Following the money 

Three of Arkansas's wealthiest families are putting their money into newspapers where the new money is — Northwest Arkansas. 

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Anyone who is hungry for a printed version of the news in the seamless sprawl of cities along old U.S. Highway 71 in Northwest Arkansas can feast each morning upon seven newspapers.

That at least is the number of distinct flags and showy front pages that peer at you from newspaper racks from the suburbs south of Fayetteville to the Missouri border 40 miles to the north. But the appearance is deceiving. Depending upon whose hype you believe and your diligence as a consumer, the seven newspapers actually may number only four, or three, or two. The confusion is sown by a strange alliance of newspaper competitors and by zone editions of the leading paper in the region.

The spate of gaudy newspaper fronts hyping local news is a manifestation of the fierce competition for the booming northwest market among the megamillionaire owners of three newspaper chains -native families with the familiar names of Walton, Stephens and Hussman. But it also is an illusion to this extent: The competitive forces are shrinking, not expanding, and a newspaper monopoly, which is the prevalent condition in American cities, may be only a few years away. Even the dominant players are not confident that it can be avoided, although neither professes to covet such a triumph.

Walter E. Hussman Jr., publisher of the Arkansas Democrat-Gazette and a chain of south Arkansas newspapers, the newcomer to the battle, says the Northwest can provide profits, though not necessarily robust ones, to two or more newspapers unless one or another tries to take over the whole market — a natural business instinct which he nevertheless disavows. Then none will make a profit and a monopoly will become inevitable.

"Show me another 300,000 [population] market with two newspaper entities," Hussman said.

His competitors are Donrey Media Group, based at Las Vegas but controlled by the family of Jackson T. Stephens, the Little Rock investment banker, and, nominally, Community Publishers, Inc., headed by James C. Walton of Bentonville, a son of the late Sam Walton, the founder of Wal-Mart.

Stephens, who ran the biggest investment house off Wall Street, got into the newspaper business in 1993, with typical Stephens moxie, on the cusp of one of the most profitable eras for newspapers in U.S. history. It bought the chain of papers built by the late Donald W. Reynolds and originally based at Fort Smith. Two years earlier, Stephens and his late brother, Witt, had pondered buying the Arkansas Gazette in its last days but passed.

Donrey owns the Morning News of Northwest Arkansas, the dominant paper in the region, which last year began publishing zone editions in each of the four major cities in the metroplex. The names of the cities dominate the flags of each edition, and the front sections of the papers differ, giving the appearance of four distinct hometown papers: the Fayetteville Morning News, the Springdale Morning News,the Rogers Morning News and the Bentonville Morning News. Donrey recently bought three weekly newspapers on the outskirts of Fayetteville, at Farmington, Prairie Grove and Lincoln.

Community Publishers produces the Northwest Arkansas Times at Fayetteville and The Benton County Daily Record at Bentonville. It also publishes the twice-weekly Siloam Springs Herald Leader, several weeklies in Benton County, at Rogers, Bella Vista, Decatur, Pea Ridge, Gravette and Gentry and a weekly at Lincoln in Washington County. Last year it acquired the Harrison Daily Times two county seats over to the east.

But the Fayetteville and Bentonville dailies are now slimmed-down local-news sections that are wrapped around the hefty Northwest edition of the Democrat-Gazette, the result of an unusual agreement between the owners last year that is commonly referred to as "The Alliance."

The Audit Bureau of Circulations treats the two Walton papers as mere editions of the Democrat-Gazette and requires them to say so in their front-page nameplates, although the owners maintain that they continue to be separate papers with independent news and editorial policies.

The collaboration of the big state paper and Walton's community dailies last year dramatically altered the dynamics of the competition, and the status of the smaller papers at Fayetteville and Bentonville is the central point of contention in the promotional battles of the owners.

"They can protest until the cows come home that this isn't true, but the Bentonville and Fayetteville papers have ceased to exist by any meaningful standard in the newspaper industry," Sherman Frederick, the president of the Donrey Media Group, said the other day. "The big paper ate the little papers. The rest is public relations."

 The term "newspaper war," which the Arkansas Democrat employed to describe its competition with the Arkansas Gazette in the 1980s, has crept into the lexicon of the area. It occasionally has made it into the pages of the papers. So have some of the business strategies of the other war — free classified advertising, heavily discounted subscriptions, boastful promotions and talent raids — but the competition has not reached the bitter and often scurrilous level of the rivalry between the Gazette and the Democrat, when Democrat editors and columnists inveighed with almost daily regularity against the other paper and its owners, editors and reporters.

Oct. 19 will be the 10th anniversary of Hussman's famous victory in that war. Wehco Media bought the Gazette from Gannett Corp. that afternoon and the old paper ceased publication after 172 years. Wehco took over the assets of the Gazette, including its subscription lists, and hooked the Gazette's blackletter logotype onto the Arkansas Democrat's nameplate.

One other feature of that war characterizes the competition for the northwest: barrels of red ink, the metaphorical as well as the literal kind. It does not compare to the financial losses at the end in Little Rock, when the companies virtually gave away their papers and advertising space and between them hemorrhaged $40 million to $50 million a year, but the losses are conspicuous.

The Democrat-Gazette, which five years ago simply trucked an early edition of the paper up from Little Rock, built a $6.5 million printing plant on a hill overlooking U.S. Highway 71 at Lowell and moved in a press that Hussman had acquired in the Gazette purchase. The paper bulked up an editorial, business and mechanical staff that now numbers nearly 300 for a special Northwest edition that is stuffed each morning into Walton's slim Bentonville and Fayetteville papers. Some 35 employees at Walton's weeklies are all on the Democrat-Gazette payroll.

The Morning News, which started zoned editions in the four big cities last year, bought two state-of-the-art presses, which still sit on the dock at the newspaper's plant a couple of miles away awaiting the completion of an addition that has been stalled by government red tape. To compete with the Democrat-Gazette's state capital coverage, Donrey opened an eight-person bureau at Little Rock that probably costs $1 million or more a year. It is safe to say that no newspaper published in a city of 47,000 in the United States offers such comprehensive coverage of the community and state, but it is a costly proposition.

Neither company will share proprietary financial data but neither claims that it is making money in northwest Arkansas. A Donrey official says industry guesses are that the Democrat-Gazette's losses from the Northwest operation exceed $10 million a year. "Ridiculous," says Paul Smith, general manager of the Democrat-Gazette. "I can assure that we're never going to lose that kind of money up there." Hussman, in an eerie echo of statements he made during the Little Rock newspaper war, says his paper is within a year or two of turning a profit on its Northwest operations.

Both Hussman and Frederick, say they are satisfied with the financial situation at the papers and that the losses are not unexpected.

"Every competitive market gets expensive," Hussman said. "A lot of times it gets carried to an extreme."

"These kinds of engagements are expensive," Frederick said. "We have no illusions that this is going to end this week, with the next publisher's statement or after the next annual audit."

Although newspapering is not his principal interest, Bentonville is Jim Walton's hometown. But the reason that he and the Stephenses and Hussman are willing to throw so much money into a newspaper rivalry in a corner of the state is no mystery. It's where the money is.

Washington and Benton counties form the sixth-fastest-growing metropolitan area in the country, in percentage terms. Washington County's population grew 39.1 percent in the '90s, Benton County's a whopping 57.3 percent. Compare them to the state's growth of 13.7 percent. The fastest-growing metropolitan area in the country, incidentally, is Las Vegas, a market served by Donrey's flagship newspaper, the Las Vegas Review-Journal.

Three of the 10 largest cities in Arkansas — Fayetteville (2000 pop. 58,047), Springdale (46,798) and Rogers (38,829) — lie alongside each other on U.S. Highway 71 along with Bentonville (19,730), the northernmost city. The cities spill out along Highways 71 and 62 and state roads into growing towns like West Fork, Greenland, Farmington, Gentry, Elkins, Decatur, Prairie Grove, Gravette, Bella Vista and Lowell, a city of 5,100 shoehorned between Rogers and Springdale. The 2000 census gave the two counties a population of 312,000. By 2005 they will surpass Pulaski County.

Money is abundant, too. Three of the country's highest grossing companies — Wal-Mart Stores (second), Tyson Foods (257th) and J.B. Hunt Transport Services (667th) — are headquartered there. Per-capita retail sales in Washington County are far higher than the state or national averages. Kohl's, the big specialty department store chain and one of the nation's fastest-growing retailers, has built not one but two stores in the area, at Rogers and Fayetteville.

On the other hand, Pulaski County, the Democrat-Gazette's franchise, grew a measly 3.4 percent in the 1990s. Early in the decade, as Hussman was consolidating the gains from the Gazette purchase, the trend was clear. The profit future was not in Pulaski County. Although few businesses benefited more from the economic boom of the decade than newspapers, including the Democrat-Gazette, newspaper readership declined. That included the Little Rock paper. Between 1996 and 2001, according to audit reports, the Democrat-Gazette's circulation in Pulaski County, its franchise territory, fell 7,000 weekdays and 9,000 Sundays. Even at that, they are quick to point out, the newspaper had the second highest penetration of households among U.S. newspapers in metropolitan areas of more than 100,000.

At first Hussman didn't intend to get into another titanic struggle for a market. He says he merely decided that the Democrat-Gazette ought to be a true statewide paper and that it couldn't if it barely penetrated the second most heavily populated region in the state and the fastest-growing. But he admits the burgeoning profit potential in the region was alluring.

"If you take two newspapers in markets with 500,000 population, and one is stagnant and one is growing, the one with the rapidly growing population is more valuable," Hussman explained the other day. The paper in the fast-growing market would make more money because more people would be moving into the community, producing more real-estate transactions, more furniture and appliance sales and generally more economic activity — and more advertising.

The Democrat-Gazette owner describes his paper's strategy as evolving slowly. He invested $6.5 million in a printing plant at Lowell in 1996 simply to be able to put later-breaking news, especially sports, in the paper distributed in the area and to improve the distribution. It would avoid a three-to-five-hour haul over the mountains. He already had a virtually idle $10 million press he acquired in the Gazette deal.

"Then when we got there, people said we ought to be trying to capitalize on this growing market," Hussman explains. "It concerned me that this could be a slippery slope and at end of the slippery slope could be a black hole. So we took very small bites at first."

The paper first offered a once-a-week business section for Northwest Arkansas, then a television magazine, then a weekly zoned section with regional advertising, and finally, in 1998, a seven-day-a-week section for the region. Some Northwest advertising now appears in other parts of the paper.

Fayetteville is the key battleground. Hussman, Stephens and Walton spent the last half of the '90s fighting over the city's dying hometown newspaper, the Northwest Arkansas Times. Walton wound up with it but quickly struck a deal that leaves the paper's destiny in Hussman's hands.

Once the dominant paper in the area, the Times has languished the past 20 years in almost inverse proportion to the city's growth.

The family of U.S. Sen. J. William Fulbright owned the venerable paper for some 60 years. The paper had launched Fulbright's great political career in 1941 by getting him fired as president of the University of Arkansas. His mother, Roberta, had favored the progressive Carl E. Bailey over Homer M. Adkins in the 1940 governor's race. "Holy Homer," as he was derisively called, won and retaliated by sacking trustees of the University of Arkansas and replacing them with his own men. They fired Fulbright and installed a president suitable to Adkins. Fulbright defeated Adkins for the Senate three years later and the voters amended the state Constitution to prevent such political meddling in academics. With the calm support of the Times and its publisher, Fayetteville became the first city in Arkansas to desegregate its schools in 1954.

By 1995, the Times circulation had sunk to 13,000, and the owner, Thomson Newspapers, a chain based at Stamford, Ct., put it on the block. Hussman and Walton put together a joint bid of $15 million, which would have allowed the Democrat-Gazette to enhance the Times' appeal to advertisers by offering a discounted rate for putting the same ads in the Democrat-Gazette. But Thomson sold the paper that summer to a group of investors incorporated as N.A.T. LLC, mainly Stephens family members and trusts. The price was $22 million, more than 15 times the paper's earnings, an astounding sum for a struggling paper but an indication of the pre-emptive value of the market.

The sale seemed to be a patent violation of antitrust laws because the Stephens family two years earlier had acquired the Donrey Media Group, which owned the market-dominating Morning News. (Donrey also had owned the Rogers Daily News down the road before merging the papers in 1994 and dropping the parochial "Springdale" from the masthead. It became the Morning News of Northwest Arkansas.)

Stephens lawyers offered the farfetched argument that while Stephens interests owned both papers the separate corporate structures would make the papers independent competitors and that, anyway, television, radio and other media had to be counted as competitors, too.

Walton, joined by the U.S. Justice Department, sued in federal District Court and won. Judge Franklin Waters said the sale was anticompetitive because the Stephenses would control 85 percent of the market. Thomson had to take the newspaper back. Hussman had not joined the suit as a plaintiff but helped and was a pivotal witness against Stephens. He said he was contemplating moving into Northwest Arkansas with a special edition but wouldn't if the sale went through.

Hussman now "sort of" regrets his initial role: offering his Little Rock counsel, Williams and Anderson, to Walton on a Sunday afternoon to prepare an antitrust complaint for filing the next morning. He said he had told Walton that they would have to part ways if Walton sued, but Walton needed antitrust lawyers quickly and Hussman arranged it. The Stephenses resented his role.

The three owners had previous ties. Stephens, Inc., had taken Wal-Mart public. Jackson T. Stephens had helped broker Hussman's hiring of the Arkansas Gazette's legendary sports editor, Orville Henry, in 1988, a major coup in the Little Rock newspaper war. (Henry would leave the Democrat-Gazette 10 years later for Stephens' Donrey papers.)

Forced to take back the Times, Thomson soon found another buyer, the Chicago-based American Publishing Co., the principal owner of which was Hollinger International, Inc., the world's third-largest newspaper chain. The Northwest Arkansas Times soldiered on under the new owners and the editorship of Mike Masterson, a former reporter and editor for the Democrat-Gazette and other newspapers with a penchant for investigative reporting and an ardor and flair for newspaper contests. Despite the paper's slippage with readers, the paper won awards for its investigative reporting and editorial campaigns. (This year, Masterson is back at the Democrat-Gazette writing a column aimed at the Fayetteville audience.)

In May 1999, Walton's Community Publishers, which owned the Bentonville daily, three weeklies in Benton County and small newspapers in southern Missouri, acquired the Times. It offered the prospect of cost-saving cooperation for the papers, "operating synergies," in trade lexicon, and there was talk of impending collaboration with the Democrat-Gazette. The war was on in earnest.

Donrey ordered a new press for the Morning News and announced that it would expand local coverage and publish separate editions for each of the four major cities, and it beefed up its Arkansas reporting and editing staff by 40. Since the antitrust decision in the summer of 1995 and the Democrat-Gazette's quick preparations to build a printing plant at Lowell, Donrey had been furiously preparing for the competition. To counter the Democrat-Gazette's advantage of statewide and state Capitol coverage, Donrey expanded its single-person Little Rock bureau. The bureau serves other Donrey newspapers in Arkansas - the Southwest Times Record at Fort Smith and the Pine Bluff Commercial - as well as several other newspapers that Donrey calls "content partners."

In May 1996, Donrey hired Dennis Byrd, a nine-year Associated Press veteran, to run the bureau, which now has six reporters and editors, an editorial cartoonist, a daily political columnist and two part-time columnists and an outdoor writer. The Little Rock bureau, which occupies a building at Fourth and Victory streets down the hill from the Capitol, often scoops the Democrat-Gazette on state government and political news. When Chancellor Collins Kilgore handed down the landmark ruling this spring striking down Arkansas's school-finance system, the Donrey report that day was more comprehensive and analytical.

For veteran wretches of the trade and for young journalists, the competition has been a bonanza. The Democrat-Gazette dispatched much of its talent to Northwest Arkansas, and it and Donrey have raided each other's staffs. While the consolidations of the Donrey papers and the Walton's acquisitions and alliance with Hussman have canceled more than 100 newspaper jobs the past two years, the competition has bid up the miserly pay of journalists.

Donrey, which had hired away Orville Henry and Vic Harville, a Democrat-Gazette cartoonist, scored a coup late last year by persuading the prolific John Brummett, the best-read columnist in the state, to leave the Democrat-Gazette. Henry and Brummett, both nettled at changes at the Gazette under the management of Gannett, had crossed Capitol Avenue to write for the Democrat at critical stages of the Little Rock competition.

If the competition has been good for the trade, it has been better for advertisers, who often get heavily discounted or free advertising and bargain rates in any case, and even better still for newspaper readers. Subscriptions are cheap — for two bits any of the Morning News editions can be bought from the rack on any day but Sunday.

For subscribers who are obsessed with local news, which are nearly all of them in the view of the owners, it is an embarrassment of riches. Nothing but local and state news fills the front sections of theMorning News each day. Only will the occasional blockbuster national or international story make it to the front page. National and world news is relegated to the back sections.

The Northwest Arkansas Times and the Benton County Daily Record carry local news exclusively. The single section of each newspaper on weekdays runs local and occasionally state news on page one, and behind it are city and regional happenings, an editorial page, a business page, a local sports page and a page of comics and games. Readers who are curious about the world outside the Boston Mountains can pull out the hefty Northwest edition of the Democrat-Gazette tucked inside.

More than a few readers, particularly in the cosmopolitan university community, find the scarcity and demotion of U.S. and world news unsatisfying. A retired professor at the University of Arkansas said he needs the Morning News for local news but requires the Democrat-Gazette, too, because of its far more comprehensive report on the events of the world. He's troubled by the state paper's judgment, too. Almost daily he finds important stories in the Morning News' truncated world and national reports that are mystifyingly absent from the Democrat-Gazette.

The Democrat-Gazette's franchise readers in Pulaski County or those in the other 72 counties have not escaped fallout from the competition. The Northwest Arkansas edition has siphoned staff and resources from the paper's other coverage. The paper's once impressive business news at times seems to have disappeared. The Central Arkansas reporting staff has shrunk and so has its coverage, especially of state and local government news. The editions that reach the doorsteps in Central Arkansas and the rest of the state are saturated with stories that were collected for the Northwest Arkansas paper, principally from cities along U.S. Highway 71 from Van Buren to Bella Vista.

In one week in June chosen at random, 40 percent of the Arkansas stories in the Democrat-Gazette that originated outside Pulaski County were from Benton and Washington counties and Crawford County immediately to the south. The rest of the state coverage included mostly short articles on fatal accidents, jail and state prison escapes and follow-ups to the big chemical explosion at East Camden.

Democrat-Gazette readers in central Arkansas, on the other hand, were treated to 13 inches on the theft of the Springdale mayor's wallet from the floorboard of his wife's car and 28 inches on the future power-generation needs at Bentonville. A full week of business sections produced only five Arkansas stories, two of them announcements of federal defense contracts that could affect either an Arkansas military base or an Arkansas supplier.

A similar distortion of resources occurs in the Donrey chain. The Times Record at Fort Smith, the cash cow of the Arkansas operation, and the Pine Bluff Commercial run lean and anemic while the company pours resources into the fat and peppy zone editions of the Morning News.

Fort Smith is more than a bystander in the war. The Times Record building houses editors and page designers for both the Fort Smith paper, the four zone editions of the Morning News and a twice-a-week special section of the Times Record that is circulated in eastern Oklahoma. The news in Washington and Benton counties is gathered and sent electronically to Fort Smith, where some 25 paginators and editors make up the pages and transmit them back by telephone lines to the Morning News presses at Springdale.

Most of the local stories usually appear in all four city editions, but they are rearranged according to their relative value in each community. A Fayetteville Planning Commission may be on the front page of theFayetteville Morning News but on page 8 of the Bentonville Morning News.

Snafus that delayed the construction of the Morning News plant addition and erection of two new presses almost a year have restricted the zone editions. Owing to the limited press capacity, stories have to run in all editions, many pages cannot be remade and advertising options are limited. Sherman Frederick, the Donrey president, expects the new presses to be running by the end of the year.

The zone editions were supposed to overcome an advantage that the Fayetteville and Bentonville papers enjoyed with small merchants. The city papers could offer small advertisers a rate for their target market instead of having them pay for readers in the other county. The Morning News, for example, now offers a merchant at Rogers a chance to advertise only in the edition that is circulated there or in only two of the four editions, although the press capacity still limits the page remakes.

 While Hussman and Walton had been collaborating since 1995 when they tried jointly to buy the Northwest Arkansas Times and then to keep it out of Stephens' hands, the hybrid arrangement that the owners announced one Saturday in August 2000 caught everyone by surprise. They had worked out the agreement in early summer and kept it secret until the Justice Department concluded that it did not seriously impair competition in the market.

Nothing quite like it exists anywhere in the country. All the employees of the Northwest Arkansas Times and Benton County Daily Record, except the news and editorial staffs, became employees of Hussman's Wehco Media. Advertising, circulation, all the business functions of the papers and their printing were consolidated under the direction of the Democrat-Gazette. The consolidation cost about 75 jobs.

Community Publishers still owns the papers and controls the news and editorial policies.

The outlying community papers were brought into the arrangement, but all 35 employees at Siloam Springs and the weeklies, including the news and editorial staffs, became Democrat-Gazette or Wehco employees.

Jeremy Peppas, who had just become the editor at the Siloam Springs Herald Leader, learned on Saturday morning that he had become an employee of the Democrat-Gazette. "It seemed that we were thrown into the deal as lagniappe, sort of a baker's dozen," he said. He left for Donrey's universal desk at Fort Smith.

While every employee is on the Wehco payroll, Wehco is not the de facto owner, said Paul Smith, the Democrat-Gazette general manager. He compared the arrangement to leasing a building. You run the operations inside but you don't own the building.

Donrey wondered why the Justice Department Antitrust Division, which opposed the Times' sale to the Stephenses, could accept the combination of the three other papers in the market. Hussman said they told the Justice Department that the alliance would strengthen competition by creating a second strong medium. Otherwise, he said, the Morning News would have so overwhelmed the whole region with its zone editions that the other papers could compete only marginally for advertising. He thought the Justice lawyers agreed.

The Fayetteville and Bentonville dailies, which usually are eight to 12 pages, wrap around the Democrat-Gazette and concern themselves entirely with local news and an editorial page. The editors of the three papers — Susan Scantlin is the editor of the Democrat-Gazette's Northwest edition — collaborate every day on covering the region so that they do not send duplicate reporters to the same event, but otherwise the local papers go their own way.

Like the Morning News, the local papers are vastly overstaffed with reporters, photographers and editors by any small-town standard: about 25 at the Times and 23 at the Daily Record. They mark the sparrow's fall in Fayetteville, Bentonville and the outlying towns.

Hussman and Steve Trolinger, the president of Community Publishers, insist that their editorial independence is not a fig leaf to hide the fact that Little Rock controls the papers. Frederick, the Donrey spokesman, claims to be saddened by the inglorious end of the once great Northwest Arkansas Times. "It's not a real newspaper anymore," he says.

"Ask Jim Walton and Steve Trolinger if they can hire and fire their own editors and if they dictate what's going to be in those papers every day," Hussman said. "If they say 'yes' then they're independent papers."

Greg Harton, a Democrat-Gazette editor, moved over to become executive editor of the Northwest Arkansas Times after the alliance, but Hussman said he had nothing to do with the move.

"They lost their editor and they interviewed people. Greg applied for the job. We thought we'd like to keep him, but if he'd like to be the editor up there and he does good job, it helps us economically. If they put out a first-class product obviously it helps us."

One way that it helped was to give the Democrat-Gazette a big leg up on circulation, especially on Sunday. After the paper shook out about 8,000 duplicate subscriptions with either the Times or Daily Record, it could claim a lead over the Morning News in Sunday readership in Washington and Benton counties for the six months ending March 31. The Democrat-Gazette claimed 42,313 subscribers on Sunday for its combined editions to the Morning News' 36,354. Some 4,000 papers thrown to Siloam Springs Herald Leader subscribers are counted in the total. The Morning News still held the lead weekdays, 36,272 to 30,844.

Winter had been disastrous for the Morning News, which lost subscribers to the ice. Fayetteville readers particularly have complained about delivery problems, and at the peak of the ice storm, Dec. 27, the Fort Smith and Springdale papers made a decision not to publish that night. There was no delivery the next day, a no-no in the newspaper business that attracted national attention in trade publications

The altered format of the Northwest Arkansas Times was greeted with considerable dismay in Fayetteville, where longtime subscribers thought they had lost their hometown paper.

"At the beginning there was much concern about what was happening," said Hoyt Purvis, a professor of journalism at the University of Arkansas and a weekly columnist in the Times. "People surmised that the Times was about to disappear altogether. They resented the change in their hometown paper, which they thought was left a shell of itself. People would stop me and say, 'why do I have to take the Democrat-Gazette?'" Some of them, he acknowledged, just didn't like the Democrat-Gazette's right-wing editorial page.

"But people adjust to change," he said. "I don't hear much of the grumbling anymore." And subscriptions have remained steady this year.

Says Community Publishers' Steve Trolinger: " People are finally becoming accustomed to wrapping one daily inside the other. Our competition put out the word that they would do away with the Times and the Daily Record, that it was going to be a shell game. That was false. If you measure the columns of local news we put out today with what we put out before August 18, 2000, there's no comparison. We're giving readers far more columns of local news now. On an average day we're putting out 10 to 14 pages of news with a very low advertising-to-news ratio, roughly 60 to 65 percent news. We no longer have to take staff resources to edit wire stuff and to lay out wire pages so we can concentrate on doing what we do best. We're drilling down into the community, the churches, the Little Leagues."

Blue collar v. white collar

While the huge influx of people into the two counties has blurred old community identities and allegiances, the market is still segmented. The Morning News is still considered the Springdale paper to many, and old-timers in Fayetteville have looked down on the raw-boned blue-collar suburb. The News dropped "Springdale" from its name but it still competes with the image.

The Democrat-Gazette and its surrogate local dailies now dominate Fayetteville and Bentonville, the two upper-scale markets, and the Morning News has the hugely dominant penetration in Springdale and Rogers.

Hussman claims that he's content with splitting the market that way. He has the up-scale communities and Donrey the blue-collar communities. Big advertisers like Kohl's and Dillard's, forced to choose, would want to reach the upscale readers. Frederick said the Morning News was happy to cater to average people.

It is the opposite of Little Rock, Hussman observed. The old Democrat circulated mainly in blue-collar neighborhoods and the Gazette had the better educated, more affluent readers. It was hard to enlist advertising in the Democrat until the demographics changed toward the end, he said.

If a single strategy changed courses at Little Rock, it was Hussman's decision, after consulting with Donrey and others, to offer classified advertising free to individuals for unlimited periods. Classifieds constituted a huge part of the Gazette's income and it had nearly all of them. As the Democrat expanded its circulation, partly through giveaways, the Gazette's classified section shrank and so did its revenues and, eventually, so did the paper itself. Although the Democrat offered retail display ads for about an eighth of the Gazette's rate, the Gazette lead there continued, but the classifieds eventually drained the paper of revenues. After Gannett took over, it slashed prices and offered free ads, too, and both papers ran up mammoth losses until Gannett concluded it couldn't justify it to its stockholders any longer.

The combined classified sections of the Democrat-Gazette and the Fayetteville and Bentonville papers offer the same deal: Individuals can run four lines of noncommercial ads for seven days free in the Northwest edition that covers 12 counties in the region. The classified section is fatter than the Morning News'.

That's misleading, Frederick said. The Democrat-Gazette section is laced heavily with ads carried over from the central Arkansas edition to make the section look bigger, he said. The Morning News, which marries its classifieds with Fort Smith's, has not joined the giveaway, yet.

"We keep a very close eye on our classifieds, as we do on all parts of our business," Frederick said. "It's very important to us. We monitor our competitors, too. We get paid for our classifieds, and we dominate Northwest Arkansas with them, and we think we'll continue to do so. I think their ads irritate people. If they're trying to buy a car, they have to look through all the ads from Chenal."

Neither owner owns up to wanting to be the only daily newspaper in town but each acknowledges it could happen if the predatory practices of the other prevail.

"As long as we stay number one in the market we consider that the proper order of the universe," Frederick said. ."We don't underestimate him [Hussman] at all. He's smart and he's well-financed. But we have one thing that he doesn't have. And that is that we live there." Frederick lives in Las Vegas but he referred to the hometown base of the Morning News, while the Democrat-Gazette is a Little Rock paper.

Hussman said he and Walton would have been content to divide the market, each dominating in its own sphere, but that Donrey moved to squeeze the others out by moving to the zone editions. Although theDemocrat-Gazette is offering heavily discounted subscriptions, Hussman says he's not pushing circulation aggressively in Springdale and Rogers, the Morning News' franchise market, at least for Sundays. Neither has the discounting reached the levels it did in Little Rock, where people could have the Sunday Democrat delivered to their home for 19 cents and the daily paper often could be had free when theDemocrat strove for total market coverage.

Hussman said he respected the Donrey organization and admired the Morning News, which he said was easily the best newspaper in a community of that size that he had ever seen.

Differences in ownership

The difference in the ownership of the papers is not geographical but motive, he suggested. He observed that the Stephenses had always been involved in politics and invest heavily in politicians. (The Stephens investments are mainly in conservative Republicans, the kind that Hussman's paper supports editorially.)

"The Stephens people think of themselves as businessmen first and then journalists," Hussman said. "I think of myself as a journalist first and businessman second. I went to journalism school. I got a journalism degree. I tried to live my life under journalistic ethics. I never make political contributions. It can jeopardize a newspaper's credibility. It's a different approach to the business, but I think it's important. The Stephenses have a lot of investments in Arkansas and they feel like they need to be involved politically. I try not to be close to any politician because it can compromise our journalistic integrity. Some in journalism get close to politicians. I feel like it's better not to get close to politicians."

None of the owners claims to want to be the dominant newspaper voice in the state, although the Democrat-Gazette would come close if it became the only paper in Northwest Arkansas.

Donrey and Hussman both bid last year on the 27,500-circulation Jonesboro Sun, which was sold the Paxton Media Group for a rumored $53 million. Donrey could have had it by upping its bid by $8 million, reportedly, but the Stephenses pondered it and waived. The rumor dismayed some in the Donrey papers because if the Stephens was unwilling to fork over a measly $8 million to get the dominant paper in eastern Arkansas it was a sign that the Stephenses would blink . Hussman, after all, is believed to have spent far more than the $100 million Gannett is believed to have lost in the Little Rock newspaper war.

But Hussman bid even less for the Jonesboro paper and says he doesn't regret it. The sum was a good business decision only for Paxton, who could take advantage of the synergies with its nearby papers.


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