Tribune Co.'s Smith: Welcome to the jungle

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Scott C. Smith, promoted earlier this year to president of Tribune Publishing, oversees major metro newspapers from coast to coast, and he's beset by challenges across the land. Long Island's Newsday has degenerated from a tent-pole paper into a drag on earnings thanks to circulation scandals there, as well as at Spanish-language Hoy. On the opposite coast, the Los Angeles Times' circulation is sliding, and a Pulitzer Prize windfall was followed by deep staff cuts. Then came the announcement this month by General Motors Corp. that it would pull its ads from the Times. The Times is counterpunching with a $10 million marketing effort to attract readers. Correspondent Greg Lindsay reveals, in this edited transcript, that Mr. Smith is also betting that initiatives at the Chicago Tribune, like the Subscriber Advantage retention program, can help stem the circulation woes at Tribune Co.'s ink-on-paper properties.

Advertising Age: The last batch of circulation data set off alarm bells across the industry. At the Los Angeles Times, daily circulation was down 5.6%, and at the Chicago Tribune, down 2.3%. Do you believe the industry should be in crisis mode?

Scott Smith: Big picture-we're seeing a continuation of audience fragmentation across all media that you've seen for decades. In that context, newspaper circulation has been remarkably resilient. If you look at circulation and readership today vs. a decade ago, yes, it's been declining gradually. But it's held up much better than the TV networks.

AA: But is the slide reversible? Is Subscriber Advantage meant to attract new readers or simply hold onto the ones you have?

Mr. Smith: Subscriber Advantage is focusing on our most valuable customers, improving our relationship with them by offering more-special offers from advertisers, advertiser events and more online. We've segmented ChicagoTribune.com, so while much of what we offer is available to everyone, subscribers now have access to information organized like the newspaper is. We think this will help with retention of existing print subscribers, and also allow us to offer online-only subscriptions to people who prefer an online-only experience.

We keep our overall Internet reach very broad. It's encouraging that in the first month, we had a record 53.5 million page views. We're letting them interact with the Tribune when, where and how they want it. We're enhancing what it means to be a subscriber.

AA: Do you have any evidence yet that young-skewing tabloids like Red Eye can attract, retain and pass along younger readers to the parent paper? It's already been several years, and I know Red Eye is still largely given away.

Mr. Smith: We're distributing about 80,000 copies per day, and more than three-quarters are essentially complimentary. But over the course of a week, 500,000-600,000 people read Red Eye, and half of those are young adults. We've created a vibrant connection with readers and are translating that into reach for advertisers. Is it a gateway to reading the broadsheet Tribune? Yes.

And so our overall strategy here is we want the flagship, broadsheet Chicago Tribune to be important in the lives of readers who want the paper in that size, and then we supplement that with more targeted initiatives like Red Eye, where we extend our reach further and reinforce the core brand.

Like I said earlier, audiences are fragmenting. If the big electronic media companies think the right answer is to not only own leading broadcast networks but cable channels, too-and in effect, reaggregate audience-then that's our strategy in our local markets. It applies across the core newspapers, targeted publications and the Internet.

AA: Do you see The New York Times and The Wall Street Journal-which are both bidding to be national, upscale, more lifestyle-focused papers-as a direct threat to the Sunday editions of the Chicago Tribune or Los Angeles Times? Especially when the Journal is preparing a weekend edition?

Mr. Smith: If you look at the Journal or the Times, you'll find they reach a couple percent of the adults in [the Chicago] market. Yes, that skews heavily higher-income/higher-education. But it's no substitute-in Chicago or Los Angeles or Florida or our Northeast markets-for the reach we offer. And people who would tend to read The New York Times read their local paper as well. So you're not getting much additional reach through them, if you're an advertiser, than you do through us.

AA: Tribune Co.'s rivals are betting big on the boom in online ads, such as with The New York Times Co. acquiring About.com for $410 million. Are you exploring outright buying proven online brands rather than building them?

Mr. Smith: Our primary thrust has been through our joint ventures with Gannett and Knight Ridder, where we focus on categories with clear business models that engage consumers and generate a lot of revenue. Through CareerBuilder.com, we're now the clear leader in audience in the job-seeking category, as well as job listings, across the nation. We've been very aggressive and are enjoying good success-and the same would hold true for our Classified Ventures and Cars.com.

Our most recent investment was a company we acquired together called CrossMedia Services that has launched a Web site that's across our markets called shopLocal.com [see story on next page]. We see opportunities to do more categories of information, potentially through joint ventures and network affiliate models where we see lots of value creation. We think there is more synergy in the strategy that we're pursuing.

AA: Speaking of synergy, what new programs, publications and initiatives do advertisers have to look forward to in the rest of this year and beyond? Will Subscriber Advantage be expanded?

Mr. Smith: We're thinking about lots of things, but beyond what we've already launched, it's too premature to give specifics on what might be next. We're focused on growing what we've already created. Hoy, our Spanish-language newspaper, is not just in the New York market but Chicago and L.A. now. We've revamped that strategy and are very focused on growing our reach with readers and advertisers who want to reach that market. We're also very focused on growing Red Eye and amNewYork [a Tribune Co.-backed tabloid]. Together, those reach more than 1.2 million readers a week, and last year generated $15 million in revenue, and that's growing at a healthy rate.

AA: What's your ad forecast for 2005? Are there particular pockets of strength?

Mr. Smith: What we're seeing is a somewhat choppy environment-choppy by both advertising category and by local markets. On balance, we're seeing very good growth in a couple of categories. One is strong continued growth in preprint advertising. That's a function of market demand and the capabilities we've created through our preprint strategy across our markets; we're not just growing with the market but also growing market share. A couple of the classified categories have continued to be strong: help wanted and real estate, somewhat spotty by market, but generally, trends are good there.

AA: About GM's decision to pull its advertising from the L.A. Times ...

Mr. Smith: Our overall advertising relationship with General Motors has been good. We're disappointed in their decision, but we respect their decision. The L.A. Times said they will review the factual accuracy of their coverage of GM and correct any inaccuracies.

Separately, our advertising people are working to earn back GM's business, and appropriately view the advertising business as independent of editorial coverage.

AA: And the Newsday circulation scandal?

Mr. Smith: The Newsday situation was clearly a very difficult one for us, but it was unique. It essentially involved fraud on the part of a handful of people who worked for us at Newsday and Hoy. And we have dealt with that situation as directly and as aggressively as we believe we possibly could. We disclosed the real results. We've made substantial progress working through the settlement process with advertisers both large and small. We're also encouraged by the commitment most advertisers are making going forward.

AA: But the Newsday situation also set the stage for the current climate of circulation fear and loathing. What lingering effects will Newsday, as well as similar problems at other papers, have on the industry?

Mr. Smith: Increased scrutiny and understanding are positive. We have created new policies and procedures, with supporting controls, so it's absolutely clear what our circulation levels are, and, as reported, they are verified and accurate.

We think this needs to settle down. What are the real reported levels by category-it's not just one number that matters, it's how many home deliveries do you have and how many single readers. And then there's this other category, with third-party sales and things of that nature that have value but are generally less valued by advertisers. We're very focused on the former and improving those trends over time. The results we'll report in the March [Audit Bureau of Circulations] figures will be down from a year ago; we view them as disappointing but very accurate.

Snapshot: Scott Smith and Tribune Publishing

Scott C. Smith was named president of Tribune Publishing last January, rising from chief operating officer, a title he'd held since November 2004. A 25-year veteran of the executive ranks at Tribune Co., Mr. Smith has held top spots at the Chicago Tribune and South Florida Sun-Sentinel. Tribune Co. says it's the U.S.' No. 2 newspaper publisher in revenue and No. 3 in total circulation; the publishing unit generated $4.1 billion in operating revenue last year, up 2.3% from 2003; operating profit fell 18% to $726.2 million. Mr. Smith's purview includes these dailies:

Newspaper Estimated circulation

Los Angeles Times 902,200

Chicago Tribune 601,000

The Baltimore Sun 270,100

Orlando Sentinel 248,500

South Florida Sun-Sentinel, Fort Lauderdale 218,800

The Hartford (Conn.) Courant 193,600

The Morning Call, Allentown, Pa. 112,000

Daily Press, Newport News, Va. 91,300

The Advocate, Stamford, Conn. 25,900

Greenwich (Conn.) Time 11,700

Notes: The circulation numbers are estimates based on weekday total paid circulation for the six months ended Sept. 30, 2004, reported by the Audit Bureau of Circulations. Following their much-reported circulation scandals, Tribune Co.'s Newsday and Hoy have been excluded from the Audit Bureau's semiannual preliminary circulation numbers.

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