Another Good Year For the Business

'98 Marked By Growth in Ad Sales and Continued Consolidation.

For some ink-stained wretches, it has not been a kind year.

Former New Republic writer Stephen Glass has seen better times. The same goes for former Boston Globe scribes Mike Barnicle and Patricia Smith. And for the fallen former Cincinnati Enquirer reporter Mike Gallagher, ’98 stunk.

But the same can’t be said for the alternative newspaper business. The past 12 months brought double-digit growth and higher bottom lines at many AAN papers. It was also a year dominated by industry consolidation and papers selling for big dollars. While the legacy of consolidation is far from clear, the vibe emanating from many in the business is: It has been a good year.

Here’s a snapshot of what happened in the alternative newsweekly business in ’98, why it went down and what comes next.

Cash Flow
The Chicago Reader is an AAN pillar. Founded 23 years ago, with an average weekly issue now running 180-plus pages, the Reader is one of the association’s oldest and largest papers. Nevertheless, its age and size didn’t prevent it from turning in another sterling performance in ’98.

Publisher Jane Levine says the 134,000-circulation newsweekly will register gross revenue this year of $18 million. She also says that Washington City Paper –owned by the same group who controls the Reader–will gross $7.2 million.

“The year has been fine,” says Levine, “but not as good as ’97. Sales are up, income is up at both papers–around five percent–but that’s been offset by increased printing prices.”

The year has also been good for other AAN papers like Worcester Magazine, City Newspaper in Rochester, NY and Baltimore City Paper. These papers–and others, including Nashville Scene, Salt Lake City Weekly and The Stranger in Seattle–all report increased revenue figures. Moreover, at some member papers, growth reaches well into double-digits, with some as high as 20 percent.

At Salt Lake City Weekly, local display advertising accounted for a sizable percentage of ’98’s “double-digit” growth, according to majority owner and Publisher John Saltas. Sheer endurance also played a part, he says.

“Being around longer, you become a more familiar read, and more familiar to [different] advertisers,” Saltas says. “[In 1998] we got a lot more car dealership [and auto-related] ads. We’ve had everything from Porsche and Audi to ads for people with [questionable] credit looking to buy their first car.”

Worcester Magazine–like many of its AAN peers–saw income from personal ads continue to dwindle this year. But hitting a plateau in the personals business didn’t hurt the paper enough to keep it from growing at a double-digit pace.

“It’s been a good year,” says Publisher Peter Stanton. “Compared to ’97, our total sales are up 12 percent. The income from personals was down and because we’re in the Boston MSA [Metropolitan Statistical Area], we get very little national advertising. Almost all of [the growth] came locally.”

But local merchants weren’t the only businesses pouring more ad dollars into alternative papers. The cash also came from national advertising sales.

“From Levi’s to Camel to Chivas Regal, we’ve continued to have more national ads in the paper.” says Tim Keck, publisher of The Stranger.

Keck, whose average-sized paper has grown from 10 to 104 pages per week in seven years, says The Stranger generated an increase in total gross revenue in ’98 that is well into two figures. He suggests that as alternatives continue to demonstrate their staying power by consolidating their hold on the cherished 18- to 45-year-old demographic, more big advertisers have come to view them as viable ad vehicles.

“What this tells me is the papers have grown to the point where they have a general sense of legitimacy from national advertisers,” says Keck.

Greater legitimacy or not, one thing certain about the higher national sales numbers: They’re largely due to more tobacco and alcohol advertising.

The Alternative Weekly Network [AWN]–with 100 member papers–will peddle $19.6 million worth in national ad sales in ’98. That’s up over 50 percent, from $13 million in ’97. Tobacco is still the leading category, according to AWN Executive Director Mark Hanzlik.

“It’s not even close,” he concedes.

In ’98, tobacco ads will account for over 66 percent of AWN sales. That’s up from 61 percent ($8.2 million of $13 million) the previous year.

“The amount of money [the tobacco companies] spend with us is amazing,” Hanzlik says.

Far behind tobacco in second place in the AWN sales hierarchy is alcohol–mostly hard liquor. Booze companies, says Hanzlik, spent $2 million with AWN in ’98. Pharmaceuticals are next at $1.2 million.

Tobacco companies will spend approximately $500,000 advertising in the Chicago Reader this year, according to Jane Levine. (The Reader is a member of the Ruxton Group, which represents 19 alternative papers, including all of the New Times, Inc. properties. Ruxton Vice President Michele Laven could not be reached for comment.)

Nevertheless, Levine is not one to wring her hands about all that tobacco money.

“If [American society] is going to continue to look down upon tobacco companies, I think we should just get to the point where we outlaw cigarettes,” she says. “That would make this a legal [issue]. But if tobacco remains legal, I don’t see why we should be ashamed for running cigarette ads.”

As politicians have found it advantageous to beat up on big tobacco, companies like Philip Morris have seen their advertising options grow scarce. That explains the influx of tobacco ad dollars into AAN papers, says Levine.

“By advertising in alternative papers,” she says, “the tobacco companies get less grief.”

After setting a blistering pace last year, the continuing consolidation of the alternative newspaper business got off to a slow start. In fact, the first two “sales” in ’98 were never consummated: Stern Publishing’s purchase of the Santa Barbara Independent and Yesse! Communications’ pursuit of the Boise Weekly both collapsed in the 11th hour.

However, whatever reluctance there may have been to sell during the early months of ’98 had faded and been replaced by frenzied deal-making by year’s end. Yesse! began the game of musical chairs in April, when it bought the Iowa City-based Icon. Then New Times, Inc., flush with a new line of credit, opened the floodgates with three quick deals, culminating in September with the purchase of the Riverfront Times.

Earlier that month, Canadian media conglomerate Thomson Corporation paid Steve and Cherry Fisher May $14.9 million for the Lafayette, La.-based Times of Acadiana and two shoppers. Arlington, VA-based media giant Gannett also got into the act in October, when it bought Brandywine Valley Weekly, an alternative covering parts of Pennsylvania and Delaware. [Citing a “very, very dim, if not bleak” financial outlook for BV Weekly, Gannett has since shut down the paper.]

Saving the biggest deal for last, Philadelphia City Paper owner Art Howe acquired the three-paper chain Alternative Media Inc. [AMI] for a reported $21 million in late November. That sale has yet to be finalized, but is expected to close sometime in January.

“I’m a little worried that [because of consolidation] I might be one of three people at next year’s AAN convention,” jokes PitchWeekly Publisher Hal Brody.

Although there are almost certainly economic factors at play–the increasing value of niche media and the growing importance of national advertising are two that come to mind–many industry players argue there are personal factors behind the sales as well.

“A big reason I think we’re seeing the [sale of papers],” says Baltimore City Paper Publisher Don Farley, “is because some people are tired–they’ve been doing this for 15, 20 years and they want to get out of it.”

Austin Chronicle co-owner and Publisher Nick Barbaro agrees: “A lot of the people selling papers started them a long time ago and now these same people are getting older. Of course, there’s going to be a few people every year who burn out and want out–and with the attractive financial offers they’re getting–you can see why they’d want to retire.”

AAN President and Nashville Scene Publisher Albie Del Favero also attributes the changing ownership landscape, in part, to fear.

“I think there are some people who are fearful of having one of the big players enter their market or having the [local] daily paper start a weekly,” he says. “If the competition is willing to operate at a loss, the [existing alternative] might not have the deep pockets to compete. That’s a threat and I think it’s part of the reason why some are willing to sell.”

There are some who have argued that consolidation will inevitably impair the editorial quality of the papers that are sold. But Del Favero says that theory is bunk.

“The opposite has happened,” he says. “On the whole, we’ve seen improvement at papers when either New Times or Stern has come in.

“The numbers that these papers are selling for enhance the image of the industry. It also shows we’re an up-and-coming industry and the values these papers are selling for reflect that.”

Still, Independent Weekly Publisher Steve Schewel isn’t entirely enthused about consolidation.

“I wish there were more independently-owned papers,” he says. “For me, the alternative press is not just a business, but also a movement. And so, it’s important to me that the alternative press continues to be a progressive force in America. I worry that over time, chain ownership diminishes that possibility. In the short run, the extra resources that chains bring to papers improves them. In the long run–say, 10 years from now–I worry what we’ll see is more homogenized and less alternative papers.”

Saltas says that thoughts about consolidation and selling his paper “aren’t even on my radar screen.” Regardless, it has been virtually impossible to ignore the hefty price tags and sales multiples accompanying alternative newspaper sales in ’98.

“When people hear that a certain paper sold for $10 million,” The Stranger’s Keck says, “They think, ‘Fuck, maybe I should sell.’ I think what we’ve seen is a herd mentality. There’s a feeling of pressure, like this is the heyday to sell. My gut reaction is [the papers] are over-valued, but I don’t know the specifics of each sale–the paper’s sales, revenue and growth. They’re always so cloaked in mystery. I think what this year shows is [alternative papers] last a long time, are valuable and it’s hard to fuck them up.”

On Deck
AWN’s Hanzlik and his staff are modestly optimistic for ’99.

“We’re projecting a flat level,” he says. “We’re not expecting an economic dip or any major increases. We feel [that ’99] should be another very good year–the same as ’98, with tobacco ads staying about the same and keeping us stabilized.”

Others believe the coming year will be more prosperous.

“Unless the economy just dies, we should continue to pull in new advertisers,” says City Newspaper Publisher Bill Towler. “Right now, our circulation stands at 40,000 [weekly copies]. We’re hoping to bring that up to 45,000 by mid-year.”

PitchWeekly’s Brody adds: “Not very long ago–as an industry–we were feeding on ourselves. But now, people from the outside are paying more attention to alternative papers. That higher visibility I think will continue in the future.”

The Chronicle’s Barbaro believes the industry as a whole “is in really good shape.” And despite the departures of AMI co-founders Ron Williams and Laura Markham and The Times of Acadiana’s Stephen and Cherry Fisher May, Barbaro doesn’t see himself or a throng of others within the AAN clan leaving the business anytime soon.

“[Chronicle Editor Louis Black] and I still like what we’re doing,” he says. “We both enjoy coming to work. Besides, if we weren’t running this paper, what else would we do with ourselves?”