The Death of the News

The trio might have been candidates campaigning as they smiled, shook hands, and spoke to half-empty auditoriums around Ann Arbor in April. Instead, they were publishing executives working for the Newhouse family, and their mission was to sell a website and twice-weekly paper that will replace the daily Ann Arbor News this summer.

Their ambitious company, AnnArbor.com, will bring together news, blogs, reader-created content, community interest areas, social networking, various forms of advertising, and other features still to be defined. Yet it is expected to employ less than one-fourth the staff of the News. And its three leaders have never worked for a web organization.

At a forum at Concordia University, Matt Kraner, the chief executive officer of AnnArbor.com, sports a web-savvy look with his goatee, pompadour hairstyle, and shirt without a tie. A former chief marketing officer of the Cleveland Plain Dealer, he uses the terms “sustainable business model” and “generate value for advertisers” many times. The new company, he says, will be “a smaller and more nimble organization than the daily newspaper.

“There will be journalism in AnnArbor.com, but we’re going to take that a step beyond,” says Kraner. Ann Arbor residents themselves, he says, will serve as “aggregators and curators” of online information—they’ll be editors and producers as well as readers.

Next up is Tony Dearing, a journalistic veteran who has recently served as the editor of the Bay City Times and the Flint Journal. In a pinstripe suit and white shirt and tie, he looks more like he’s talking to bankers than to potential Ann Arbor readers and bloggers. He promises “local, local, local” coverage – local journalists covering police, government, and schools and writing commentary and blogs. “What kinds of things do you need us to be a resource for?” Dearing asks the twenty or so people in attendance. “We want to hear.”

Laurel Champion, also wearing a pinstripe suit, is the last to speak. A third-generation publisher, she has been at the helm of the Ann Arbor News since 2005. Hers is a difficult task: she has to acknowledge the anger and sadness provoked by the death of the daily paper while trying to sell its successor. “With every ending is a new beginning,” she says. She also praises the Ann Arbor News staff as “extremely talented” and insists “there’s nothing they did wrong.”

Yet on the morning of Monday, March 23, Champion told the staff – and then the community – that the Ann Arbor News, which traces its editorial lineage all the way back to 1835, will cease publication sometime in July. Stories about its demise appeared almost immediately on mlive.com, the website that provides online content for the News and Booth Newspapers’ seven other Michigan publications. Ironically, though, the news about the death of the News didn’t show up in the newspaper itself until the following afternoon – long after the bloggers had filed multiple pieces and the television trucks had pulled out of the paper’s parking lot.

As the subsequent company-sponsored forums revealed, the announcement hit older readers with particular force. Kittie Morelock, a retired social worker, says she is “digitally competent” and online most days but is sad to think of all that will be lost when the News doesn’t show up on her doorstep every afternoon: editorial cartoons, Jo Mathis’ columns, crime items, and all the “little things that I’ll talk to my friends about.

“I don’t know how email can be made into a newspaper,” she says. “How are you going to do it?”

Plenty of newspapers have been rethinking their frequency of publication and online presence lately, but the Newhouse family is going much further: the Ann Arbor News will cease to operate as a company. From its ashes will emerge a new, untested media venture.

Come July, everyone who works at the News will be officially out of a job. And while staffers have been told they can apply to work at AnnArbor.com, the pay scale will be lower, and entire departments will no longer exist. There will be fewer reporters and more “tech whiz kids” as Dearing called them.

This new, slimmed-down team will commence a grand experiment in new media – an experiment launched by media barons in New York without consulting anyone in Ann Arbor.

The powerful and private Newhouse family has owned Booth Newspapers for a generation – along with other papers across the country, stakes in cable television, and a distinguished roster of magazines that includes Architectural Digest, the New Yorker, Vogue, and Wired.

Brothers Si Newhouse, eighty-one, and Donald, seventy-nine, own all this outright through their privately held company, Advance Publications. With no public stockholders, they don’t have to report income and profits. But until very recently, newspapers were incredibly profitable. As recently as 2005, Gannett, which owns the Detroit Free Press, Lansing State Journal, and the Daily Press & Argus in Livingston County, reported 26 percent operating margins for its newspapers. The Newhouse papers’ profits are not known, but they mainly operate as monopoly publications. Last year, Si and Don Newhouse shared the number thirty-six spot on Forbes magazine’s list of the richest Americans, with an estimated net worth of $8 billion apiece.

But that was then. Companies that depend on advertising sales have been devastated by the current recession, and newspapers, with their daily publication schedules and high costs, have been particularly hard hit. Just since last year, Forbes has cut its estimate of the Newhouse brothers’ worth in half.

In past downturns, the Newhouses maintained staff with a “no layoffs” policy. But this time, they are moving aggressively to cut costs in many cities, says independent newspaper analyst John Morton. “Clearly they’re feeling the pinch,” says Morton.

Sometime last summer or early fall, the family decided to make drastic changes to its newspaper empire, which stretches from Staten Island to Portland, Oregon, and from New Orleans to Grand Rapids.

In meetings in midtown Manhattan and at dinners on the east side of New York City, possibilities were discussed, surveys commissioned, and hard decisions made: Forget the commitment to staffing and slash 40 percent of the writers, editors, and photographers at the Star-Ledger, a Pulitzer Prize–winning daily in New Jersey. Combine operations of once-independent papers in Flint, Bay City, and Saginaw, cut publication from seven days a week to three, and slash pay by up to 50 percent. And, most stunning of all, kill off the daily paper that for generations had informed Ann Arborites about everything from football to farming, local politics to cooking, in favor of a new website and twice-weekly paper—both to be called, confusingly, AnnArbor.com.

The decisions that sealed the fate of the Ann Arbor News were made with no one from the city or newspaper present. Even the News’ longtime editor, Ed Petykiewicz, and publisher Champion weren’t informed until months later. Champion says she learned of the decision in a late February telephone call; Petykiewicz says he got the news only a week or two before the public.

Equally amazing, the decision to kill Ann Arbor’s daily paper was made without any detailed plan for the new media outlet that would replace it – though New York journalism professor and former Newhouse exec Jeff Jarvis says he was retained as a consultant soon afterward to come up with ideas.

Steve Newhouse, Don’s son, is acting as the family spokesman on the changes here. Newhouse, who heads their companies’ web arm, advance.net, says he became convinced last year that Ann Arbor was the perfect place to create a new media enterprise. “We did research that bore out what we suspected,” he says. “Ann Arbor is a unique community, a thought leader. If there was ever a place to try a direction based on the power of the Internet and tapping into the vibrancy of the community, it would be Ann Arbor.”

Jarvis says that the Newhouses had already decided the newspaper’s days were numbered by the time he was called in as a consultant. He can’t pinpoint the timing but recalls the weather was turning cold. And Steve Newhouse told Crain’s Detroit Business that the plans to close the News had been in the works for “many months” before the late March announcement.

Asked about what he hopes AnnArbor.com will accomplish, Newhouse answers: “It will preserve a lot of journalistic quality of the Ann Arbor News while adding in a tremendous amount of Internet-based features. Most of all I think we’d like AnnArbor.com to be a place where the community finds a home—to add in things that we wouldn’t have thought of.”

Jarvis – who helped launch mlive.com in the mid-1990s and now writes a popular blog, Buzz Machine – also touts the new website’s potential to com-bine traditional reporting with community contributions.

“The people of Ann Arbor have an opportunity to create and build what they want – and they’ll have the help of some very talented people to do that,” says Jarvis, formerly president and creative director of advance.net. “I think Ann Arbor can be a model for the wired city. That’s very exciting.”

While Jarvis is excited, observers steeped in the print media are skeptical. To many, the contention that a city as prosperous and literate as Ann Arbor can no longer support a daily newspaper seems dead wrong.

“I don’t get it,” says Charles Eisendrath, director of the Knight-Wallace journalism fellowship at the U-M. If the Newhouses had asked him, Eisendrath says, he would have argued for sticking it out until the economy turns around. But, he adds, “It’s a privately held company, and a privately held company can do pretty well what it wants.”

“It makes no sense that they would retain [the] Jackson [Citizen Patriot] as a traditional newspaper and close down Ann Arbor,” agrees Ben Burns, a former Detroit News executive editor who heads the journalism department at Wayne State University. “Ann Arbor probably has a better reading demographic than any other community in Michigan.”

In late 2006, in fact, the Newhouses were on the brink of adding local print publications, new weekly newspapers for Chelsea, Saline, and other nearby areas. They had even hired key staff, but backed off when Pfizer announced it was closing its Ann Arbor laboratory in January 2007. “That really pulled the plug on that grand plan,” said one executive involved in the rollout. “They were in an expansion mode up until that point.”

But even before the Pfizer bombshell, the News had suffered a steep loss in advertising, as the Observer reported this January. A comparison of Sunday issues in December 2000 and December 2008 revealed a 65 percent drop in classified ads alone. Less money was coming in from subscribers, too – daily and Sunday circulation are both off more than 20 percent in the last five years.

Fred Manuel of Saline is the former chief executive of Heritage Newspapers, which publishes weeklies in Chelsea, Dexter, Manchester, Saline, and elsewhere. Manuel thinks the News could have strengthened its position by converting to morning publication. A morning paper is more timely, since it reaches readers before they’re bombarded by the day’s cable TV and Internet news, and many afternoon papers have made the switch to improve readership. Manuel suspects the News was locked out of that option, though, by a long-term contract to print the New York Times. The deal brought in revenue to build a new printing press in Pittsfield Township – but also meant the presses were busy overnight.

Manuel also believes the Newhouses had locked themselves into a bad website. MLive, which posts stories from all eight Booth Newspapers, “was flawed from the beginning,” he says. “It was so tough to get to the local paper. The website is so complex.”

That left the Ann Arbor News as the core of the Newhouses’ local media franchise. But despite repeatedly cutting staff and reducing the paper’s size, Laurel Champion says, the News suffered “very steep losses last year.” And, she says, the losses were accelerating this year.

“We worked hard to make the paper . . . successful as long as possible,” says Ed Petykiewicz, who announced his own retirement just days before the closing announcement. He says, “There was no one thing or small number of things that would have prevented this from happening.”

Still, not everyone buys that the News had to close. “They had a media monopoly. In Ann Arbor. How can you screw that up?” asks former staff writer Marianne Rzepka.

Newspaper analyst Morton also thinks papers such as the Ann Arbor News should be faring better than papers in Denver and Seattle that shut down or went to online-only editions. Smaller dailies “aren’t suffering from the woes of the metropolitan papers. . . . They tend to be closer to their readers and advertisers,” he says. And he points out that Ann Arbor also is fertile ground for readers – “highly educated, high-income demo-graphics.”

Champion says she feels some “woulda, shoulda, coulda” guilt about the demise of the News. But after two years of cutting the staff and size of the newspaper as revenues shrank, she saw “no easy decisions. There’s just taking value away.”

The bottom line, Champion says, is that “we could no longer sustain a seven-day print model.”

For Wayne State’s Ben Burns, the death of the Ann Arbor News calls to mind a Kafka tale about a complicated machine that executes people one thin slice at a time: “They take a little bit more and a little bit more until the prisoner dies. Corporate folks [who] have taken over most of the newspaper industry have done this—they are giving less value. They have squeezed out profits [that] by modern standards are fairly unconscionable, except for [financial fraudster Bernie] Madoff.”

Burns believes that the Newhouse family made the change because it saw “a corporate advantage to shut the newspaper down and go to an online operation.” The list of advantages is a long one—starting with jettisoning the entire workforce. Closing the News also allowed them to sell its downtown building (on a prime piece of property) and shed many other obligations—from the cost of daily comics to the expectation that the paper would contribute sponsorship dollars to local events.

Even after two recent rounds of staff cuts, the Ann Arbor News still has 272 employees. The newsroom alone—news and feature writers, editors and photographers—has a recent head count of sixty-five to seventy. “Newspapers are expensive,” says Jarvis. “It’s an economic reality.”

AnnArbor.com’s entire staff will be only fifty to sixty people, including ad salespeople, the one staff that won’t be significantly smaller at the new company. Pay scales for those jobs will likely be significantly less than for corresponding positions at the News. The company will out-source virtually all other functions, including circulation and delivery, printing (to a new company operating at the Pittsfield Township plant), accounting, and copyediting and layout (to other Booth papers). And it will try to get a significant amount of its online content for free, from reader-contributors.

Steve Newhouse and the people creating AnnArbor.com acknowledge the cost savings are important. But they prefer to emphasize the opportunity to experiment with a new hybrid website—part news, part social connection, part community-generated tools and content. Ann Arbor was chosen as the laboratory for this kind of journalism, they say, because of its high rate of engaged, computer-savvy residents – both at the University of Michigan and beyond it.

“In order for the project to be successful, it had to be a complete re-thinking, built from the ground up, with the support of the community,” Steve Newhouse says. “We wanted to reinvent the model. We had to build from scratch.”

So last year, Newhouse hired a market research firm to survey Washtenaw County residents. The survey found almost all have a computer in their homes—and, Champion told a forum audience, “ninety-two percent are willing and ready to accept news online.”

Apparently their pollsters didn’t reach the hundreds of people who come into Ann Arbor District Library branches every day to read copies of the News. Many also read the New York Times or the Wall Street Journal—and they’ll keep coming for those newspapers after the daily News disappears, predicts Josie Parker, the library’s director. Parker says she, too, will miss the daily paper—both as an effective advertising tool for library events and as a source of local information. A website is “not the same as sitting down in a comfortable chair in the sunshine and reading the newspaper,” she says.

Nobody polled Greg Dahlberg of Scio Farms, who buys the News at a newsstand almost every day. He uses it to identify estate sales and garage sales, where he’s bought all kinds of items for resale. And he’s disappointed because “a viable free press keeps us informed as citizens.”

“The corporate bean counters are trying to invent a three-hump camel,” says Ben Burns. “They’re trying to change a [newspaper-reading] culture of a century, and doing it without consulting the people of the culture.”

On the other hand, John Morton says, “If you’re going to try to reinvent the newspaper, Ann Arbor is a good place to try it.”

Jeff Jarvis spent time in Ann Arbor when mlive.com was launching, but he’s now a professor at the City University of New York’s graduate school of journalism. “We’ve got to be looking at, trying out, experimenting with new things. That’s good for all of journalism,” says Jarvis. “We’ve got to have a lot of experiments – I shouldn’t use the word experiment – a lot of innovation.” He thinks residents may use the new site to share photos, for example, or to invite people to meetings or events.

Making all this into a coherent package is the task of Tony Dearing. An editor at the News from 1988 to 1999, he has an upbeat outlook. Asked about the staffing for AnnArbor.com, Dearing speaks in generalities, giving no specifics on the number of editorial employees or their salaries. But he does say, “It’s a buyer’s market—a lot of journalists are looking for jobs.” And, he promises, “We are going to have a staff of very good journalists” and a much expanded pool of freelance writers.

Some journalists wonder if Dearing is the right person to head an experimental new media outlet. When Dearing started as Flint Journal editor in 2006, “we hoped for change. What we got was a lot of pretty words and platitudes and nothing else,” says James Smith, a Journal writer for sixteen years, who now blogs on newspapers and other subjects. “He’s good at putting on a happy face. He knows nothing about what he’s taking on. He has no experience and no credibility in this area” of online media.

Dearing disputes that characterization. “Our record on the Internet team at the Flint Journal was strong and getting stronger,” he says. The Journal was doing “a lot of things online.”

Smith and others believe the Newhouses should have gone outside the newspaper world to find some people already steeped in the web and its best tools and possibilities. But Steve Newhouse feels good about Kraner as a “special marketer” and about Dearing’s creativity. “I don’t accept the premise that he’s not clued in” to Ann Arbor’s interests and thinking, Newhouse says.

On the business side, AnnArbor.com will depend on advertising to pay most of its bills, including the paychecks for those journalists and freelance writers. The company wants to “create value for advertisers” and will “generate content to generate value for advertisers,” Kraner told the audience at Concordia. In addition to buying the traditional banner ads or tile ads used by many websites, businesses will be encouraged to post information about themselves online.

Online advertising will include sponsorships and “deals of the day” based on what Kraner calls a “business directory on steroids.” And there will be Google-esque contextual ads, so that an article on Michigan football could appear next to an ad from a local retailer selling university sweatshirts. It’s “the next level of targeting ability,” he says.

“The business model is based on the creation of an audience,” Kraner says, a “very connected passionate audience” that interacts often with advertisers and one another.

And though it’s often lost in the online buzz, Newhouse is not getting out of the newspaper business in Ann Arbor. When the News closes, it will be replaced by a new, twice-weekly paper—also to be called AnnArbor.com. It will be sold countywide, by subscription.

“We’re not abandoning print,” says Champion. “There’s a value to that.” What Champion and the other executives refer to as “the print product” will be published Thursday morning and Sunday morning. “It will look a lot like a newspaper,” she says. The midweek edition will focus on entertainment and features, while the Sunday product will be something like the Sunday Ann Arbor News, with news stories, comics, and preprinted ad inserts. Kraner says the company plans to distribute roughly the same number of copies as the News now does, but he will not provide paid circulation targets.

The leaders of AnnArbor.com plainly hope the new paper will inherit the readers and advertisers abandoned by the News. But some in the community are taking a wait-and-see attitude. Mayor John Hieftje says it’s unclear what will happen to the city’s legal advertisements, required for public meetings, notices of changes in law, and other matters. “I’m not sure I have confidence in the Thursday and Sunday product,” Hieftje says.

There’s definitely an air of improvising on the fly about the new venture. At this point, its creators have not even determined their financial or audience goals. “The project is so new that we don’t have any benchmarks,” says Steve Newhouse, who has worked with online websites for more than a decade. While he says “we have some internal hopes,” he doesn’t share them, and says that setting financial and other benchmarks will have to wait until the new company has been operating for a while.

Kraner says he will measure success by the connection and engagement with the Ann Arbor audience – “how big of an audience is it that we can create.”

“We want to create a growing business, not manage decline,” he says, and build a “business model that is sustainable.”

Newhouse says he hopes the trio who are leading AnnArbor.com will “preserve a lot of the journalistic quality of the Ann Arbor News – and its localness.” But he’s most eager to see the web features sprout and grow into something that will “reach out to the broadest number of people.

“We felt that it was our best chance to have a model that would scale well into the future,” he says – presumably a reference to the future of other Newhouse newspapers. But Newhouse quickly adds that AnnArbor.com must first show that it works before he’s ready to discuss a rollout to other places.

So what will AnnArbor.com be like? As described by the people charged with creating it, the site will be a mix of staff-produced stories, freelance pieces, blogs, contributions from community members and advertisers, videos, maps, and links to other online resources—and social networking.

“It’s more of an online community and not just a news site,” says Dearing. “We are doing something that has not been done before.”

The site will have breaking local news—but not much national or international news, since that can be found in a host of other places. Local stories will focus on the same subjects traditionally covered by the News: sports, city government, business news, and education.

Leaders of AnnArbor.com say they’ll have a big freelance budget but also a good range of staff journalists, from veterans who know Ann Arbor well to newcomers who know how to post video and produce several stories a day.

Some of that content could come from other media outlets in the region. While the News never acknowledged its competitors, Kraner and company have visited several local media companies to discuss their desire to share content and revenue. Despite its smaller staff, Kraner believes, such arrangements could give AnnArbor.com “far better local content than the Ann Arbor News.”

Despite a growing national discussion of newspapers charging for online content, AnnArbor.com’s online materials will be free, Kraner says. And whatever shows up in July will be changed and enhanced in a second phase planned for October and a third one early in 2010. The idea is to plan for growth and new features.

While the leaders of the new business look ahead, those left behind by the closing wonder what comes next – not just readers, but the soon-to-be-jobless staff. One writer compares the atmosphere in the newsroom to the TV show Survivor, with former colleagues fighting for a spot on the new venture—and most knowing they’re not going to make it.

“A group of us have started a support group, for job transitions, meeting together,” says another newsroom staffer who asked not to be named. It started in the newsroom but now is open to anyone at the News.

Others say the staff is doing the best that it can in difficult circum-stances. In the past, newspapers typically have had only a few days’ notice of closing. Often staffers are called together and told they have twenty-four hours to produce their final edition. But the News will have to go through almost four months of slow death. “Boy, it feels like a long time in this building now,” says Champion—though on a positive note, she adds, the time might be useful for employees to develop transition plans. Severance packages will be worked out in coming weeks, she says.

With one publication dying as other entities are born, the entire venture has a transitional quality. At the Concordia College forum, it wasn’t lost on some in the audience that the discussion was very short on specifics.

To succeed, the new venture will first have to define itself editorially. But it also must find new sources of revenue—a huge challenge at a time when even Google, the undisputed king of online advertising, is reporting falling sales. And it must persuade Ann Arborites to change life-long habits.

“Whether you love or hate your hometown paper, you know it,” writes former sports columnist Jim Carty in his blog, Paper Tiger No More. “In many cases, you are tied to it by ties you don’t even realize exist.”

By closing the Ann Arbor News, the Newhouse family has cut those ties to the local community. Now, its challenge will be to create new ones.