AS OAKLAND COUNTY EXPLODES, DETROIT PAPERS SQUEEZED: SUBURB PAPERS SHOW GROWTH IN WAKE OF BRUTAL METRO STRIKE

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Detroit. that's the city where the two major daily newspapers have lost nearly one-third of their readership -- but just raised advertising rates anyway.

The reason for the circulation drop: A lengthy, bitter labor dispute with unions at The Detroit News and Free Press, which publish under a joint operating agreement between respective owners Gannett Co. and Knight-Ridder.

The reason for the rate increase: Detroit Newspaper Agency, which is responsible for all business operations at the two papers, believes circulation is on the way back up for the first time since '95.

AD REVENUE UP

Gannett closed the 1998 books on Detroit by reporting a "favorable year to year [profit] comparison." Knight-Ridder reports ad revenues at the Free Press are up 9% in 1999 through February, as compared with the same period a year ago.

"That's slightly better than our internal forecast," says Tony Ridder, CEO of Knight-Ridder.

The biggest story in the Detroit market is in the suburbs.

The privately owned newspaper groups operating there don't disclose their ad revenues, but "We're seeing growth in revenue. Our margins are holding very well," says Bill Douglass, VP at Heritage Newspapers, a member of Detroit Suburban Press Ring Newspaper Network.

Across town at The Macomb Daily in Mount Clemens, Advertising Director Elaine Meyers claims her newspaper is healthy.

POPULATION SHIFTS

Population trends are important in that growth, but the strike is the overwhelming factor in the marketplace.

In March 1995, the combined masthead Sunday edition of the News and Free Press (weekday papers are published under separate mastheads) had a circulation of more than 1.1 million (1,113,773). But on July 13, members of six major unions including reporters, press operators and delivery drivers, went on strike.

The papers brought in replacement workers and continued publishing. The powerful United Autoworkers and other unions joined in urging both readers and advertisers to boycott the papers.

Circulation and advertising plummeted and some major advertisers who did not pull out found themselves the target of picketing. SPRING, which at that time represented as many as 65 different mastheads across the Detroit suburbs, saw combined Sunday circulation climb to 730,000.

A strong regional economy has also been a big boost. DaimlerChrysler moved its headquarters to Auburn Hills in northern Oakland County and many people and other businesses have rushed north as well.

That's the market for Oakland Press, where Director of Advertising Gail Wysocki notes: "Business is booming. The face of our market has changed and grown."

Sunday circulation at the Pontiac-based newspaper has jumped 21% since '95. Advertising revenues have shown a double-digit increase in the past year alone, she says.

Detroit Newspaper Agency has never released circulation figures for the 19-month period the strike officially lasted.

"[SPRING] felt we had them beat on Sunday and the advertisers certainly responded," says Mr. Douglass.

Last September, more than a year and a half after workers agreed to return to their jobs, Sunday circulation was 805,326, according to DNA and combined daily circulation of the News and Free Press was 623,608. That's 30% below the pre-strike numbers.

"Detroit is an extremely union-loyal community and our circulation numbers show that," says Susie Ellwood, VP-market development for DNA. "It's not anything we did not expect and we are starting to see some strength in the numbers."

Many advertisers, especially in the automotive categories that are among the biggest ROP spenders in all of the Detroit-area newspapers, pulled out of the DNA publications during the strike.

According to Ms. Ellwood, every advertiser who left as a result of the the labor dispute has returned.

"That tells us that our advertisers are getting results in spite of the fact that the circulation numbers have declined," Ms. Ellwood says.

This year, the DNA increased advertising rates for the first time since before the strike.

"We still distribute through the News and Free Press, [but] use other papers as well," says a Kmart Corp. spokesperson. "We primarily do preprinted weekly circulars. Typically, our main advertising vehicle is our weekly circular."

"Advertisers that had not tried the Macomb Daily or the Oakland Press, The Daily Tribune or [the] Observer-Eccentric [papers] were given a chance to see the results from those papers," says Ms. Meyers on behalf of the Greater Detroit Newspaper Network, of which her newspaper is a member. "Both the Oakland Press and the Macomb Daily have practically all of the major advertisers' inserts now. They've obviously experienced results from our circulation and continued to stay with us."

RETAIL COMPETITION A BOON

"The national circulars have become very important to us," says Mr. Douglass. "There's a lot of competition with Home Quarters and Builders Square; Best Buy, Circuit City. These guys are fighting it out for market share and that leads to more advertising for us."

The Macomb Daily carried mostly local advertising before the strike, and now nearly 60% of the revenue is major and national advertisers, says Ms. Meyers.

From Mount Clemens to Ann Arbor, from Pontiac to Dearborn, suburban Detroit newspapers continue to enjoy circulation, advertising and revenue increases.

"We have retained the lion's share of the business which we got as a result of the DNA strike," says Mr. Douglass. "We were concerned we would see a drop off and that hasn't happened."

Detroit's newspaper labor troubles are not yet at an end. Four of the six unions still have not negotiated contracts. Replacement workers have kept their jobs, meaning many of the former strikers have not been recalled. They now term it a lock out. Organized labor continues its official boycott. Advertisers continue

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