THE PERIL FOR NEWSPAPERS

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The newspaper business appears to be suffering a crisis of conscience these days. At the recent Newspaper Association of America conference, two major industry figures urged the industry to save itself by rethinking the way its newsrooms deal with advertisers and ad sales.

However, the two speakers -- Mark Willes, publisher of the Los Angeles Times, and David Cox, outgoing NAA chairman and retiring president-CEO of Cowles Media Co. -- differed crucially in what they advocated. It's a distinction worth closer examination here. If newspapers are going to adapt to the modern business world, then it's important for both readers and advertisers it be done the right way.

Mr. Willes is taking the proper approach. Though he's been hit with considerable criticism for his decision to put general business managers in charge of each newspaper section, his purpose is developing new businesses and setting measurable benchmarks for old ones. It is strategic-level change and, at this point at least, it's not aimed at the sacrosanct day-to-day news process at all.

Mr. Cox, on the other hand, while agreeing the fundamental independence of the newsroom is of bedrock importance, puts more emphasis on tactics than strategy. He urges newsrooms to be more open to covering advertisers when they do something deemed newsworthy. Tellingly, in his speech he notes that it takes almost as much courage to cover advertisers -- in the face of charges of pandering -- as it does to cover politicians or wrong-doers in the face of threats.

This is flat wrong. The appearance of pandering is at a completely different level than other threats: It risks not simply lawsuits or letters, but the entire credibility of the business.

History is clear on this: There's no way to avoid the perception that there's a quid pro quo at work if you write favorably and often about the local department stores and local car dealerships and local restaurants. Readers notice this, and so do other advertisers.

The principle at issue is well-known to students of public ethics: Newspapers, like public officials, must strive to avoid even the appearance of conflict.

Moreover, lest anyone be confused, there is currently no shortage of print outlets that give favorable coverage to local advertisers. No one remembers them because nobody takes them seriously. Real newspapers follow that model at their considerable peril.

A vintage year

If size does matter, as the teaser ads for feature film "Godzilla" proclaim, Omnicom Group passing WPP Group in our latest Agency Report rankings to become the new world's largest ad organization is an attention-grabber. As is the photo-finish among J. Walter Thompson Co., Grey Advertising and Leo Burnett Co. to be the top U.S. agency brand.

But this misses the bigger story: how marketers invested unprecedented sums last year in the services offered by the top 500 U.S. agencies. As a group, the top 500 saw gross income jump 13.3% in 1997 on billings of $103.75 billion. Agencies offering specialized direct response and sales promotion services enjoyed even faster growth than their ad agency counterparts: up 19.5% for direct response and 14.7% for sales promotion, compared to 11.9% growth for conventional ad agencies.

There are other stories in the reams of Agency Report data we published last week, of course. But the advertising and marketing services industry has earned at least a brief respite from today's worries about future growth, ad industry consolidation and what clients may demand tomorrow.

Savor the vintage year 1997 was -- when marketers eager to tap into the prosperous U.S. economy expressed through their spending a vote of confidence in what the agency world offers.

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