AMP News April 2019 Business Magazine Media/Marketing

From Daily to Digital: Walter Hussman and the Future of Newsmedia

Walter

Multimedia magnate Walter Hussman is once again taking a gamble on his newspaper as the industry verges on total collapse.

by Caleb Talley | Photography by Jamison Mosley

Walter E. Hussman Jr. has succeeded at just about everything. He’s certainly come close to failing a time or two; he’ll be the first to tell you. But what Hussman has that most other business leaders don’t is the fiscal capacity and personal tenacity to play the long game. Had he not exercised both some 30 years ago, the media landscape in Arkansas today would likely be much bleaker. Once again, he’s taking risks to save his newspaper, now Arkansas’ paper, as the industry collapses around him.

Hussman won’t admit it, but he was born for the multimedia business. His father, Walter Hussman Sr., married into a newspaper family. His father-in-law, Clyde E. Palmer, owned several newspapers in Arkansas including the Texarkana Gazette, the Hot Springs Sentinel-Record, the El Dorado News-Times, the Camden News, the Magnolia Banner-News and the Hope Star. After returning from World War II, Hussman Sr. wanted a paper of his own. His father-in-law sold him the Camden News. 

It was about that time Walter Jr. was born. “I was a war baby,” he says with a grin. “I wasn’t planned.”

Summers would see Hussman working for his father’s paper as early as 10 years old. By the time he graduated high school, he had begun to consider it as a career. “I thought, ‘You know, I think I’ll major in journalism. Maybe this is something I’ll do,’” he recalls. 

Hussman earned an undergraduate degree in journalism and then an MBA. Interested in writing, he took a job with Forbes as a reporter. He was impressed with how much the publication could do with so few employees. . 

“They only had 25 people on their staff,” Hussman says of Forbes. “I interviewed with Business Week and Fortune, too. Business Week had 400 people, and Fortune had 100 people. Forbes only had 25. 

“I got to do more writing, and I really enjoyed it. I ended up coming back to get involved with the family business. I always thought I’d try to learn the business side. The more I got involved in it, the more I realized how interesting the business side was.”

In 1970, Hussman became administrative assistant to his father at the Camden News. He would later be named the paper’s general manager. In 1973, he would become vice president and general manager of all the Palmer newspapers, of which Hussman Sr. had become president and publisher after C.E. Palmer’s passing. The same year, Hussman Sr. founded WEHCO Media, a company that by then also owned a cable company. 

The following year, Hussman Jr. convinced his father to purchase the Arkansas Democrat, the Little Rock-based afternoon newspaper with a circulation a little more than 60,000, nearly half that of the dominant morning newspaper the Arkansas Gazette. He would move from Camden to Little Rock to serve as publisher. 

“It was a long shot,” Hussman remembers. “[My dad] read the Gazette. He didn’t always agree too much with some of the editorial positions, but he always said it was a good newspaper. He said, ‘This would be a tough thing to compete against.’ 

“I was more enthusiastic about it because in business school, what was one of the most exciting things you could do is try to take a business that was not doing very well and try to turn it around. The Arkansas Democrat was a classic turnaround situation. [Dad] was not enthusiastic about it, but he said when we bought it, ‘This is really going to be an uphill battle, a long shot. We’ll give it three years to see if it’ll work.’”

The rest is history – Arkansas history. 

The Newspaper “War”

In the three years that followed WEHCO Media’s purchase of the Democrat, Hussman reduced operating costs and focused subscription efforts within the central Arkansas city zone. It wasn’t enough to make the newspaper competitive. So, in a “last-ditch effort” to save his father’s investment, Hussman sought a joint operating agreement with the Gazette. His offer was declined. “I can see why they didn’t,” Hussman concedes. “They thought we were probably going to go out of business, and they were pretty close to being right.”

Left with the decision to sell the Democrat, shut it down or fight, Hussman chose to fight. No longer could the Democrat be a complimentary newspaper to the Gazette. To survive, it would have to replace it. 

“After those first three years, I was pretty depressed,” Hussman says. “I really thought about giving up. I visited with my dad about it, and I said, ‘Every business or company our family has had has been really successful.’ We got in the newspaper business in 1909. We’d done well in that. We got in the radio business in the 1930s; we did well with that. We put a television station on the air in 1952 in the Texarkana-Shreveport market; we did well with that. I said, ‘This thing looks like it’s going to be a real failure.’ But I decided we ought to give it one last shot, being a substitute. If things turn around, good. If it doesn’t, at least we can say we tried.

“It was strictly a business strategy to say, ‘If we are a substitute, maybe we can make it,’” Hussman adds. “Maybe we were too far gone to do that, but we were going to try. That was the reason we published as many pages as we did, even more than the Gazette. That’s why we increased the newsroom staff by 80 percent, increased our newshole a vast amount.”

Hussman hired more reporters, editors and photographers. He began offering the region’s top advertisers special rates to duplicate the ads they were running in the Gazette. He also offered free want ads to the general public, which helped drive up classified ad revenues. The paper switched from an afternoon to a morning paper in 1979. His plan looked like it might work, although it would be a few more years before he began to see any profits. 

His tenacity, and maybe a little stubbornness, kept him in the fight even when things were bleak – that, and the financial support of his father’s WEHCO Media. Hussman always managed to find some silver lining, despite losing so much money early on.  

“We lost a lot of money in ’79, and we lost money in ’80,” Hussman says. “But we lost less money in ’81, less money in ’82, less money in ’83. Once we started free want ads, we had over $800,000 a year in classified ad revenues. 

“By 1984, we had over $5 million a year in classified revenues. And we were giving away ads for free to private parties. I was really encouraged. In ’84, we started having some profitable months. That was encouraging. That kept me going.”

Then, in December 1984, the Gazette filed a federal antitrust suit against the Democrat, accusing Hussman’s paper of trying to run them out of business. It was a hard sell on the Gazette’s part, given that they still owned a bulk of the market share. “We wrestled with that thing for a year and a half,” he says. “And then, we won the lawsuit.”

Hugh Patterson, owner of the Gazette, saw the writing on the wall and sold the paper to the Gannett Corp., the country’s largest newspaper chain. The sale was effective Dec. 1, 1986, less than nine months after he’d lost his legal battle with the Democrat. 

With Gannett, Hussman was now at war with a newspaper giant. This could be the end, he thought. 

“That was pretty discouraging,” he admits. “Before, we were mainly competing with the Gazette on advertising. When Gannett came in, it was a circulation war. And that means big losses. With advertising, there’s plenty of margin. With circulation, there’s almost no margin.”

Hussman dusted off an old offer, a joint operating agreement. One entity would put out two newspapers, and they would split the profits. Gannett declined. Losses mounted. Hussman knew that if he were to continue fighting, he’d have to find a new way of measuring success.  

“I said, ‘We’ve got to have some measure other than the bottom line on how we’re doing. We’ve got to figure out if we’re gaining market share. Can we gain market share against the Gazette?’ And I thought about it as a four-way matrix,” Hussman says. “In one, you’re either making money or losing money. And the other matrix is whether you’re gaining share or losing share. 

“Obviously, the greatest quadrant to be in is making money and gaining market share … Another quadrant would be losing money but gaining market share. That would be the quadrant where you’d say, ‘Well, I’m losing money, but if I keep gaining market share, I’ll get to a point when I’m making money.’ That’s where we were. We were gaining on the Gazette. That was about the only thing keeping me going.” 

In 1990, the Democrat won the circulation battle, surpassing the Gazette in Sunday circulation. The Gazette was in the wrong quadrant. They were making money but losing market share. And then they were losing money and market share. “And that’s why Gannett threw in the towel,” Hussman says. “All told, they lost over a $100 million in cash over five years. You can’t sustain that.”

The following year, Gannett decided it was time to pull the plug. Despite efforts by the Justice Department to find another buyer, Hussman was able to purchase the Gazette. Its final edition was published Oct. 18, 1991. The Arkansas Democrat-Gazette published the very next day. 

Nearly two decades after purchasing the Democrat, Hussman’s gamble had paid off. And another 27 years after that, he believes Arkansans won, too. 

“People look at Gannett newspapers around the United States today – Memphis, Phoenix or Indianapolis, Nashville, or wherever – pick them up and look at and think, ‘This paper is nowhere near as big as the Democrat-Gazette. And look at all these USA Today pages.’ That’s what the Gazette would be today. It’d be terrible. I think even the hardcore critics have come around.

“I don’t have any animosity towards Gannett,” he adds. “They were gracious and gentlemanly when we closed the transaction. But they’re a public company, and public companies put shareholders first … We’re in the newspaper business. You just can’t put shareholders first and have a real successful newspaper. If you don’t put readers first, you will lose credibility.”

Gambling on a New Strategy

Twenty-seven years later, Hussman’s at war again. This time, it’s with the internet. But rather than face his competitor head-on in what would most certainly be a losing battle, he’s leaning in and gambling on a new strategy. 

“People don’t realize how bad things are,” he says. “The newspaper industry in America is verging on total collapse … You’re going to start seeing more daily newspapers close. We’ve lost Arkadelphia. We lost Hope. I think we’re going to lose more. 

“It’s a real challenge for the Democrat-Gazette, too. We’ve got to figure out a new business model because the one we’re on just is not working.”

In 2005, advertising revenue in printed newspapers in the United States was approximately $47.4 billion. By 2017, that had fallen to nearly $12 billion. “People ask, ‘Well, what about those digital ads?’ Digital ads in 2006 were $2.6 billion a year, and that’s everyone from us to the New York Times,” Hussman says. “In 2017, it was $3.6 billion. They went up $1 billion, and print went down $35 billion.”

Where did those dollars go? Most of it went to Facebook and Google, Hussman says. 

One of the toughest losses to overcome for most small newspapers, he says, was the loss of preprinted circular advertising, which require almost no work on the part of a newspaper staff. “With preprinted advertising, they back a truck up to your plant, get a forklift and unload them,” he says. “Then you just put them in the newspaper. The cost on that is very, very low compared to the other advertising. There’s a lot of margin in those.”

To survive, Hussman knew he would have to cut costs significantly. But he says he refuses to cut anywhere that would negatively affect content and customer service. “We have 106 people in the newsroom; the Denver Post has about 60. How can we do this without reducing the newshole?”

That left cutting paper, transportation and courier costs. And with that, the iPad program was born. 

Years earlier, Hussman partnered with an upstart digital newspaper printing company to supply the Democrat-Gazette subscribers with a paper when they were out of town. The company would take a PDF of the day’s paper and deliver it digitally to hotels across the country to be printed for guest subscribers. The company would eventually make those same pages available online, accessible to subscribers through their computers, smartphones or other devices.  

“It was just a nice thing to offer our readers when they were traveling; they can still get a copy of the paper,” Hussman says. “We ended up with about 4,000 of our subscribers who also got [the digital version]. They mainly used it when they were out of town, but some of them would say, ‘I don’t even read the print edition anymore.’”

Perhaps, Hussman thought, he could phase out the cost of paper, transportation and carriers by converting his print subscribers to digital subscribers. He would test the pilot program in Blytheville. At more than three hours away, it was probably the farthest his carriers delivered daily newspapers. 

At first, he offered subscribers a chance at a rebate when purchasing an iPad to utilize their digital subscription. Of the 200 to 250 subscribers in Blytheville, only two would bite, he says. So, Hussman gave iPads away. And he set up workshops in the community to teach older readers how to use their new devices. It’s been trial and error, he says. And so far, he’s invested $12 million in iPads for subscribers.   

As the rest of the country loses local newspapers at an eye-popping rate, Hussman is doubling down to keep his afloat. 

“Most of the family-owned papers in America have already sold out; they could see how bleak it was becoming,” he says. “So a lot of the owners that have bought in have been private equity groups. And – this is just my opinion – I think they don’t see a long-term sustainable model for newspapers. They think, depending on how much they pay, they can go in and cut costs and get profits for several years, and maybe the internal rate of return for profits on three, four, five years will give a good return. And then they’ll shut the paper down. 

“Some people call those vulture capitalists. I wouldn’t say it in a pejorative way. You have a dying business and people swoop in, pull all the meat off the bones they can and throw the bones on the ash heap of history. But that’s not our plan. Our plan is to figure out how to make this a sustainable business.”

And that will eventually mean ceasing to print anything beyond a Sunday paper, turning daily newspaper subscribers online, even in Central Arkansas. “We are evaluating that,” Hussman admits. 

He likens the advent of the World Wide Web to the invention of the printing press and even written language. All three have changed the way society shares information, he says. There’s no avoiding it. In January, he moved his magazine, Arkansas Life, almost entirely online. 

“Let’s say that tomorrow we decide we’re going to deliver a paper twice the size,” Hussman says hypothetically. “How much more is that going to cost us? Let’s say tomorrow we’re going to deliver it to twice as many counties as we delivered yesterday. How much more is that going to cost?

“Think about that on the Internet. How much more is that going to cost on the Internet? Almost nothing. It’s just keyboarding. We can deliver it worldwide. There is an inescapable economic reason why the Internet and digital delivery has a huge advantage over print delivery. That’s not a law of journalism; it’s just a law of economics.

“That’s where it’s all going to go.” 

The alternative is unacceptable. 

“If [local reporting] goes away, if things aren’t covered, I worry about how the government will react when no one is asking them questions and holding them accountable,” Hussman says. “That’s our only reason for existence…. Hopefully, we’ll have enough of a value proposition that people will realize and will be willing to subscribe and pay us for the content. Advertising can’t carry the load anymore.”

And that’s why, even at 72 years old, Hussman is still in the trenches with no plan to surrender. Going digital isn’t defeat. It’s a means of survival so the Arkansas Democrat-Gazette can serve its readers for years to come. 

 “Newspapers are the source of information in our communities,” Hussman says. “There’s too much riding on this.” 

READ MORE: Check out the rest of AMP‘s digital edition