Honolulu Star-Bulletin staffers and supporters marched down South Street to new offices a year ago yesterday. The first edition under David Black's ownership debuted the next day.

Star-Bulletin still alive
after frenzied first year

The milestone has been achieved
despite tough times in a tough market

Newspaper war hurt TV and radio

By Erika Engle

A year ago today, the Honolulu Star-Bulletin rolled out a morning edition, commencing independent head-to-head competition against the Honolulu Advertiser for the first time in decades.

The doubters were many, though the new owner, Canadian publisher David Black, counted on a strength of support he saw among readers and advertisers.

"A lot of people said we wouldn't last until May, then July, then October, then January 1st," said Don Kendall, president of Oahu Publications, which owns the paper. "I think it's a tribute to, more than anything, the dedication of our staff. They want to save this newspaper. They want to give two voices. They want to give readers a choice."

For nearly four decades, the business, circulation and advertising functions of the Advertiser and Star-Bulletin were linked in a joint operating agreement. The Advertiser's owner, Virginia-based Gannett Co. Inc., had reached a deal with former Star-Bulletin owner Liberty Newspapers LP to close the Star-Bulletin in exchange for a $26.5 million payment. In the midst of antitrust lawsuits, Liberty put the paper up for sale, and Black bought it.

Maryland-based media consultant John Morton was among those skeptical the Star-Bulletin would survive.

When both the Star-Bulletin and the Advertiser announced plans to publish separate morning and afternoon editions, Morton said, "There's a very large question whether there is a market for two newspapers in Honolulu, and without question there isn't a market for four."

That was last year.

"I had pointed out in the past that when a second newspaper gets down to the market share of circulation that the Star-Bulletin has, that's always been a perilous place to be," he said. "If you have the owner of a second paper that has both deep pockets and other things he can marry with the newspaper, such as MidWeek, that could change the equation."

Star-Bulletin's sister publications include MidWeek, the free weekly publication mailed to 280,000 homes, as well as military publications.

"Assuming they're profitable, they would help stem the losses that (Black) might be having with the Bulletin," Morton said.

The Star-Bulletin consistently receives 36 percent to 39 percent of overall advertising lineage, including classified ads, Kendall said.

"In my business plan I'd only estimated 25 percent," Black said.

According to un-audited Publishers' Statements filed with the Audit Bureau of Circulations for the six months ended Sept. 30, 2001, Monday-through-Saturday paid circulation for the Star-Bulletin averaged 63,343 vs. 152,098 for the Advertiser. Sunday circulation was reported as 63,902 for the Bulletin vs. 173,336 for the Advertiser's more established paper for that day.

Advertising rates are traditionally tied to circulation, but Black said those figures for the Star-Bulletin are not as critical to him as they are to "pundits" because of the company's ability to package advertising across its publications.

"I am confident we will make money this year," Black said. "I am satisfied with the position of both papers and believe they will steadily improve over the next two to three years."

Competition has not caused the Advertiser to decrease advertising rates, according to President Michael Fisch.

"Our rates reflect our market reach," he said, "and if anything has affected rates in the past year, it has been the economic realities of the economy."

A December analyst presentation by Gannett Co. Newspaper Division President Gary Watson estimated that the Advertiser's overall advertising revenues dropped 11.5 percent in 2001.

But the Advertiser is making money and is profitable, Fisch said.

"The Star-Bulletin is only one competitor among many in the marketplace that we compete with for a percentage of the share of advertising dollars and readers' time and attention," he said.

The corporate structures of the Bulletin and the Advertiser differ widely. The Bulletin is privately held, while the Advertiser belongs to publicly traded Gannett.

"David Black has said he doesn't need the profit margin that Gannett needs," University of Hawaii journalism professor Beverly Keever said.

"They have to make money, but they don't have to make outrageous amounts of money and take it out of the state. This is what David Black is telling the whole newspaper industry, including those who sell their shares on the stock market," she said. "That's the real significance, and I hope the business community appreciates what he's doing, and that means they have to support him by advertising."

Richard Port, who served as the spokesman for Save Our Star-Bulletin, formed to fight the closure of the newspaper, credited the paper with increasing employment.

"There are actually more employees working in our newspapers now than when we had the old Honolulu Advertiser and Star-Bulletin," he said.

Oahu Publications created more than 200 jobs, according to Kendall, not including independent distributors.

"When we took over the Star-Bulletin editorial staff and MidWeek, we had roughly 255 employees. At last count we had 480 employees," he said.

The paper cut 17 jobs and reduced wages in the post-Sept. 11 economic downturn, which mirrors similar cuts in the newspaper industry across the United States. A no-layoff clause that covers unionized employees at the Advertiser expires in mid-June.

Keever and Port both credited competition with improving coverage in both papers.

"I think the quality of the two newspapers has improved," Port said. "We're seeing more diversity of editorial opinions, and we continue to see several reporters covering the same story, which is important."



Newspaper war
hurt TV and radio

By Rosemarie Bernardo

As Honolulu's two daily newspapers waged a fierce battle for advertisers during the past year, Hawaii's radio and TV stations found their revenues among the collateral damage.

Industry sources estimate that ad revenues for local TV stations were about $50 million last year, down 9 percent from a year earlier. Radio ad revenues sank 7 percent, to about $25 million.

Bill Gaeth, vice president and general sales manager for KITV-4, said the local TV market suffered a double whammy of increased competition for advertisers inspired by the newspaper war, plus the post-Sept. 11 economic slump.

"Those two things certainly hurt the broadcast market," he said.

On March 14, 2001, a joint operating agreement ended between Liberty Newspapers LP, former owner of the Honolulu Star-Bulletin, and Gannett Co., owner of the Honolulu Advertiser. The two newspapers, which had maintained separate newsrooms, no longer had combined business operations. Competition to attract local advertisers with low ad rates immediately followed.

For Honolulu's radio market, the newspaper war "played a key role in the erosion of revenue being spent in electronic media," said John Aeto, sales director for Cox Radio Hawaii, which owns KCCN AM/FM and four other stations.

Both newspapers had "twice as many salespersons on the street" compared with other media outlets, Aeto said. "Both were extremely aggressive and creating deals for the advertiser that were never seen in print," he added.

Still, Gaeth and other local media executives said they hope to see a surge in income this year.

"We expect to have a great year," Gaeth said.

He said he expects to see a boost in revenues during the latter part of the year from political campaign ads in an extremely active election year.

The fallout from the newspaper war also extended to other print media.

Last summer, weekly publications found it difficult to hire qualified sales representatives, said Honolulu Weekly Publisher Laurie Carlson.

"Every salesperson in town was snatched up by everyone," Carlson said.

As of January, however, there were signs of improvement as the publication doubled its number of sales representatives, she said.

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