Advertising Age spoke with founder Al Neuharth -- the 83-year-old former chairman-CEO of Gannett Co. -- about how newspapers now need to appeal to web surfers, whether Mr. Murdoch will win, pressure from Wall Street and what USA Today has wrought.
MediaWorks: You are widely credited for prodding newspapers to become more reader-friendly with all of USA Today's once-shocking graphics, color, charticles and lack of jumps. What's the next step?
Al Neuharth: I'm not sure of that. Twenty-five years ago, the objective was to make newspaper readers out of the TV generation. Back then, newspaper circulation around the country was as flat as the top of the table I'm looking at right now and in some cases going down. We did extensive research, including work with Lou Harris, the pollster. He sat in front of our board of directors to report the results. He said, 'Ladies and gentlemen, the TV generation is not going to fight its way through dull, grey newspapers, however good they are.' That's the question now faced by newspapers: Can we capture the internet generation and how do we do it?
MediaWorks: Today's new media has helped transform journalism, even at newspapers, into more of a conversation than a straight telling of events. Is that good?
Mr. Neuharth: At USA Today, we wanted to talk with readers rather than to them. That's what you just defined. That's very good for journalism because it makes the reader a participant in these conversations rather than just a consumer of news presented in the old-fashioned way. The interest in news, information, advertising, entertainment is greater than ever around the world. Getting the reader to be part of it is essential to that. It goes to the news pages, to the editorial pages. The efforts to dictate, endorsements and so forth, aren't working anymore.
MediaWorks: You and I were each paperboys once, if about five decades apart. Will there be paper carriers five decades from now?
Mr. Neuharth: There will still be newspaper printed on newsprint with ink, hopefully more color, and they'll be distributed in various ways. We'll still have home delivery.
MediaWorks: Can the print edition remain the core of newspapers' business?
Mr. Neuharth: The only thing we can assume is that consumers of news and information will continue to want more as the world continues to become one global village. The question is how much will be distributed in print, online and on the air. I don't know how much will be delivered on newsprint. Some will be delivered by means we can't even think of yet.
MediaWorks: Travelers find free copies of USA Today at many hotels, free commuter papers are spreading and free online news keeps proliferating. Are print papers headed toward a free-circulation model?
Mr. Neuharth: My hunch is that just the opposite will happen. Instead of free newspapers, newspapers will begin to charge what they're worth. Walter Hussman owns and runs the Gazette in Little Rock and two or three others in Arkansas. The reason I know him so well and admire him so well is that he put news in the paper and charged for it. He put more and more news in the paper that his audience was interested in -- little stuff, chicken-dinner stuff -- and charged for it.
MediaWorks: Now that everyone from Craigslist to those commuter papers is sapping big papers' classified revenue -- and previous pillars of display advertising, such as Macy's, are shifting dollars to other media -- where will the money to fund journalism come from?
Mr. Neuharth: It will come from both readers and advertisers. But a larger percentage of it will come from readers than in the past. How and when will that happen? The gatherers and distributors of news have got to make that news that they're distributing available in a way that people want and are willing pay for. I think that will happen. The free commuter papers are probably with us to stay; for a certain type of advertiser, that delivers customers. The online distribution of news for free is going to be something of the past in 10 or 20 or 25 years because that is the direction now. There are some pretty good websites that are not necessarily making money but are charging for access.
Traditionally as you know newspapers have had the bulk of their bills paid for by advertisers. Circulation people have been reluctant to increase the price of their paper. But that's less true out in the boonies than it once was. The dollar price is sort of a psychological barrier, but there are a good number of newspapers already there across the country, and once they break that, everyone will start to move up.
MediaWorks: Will Rupert Murdoch succeed in buying Dow Jones?
Mr. Neuharth: I wrote a column when his offer was first announced in which I predicted that Murdoch will wind up owning Dow Jones, and that's more and more clear as time goes by. What happens in these situations is that traditionally blood runs thicker than money. But the newspaper families -- except for the Sulzbergers and the Grahams, which have kept smart, dedicated journalists from inside the family in charge -- by the time they get to the third or fourth generation, they are not interested in newspapers as much as dividends.
MediaWorks: One fear about a Murdoch takeover of Dow Jones is that, among other things, he will push for shorter stories in the Journal, à la USA Today. But what happens to long-form, in-depth journalism if this keeps spreading?
Mr. Neuharth: The Journal could benefit a great deal from a new perspective from a professional outsider who becomes part of the process. I was a reporter for quite a while, but when I looked back on it once I became an executive, I realized how much of my time and energy I wasted on long-winded stories and how most of the readers skipped a lot of that long wind. It's very important to differentiate between in-depth and long-winded.
MediaWorks: The Dow Jones bid, the Tribune Co. sale, the Knight Ridder breakup and other events have involved just about every aspect and form of newspaper ownership possible, including transnational, multimedia moguls; families; shareholders; employees; local owners; and private equity. What's going to be the next dominant ownership form?
Mr. Neuharth: As public companies, they have far more vast resources to invest in the product or in other related things. There is no question that few private companies would be able to do the kind of expansion and development of businesses that Gannett did as a public company first, as New York Times Co. has done, as Washington Post Co. has done. But it depends on Wall Street reaction over the next five, 10, 15 years, whether they're willing to support and recommend newspaper companies with a 12%, 15% or 18% return -- because what they have gotten spoiled by is returns in the 20s. Whether only private investors will recognize those returns or whether Wall Street will recognize it is the big question.
MediaWorks: With newspapers in such transition and under such pressure, how can they balance their role as the Fourth Estate with the need to maintain a viable business?
Mr. Neuharth: It is essential that the newspaper industry recognize that it is a public trust. The First Amendment made the newspaper and the media business a public trust. That doesn't mean that you can't be profitable operating a public trust. It does mean that you have to be willing to accept somewhat more modest earnings or income in order to do the job expected of a public trust. That is difficult if you are public company and you listen to Wall Street.
When Gannett announced we were going to start USA Today, our stock price took a dive, and Wall Street thought we were nuts. We had 86 quarters of consecutive earnings growth, so we were on automatic. You have to be willing to look Wall Street in the eye and say, 'Maybe for a quarter or two, or year or two, you're not going to love us as much, but our decisions are based on the long term.' Your decisions cannot be based on quarter-to-quarter report cards to Wall Street. If they are, you won't do anything that has long-term possibilities.
MediaWorks: Do newspaper companies stand up to Wall Street well?
Mr. Neuharth: Some do it reasonably well. One that didn't was Knight Ridder because Tony was afraid of Wall Street. Even the companies that have done somewhat better on Wall Street are relatively sensitive to Wall Street's reaction. Arthur Sulzberger and Don Graham have done a pretty good job of saying, 'This is what we think we need to do for the future of our company, and you may not like it for a while.' But the pressure is great.