paying rent. Keep your iPads as long as you keep your subscription,’” he said. “So then we got down to El Dorado and Camden and Magnolia down in South Arkansas and we said, let’s try something new here. Let’s tell them the subscription now includes the Sunday print edition. So you get the iPad replica seven days a week but on Sunday you’ll also get the print edition. We got 80 percent down there in those three towns. So the acceptance was 10 percentage points better than it was without the Sunday print edition.”

Next they calculated whether that approach could turn a profit statewide.

“And the answer came back: Actually we can make a little more money even going into the costs of delivering the Sunday paper, because actually about half our ad revenues for the week were on Sunday. So from then on, the offer was to include the Sunday print edition. We may go back at some point and try to offer the Sunday print edition in those areas where we didn’t offer it initially. But the hope for us has been trying to move from town to town and get as many people converted as fast as we can.”

The results in Pulaski County have been especially closely watched.

“In southwest Little Rock … generally lower income, more Hispanic now … we got about 80 percent. But everywhere else in Pulaski County – we did it by zones around the county – we’re over 90 percent. In fact, in the Heights and Hillcrest area, we’re into 115 percent.”

That “115 percent” means that in those Little Rock neighborhoods, “virtually everyone who’s taking the paper has switched over to the iPad, and we’ve got some people who were Sunday-onlys, they decided they wanted to be seven days a week. Because if you’re Sunday-only, you don’t get an iPad, but if you’re seven days a week you do get the iPad. And I think some of it relates to Little Rock is the only place where we’ve really promoted this with advertising, with television and billboards.”

On whether the Arkansas experiment can scale and work elsewhere:

Advertisement

Jim Friedlich, Executive Director and CEO at the Philadelphia-based Lenfest Institute for Journalism, called the Democrat-Gazette’s tablet project “a hopeful sign that a major local publisher has been able to convert subscribers to digital at scale.”

“The question is: How replicable is this?” Friedlich said. “Is the Arkansas experience a unicorn or is it a repeatable experiment? My hunch is that it’s a bit of both, that with the right set of circumstances, this could be done elsewhere. In Arkansas the circumstances include a news product that has been well nurtured and well maintained over the years and not bled dry as we’ve seen in other markets, a newspaper that’s still highly regarded and has a loyal statewide readership, and a publisher who has himself deeply committed to this task and has put very significant personal energy and reputation behind it.”

Friedlich added: “I think he’s onto something and we should be watching pretty closely.”

And on the next big challenge, attempting to implement the experiment in Northwest Arkansas, where the separate edition of the paper has much lower subscription rates after recent battles with competitor newspapers:

“We’ve been working on trying to get the rates up, and we finally got them up to about $19 a month. And this thing doesn’t work at $19 a month. It just doesn’t work economically. And there’s some people below $19 to get the average of $19. So how are we going to get these people to $34 so this thing will make economic sense? That’s why we put off Northwest Arkansas.”

But there’s already a pilot program there.

“We tested the town of Harrison. We sent a letter out to the people of Harrison saying, ‘Look, this doesn’t make sense. We can’t make this work at $19 a month. People have got to pay $34 a month for us to have the journalism that we produce. We’ll work with you on this. If you’re willing to go to $34, we’ll give you an iPad. And furthermore, we will do that gradually. We’ll increase your rate $1 a month until you get to $34.’ So somebody paying half price of $17, it’s going to take almost a year and a half to get there. But we think that’s our best chance to try to get to the rates we need. So, we don’t know if it’s going to work in Northwest Arkansas. We didn’t know if it’s going to work in the rest of Arkansas when we started this. This is a lot of trial and error, trying to figure out what does work and what doesn’t work.”

Much more in the piece — read the whole thing. And don’t miss Lindsey Millar’s excellent Arkansas Times cover story last June on the D-G’s gambit.