"Joint Plan Saved Two Editorial Voices Locally..."
A-8 Friday, July 23, 1967 HONOLULU ADVERTISER Joint Plan Saved Two Editorial Voices Locally The Honolulu Advertiser has moved in five years from a dying newspaper toward a healthy one, offering improved service to both readers and advertisers. This has been made possible by a mutual publishing plan entered into June 1, 1962 with the Star-Bulletin, which remains separately owned. The result has been to save two independent, competitive, editorial voices for the community. The story of The Advertiser, past and present, will be presented in Washington today to a U.S. Senate subcommittee on anti-trust and monopoly by Thurston Twigg-Smith, president and publisher of the newspaper. He is "convinced (that) a joint operating arrangement is the only way in which we can have two daily newspapers in Honolulu." The subcommittee is holding hearings on a bill which would provide anti-trust exemption to mutual operating agreements when one of the newspapers was previously failing. Twenty-two U.S. cities have such plans, which it is contended have saved them from single ownership of their newspapers. Fourteen Senators co-authored the bill, including Senators Daniel K. Inouye and Hiram Fong. Here is the text of the Twigg-Smith statement: Certain lines were omitted from our advertisement in Thursday's Advertiser due to typographical errors: The corrected items are: Holium Fluffy WHITE BREAD 3.b.. 69c Regular or Lo-Cal Shoita Assorted SGDA 10i2os...B,89c Hawaiian Maid Fresh Grade A Island EGGS Medium Dexen " FOODLAftD and FOOD CITY Mr. Chairman, and members of the subcommittee, my name is Thurston Twigg-Smith and I am the publisher of The Honolulu Advertiser. It is a privilege and a pleasure to appear before you and present my views on S. 1312. As my statement will show, I think this proposed legislation is the long-sought solution to the difficult problem of preserving independent, competitive newspaper voices in major American cities. This statement will give some of the background which led The Advertiser into becoming one of the 44 newspapers now engaged in joint operating arrangements in 22 cities in America. It also will try to answer some of the questions which have been asked of us, and in summary will set forth some thoughts which have evolved to this writer in many years of worrying about survival and five years of living with a joint operating arrangement. Founded in 1856 The Advertiser was founded in 1856 and had survived as an independent voice through several monarchies, a provisional government, a republic, a territorial and finally a state government, before I became its president in 1961. It had been losing money most of the years immediately prior to that time, and in terms of standing within the field, it had shown a continuous decline in percentage-of-the-field figures for advertising and circulation for the period 1929 up to the time that the joint operating arangement was organized in June of 1962. Parenthetically, percentage-of-the-field figures have always seemed to me a better clue in determining the economic health of the newspaper than mere financial figures. Trend lines are life and death lines to a newspaper. As other witnesses have developed for you, a newspaper's economic strength depends largely on its advertising revenues, which in turn depend on readership. Since readership depends on content, which includes advertising as well as news matter, the process is a closed cycle: A drop in advertising dollars means a drop in money that can be spent for promotion and editorial content, which leads to a drop in 0 10 tfVB SOt $80 BILLION IN WELFARE NEW YORK Public spending in the United States for programs dealing with social welfare has risen from about $1 billion in 1913 to $80 billion a year today. About half of these outlays come from the federal government. circulation, which leads to a further drop in advertising, and so forth. Thus if you examine the trend lines for an otherwise well-managed newspaper and find it on a descending curve in the key indicator areas of percentage-of-the-field for advertising and circulation, you know it is going to be only a matter of time before the death knell sounds, unless of course the situation can be corrected with massive and probably continuing infusions of capital. Bottom of the Barrel In 1961, we were at the bottom of all categories. In only one other market in America where two independent newspapers existed, was the second so far behind the first as we were behind the Honolulu Star-Bulletin. Between 1950 and 1958 the Star-Bulletin had gained advertising lineage at four times the rate of The Advertiser. By 1953 The Advertiser was down to only 37 per cent of the total advertising appearing in the two newspapers and to only 32 per cent of the total circulation. The Star-Bulletin had more than twice as much circulation and nearly twice as much advertising. The net profit or loss before taxes, to Advertiser Publishing Company, Limited from its newspaper operations for each of the five calendar years preceding the establishment of the joint arrangement was as follows: 1957 $(47,514.34) loss 1953 191,927.62 1959 56,981.18 1960 (110,615.40) loss 1961 ( 72,395.35) loss The profit shown in 1958 was due entirely to the drastic cutback in expenditures which was instituted by the then management of The Advertiser in view of the loss suffered in 1957. This cost cutting was so drastic that it caused substantial deterioration in the advertising and circulation position of The Advertiser. As soon as The Advertiser began to spend the money necessary to keep up its circulation and advertising, which began in the latter part of 1959, substantial losses were incurred. This is illustrated by the large losses in 1960 and 1961 shown above. In 1959 The Advertiser published a special Statehood Edition which netted $56,171 almost exactly the amount of its entire profit for that year. Promotion Costs Up Commencing in the later part of 1959, the circulation of The Advertiser improved. This improvement was achieved only by engaging in heavy promotion expenditures and reducing advertising rates to get volume to attract readers. This inevitably resulted in the substantial newspaper losses in 1960 and 1961. The Advertiser could not afford to maintain the expenditures that were necessary to maintain. Walt ah say: Trnxmsme I WALTJ1H i rA WALTAH CLARKE'S Hawa COUIITRY all ovarii Han Shop 'A Ala Moana Center g Westly Joins Firm A. Gordon Westly has joined Theo. H. Davies Far East as assistant to its president. Honolulu's Theo. H. Davies owns 75 per cent of Davies Far East. much less increase, the gains in advertising and circulation which it enjoyed in the latter part of 1959 and in 1960 and 1961. In fact, the advertising lineage and circulation of The Advertiser dropped, both absolutely and as a percentage of the combined Advertiser-Star-Bulletin total, in the first part of 1962 because The Advertiser could no longer afford to keep its extensive promotional activities going. For example, by the spring of 1962 the morning circulation had fallen to 61,000 as compared with 70,000 in the fall of 1961. Even with 70,000 The Advertiser had been unable to get the advertising of two major local department stores, Gem and Wigwam. The Star-Bulletin's advertising lineage and circulation, on the other hand, increased slightly during the first six months of 1962. By May of 1962 The Advertiser's circulation and advertising were dropping alarmingly, and an early consummation of the contract with the Star-Bulletin was essential to The Advertiser's survival. It should be noted that the longtime owners of the Star-Bulletin had sold the paper to a local group in 1961 and the new owners were saddled with the large debt load of the purchase price and were faced with requirements for a new plant site and new equipment. Equipment Antiquated The Advertiser's equipment was antiquated, and it did not have the resources to make the necessary replacements. Its news press was more than thirty years old, and there was some kind of breakdown almost every week. Management had no equipment replacement program. The production manager in a letter to the Board of Directors of The Advertiser in March, 1962, concerning the condition of equipment and the printing plant of the newspaper, concluded that $1,458,000 would be required to replace antiquated with essential equipment. When The Advertiser's circulation reached a 70,000 level, the newspaper was inviting production disaster every night. The equipment was simply being pushed beyond its capacity. The Star-Bulletin, on the other hand, had an adequate news press with a running speed of more than three times that of The Advertiser. In addition to the news press, the engraving equipment of The Advertiser was completely outmoded and noncompetitive with that of the Star -Bulletin. The Advertiser could not expand and could only maintain its existing circulation if there were no serious equipment breakdowns. The possibility of obtaining financing to purchase new equipment was remote. Institutional lenders had refused to make long-term loans. Another. factor contributing to the decline of The Advertiser was the requirements of the labor unions. The Advertiser has been compelled to pay the same wages as those paid by the Star-Bulletin. During the negotiations with the unions in 1961, the union negotiators demanded that The Advertiser institute the same kind of pension program that the employees of the Star-Bulletin had enjoyed for many years. ATo Funds for Program This program would have cost about $750,000 to fund. Of course, The Advertiser did not have the money to engage in Continued on A-9