Pulitzer/Lee to stake out nat'l ads

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Don't underestimate the reach of Michael Reed and his 86 daily papers sprinkled across small towns from New York to Texas. The papers' Web sites can expand their appeal far beyond their hometowns.

A similar situation is likely to play out with Lee Enterprises and Pulitzer Inc., two experts in small-town newspapering that plan to join forces in a $1.5 billion merger. While they own not a single TV station between them, their online capabilities could attract national advertisers.

Mr. Reed's company, Community Newspaper Holdings of Birmingham, Ala., gathers about 10% of its income from free standing inserts, a popular weekend tactic widely used by national advertisers. "What's going to be a little different about Internet revenue is that we are going to see national buys on the Internet site," the chain's president-CEO predicts. "That will propel us to have higher growth rates online."

The same game plan is almost certainly in store for Lee when it completes its acquisition of Pulitzer. The merger, which still must be approved by Pulitzer shareholders before its expected closing on May 31, will give Lee the nation's fourth-largest collection of daily newspapers, 58, with combined circulation of 1.7 million, ranking seventh in the nation.

STEWARD OF A LEGACY

Lee declined comment on the merger, citing the pending vote by shareholders of St. Louis-based Pulitzer, which referred inquiries back to Lee. In announcing the sale, company Chairman Michael E. Pulitzer, grandson of the founder, called Lee the best "steward" to carry on Pulitzer's 125-year publishing legacy.

Lee, based in Davenport, Iowa, and Pulitzer are known as "pure-play" newspaper companies because they don't own radio, cable or broadcast TV outlets (Pulitzer sold its TV stations in 1998, Lee in 2000 and 2001). In addition to their daily papers, each owns weekly newspapers, non-daily niche publications, shoppers and targeted advertising vehicles.

Pulitzer brings to Lee the St. Louis market, where the St. Louis Post-Dispatch and Pulitzer's Suburban Journals of Greater St. Louis group are, like Mr. Reed's papers, virtually the only game in town for print advertisers. Pulitzer also has the Arizona Daily Star, the morning-and dominant-paper in Tucson; it's published under a joint operating agreement with Gannett Co. Pulitzer has 12 dailies in smaller communities that, like most of Lee's existing stable of 44 dailies, are in markets where there's no competing daily paper. Pulitzer has a Web site with every daily.

Painting the companies as print-only is misleading, given the active online presence of their newspapers, both large and small.

"I hesitate to say `newspaper-only' because that connotes a print-only mentality," says John Kimball, senior VP-chief marketing officer, Newspaper Association of America. "We can't overstate the impact of the newspaper's Web site."

For years, Lee has been courting advertisers to buy online with its Special Web Advertising Team, which is deployed by subsidiary TownNews.com into a newspaper market in a blitz-style bid to boost sales. In three years, SWAT has brought in $15 million in new revenue to Lee, says TownNews.com CEO-General Manager Marc Wilson.

On the print side, Lee and Pulitzer will continue to face the usual problems-national advertisers preferring big newspapers and national marketers hurting local advertisers.

Pulitzer's strength in national advertising is attributable in large part to the Post-Dispatch and Daily Star, says Michael Kupinski, VP-media and entertainment analysis at A.G. Edwards & Sons. The St. Louis properties generate 2.5 times as much total ad revenue as all the papers in the rest of Pulitzer except Tucson, which as a JOA is broken out separately.

Long an observer of Pulitzer, Mr. Kupinski says its community papers "have a very strong presence in their local markets" for Lee to build on. But, he cautions, "having a broader reach doesn't necessarily mean you can expand your national category."

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