Media World: Going local, the latest newspaper strategy, is nothing new

The New York Times Co. (NYT) plans to launch a local edition in Chicago, competing against the bankrupt Tribune Co. (TRBCQ)'s Chicago Tribune and Sun-Times Media Group (SUTMQ)'s Chicago Sun-Times. The New York–based company said last month it will start an edition in San Francisco, where News Corp. (NWS)'s The Wall Street Journal also plans a local edition, and where the remaining "real" hometown daily, The San Francisco Chronicle, has struggled for years.

The attraction for newspapers to go local is obvious: it's where they think the most ad dollars can be had. The Times counts on national advertising, which can be more economically sensitive than local advertising, more than most dailies. It's the same logic that drives Walt Disney Co. (DIS)'s ESPN to develop local sports Web sites for the Chicago and Boston markets, with other sites anticipated for New York City, Los Angeles, Dallas, and Pittsburgh, according to paidContent.Org.

This strategy has a familiar ring to it. When I lived in the Washington area in the early 1990s, commuters could snap up copies of The Los Angeles Times, which had a special Washington edition, along with other out-of-town papers like The Philadelphia Inquirer, and even the Toronto Globe and Mail. And The Washington Post proudly trumpeted its national weekly edition. But that was then. The L.A. Times has since suspended its Washington edition, and the Postrecently announced it will drop its national edition at the end of the year.

So why does the Times Co. think it can make this strategy work? "Many newspapers have tried this and then stopped, and now they seem to be starting again," Lauren Rich Fine, a former newspaper-industry analyst with Merrill Lynch, tells DailyFinance. "I'm actually glad to see some old ideas recycled. Many newspapers tell me that they have tried a lot that hasn't worked. My sense is that the world is changing so quickly that it makes to keep trying and retrying."

This strategy is hardly a sure thing. For one thing, the media companies are facing a plethora of well-entrenched local competitors. San Francisco financier Warren Hellman is investing $5 million into a local news site, with labor from the 28-staffer news team of KQED-FM and 120 journalism graduate students at the University of California–Berkeley, according to The New York Times. Hellman may establish a partnership with the Times or The Journal.

But by going local, media companies reveal a strong signal of their growing impotence in the face of the growing popularity of blogs and other cheaper competitors. In the U.S., local media ad revenue, $155.3 billion last year, is expected to drop 18.3 percent this year and 16.8 percent next year, according to research firm the Kelsey Group. Web-based ad spending will continue to grow, the firm says.

"I've extrapolated that U.S. dailies are producing about 800,000 fewer stories in 2009 than three years ago, as 10,000 or so journalists have lost jobs," says Ken Doctor, an analyst with Outsell Inc. "Strategically, that leaves the papers' flanks open. They are newly vulnerable to competition."

And the Times, the Journal, and their national rivals have withstood the economic downturn better than some local papers, though they have suffered their share of losses. But in areas like business coverage -- cut back significantly by many metro dailies -- national publications can tailor local coverage without large incremental costs, Doctor says.

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