Wall Street Journal revs up New York Times rivalry

[April 26, 2010]  NEW YORK (AP) -- It might be the last great American newspaper war. And Rupert Murdoch intends to win it.

He has made a career of grabbing readers and advertisers from competing newspapers, and now he is racheting up the challenge his Wall Street Journal poses to The New York Times. On Monday, the Journal is launching a metro section that will vie for readers and advertisers on the Times' turf.

Although the new section will be available only in the New York City area, collateral damage could spread around the country. Both newspapers are jostling with each other, USA Today and regional dailies for readers. By dramatically lowering advertising rates in New York to undercut the Times, Murdoch's assault could leave both newspapers with fewer resources for other expansion plans.

"The Times has a lot of readers and a lot of them are very loyal, long-standing folks. It's not going to be easy to peel off the Times' core constituency," says Dean Starkman, a former Journal reporter who writes for the Columbia Journalism Review. "As a business proposition, I think I'm with the majority of skeptics who think that this could ultimately damage both papers."

Luxury retailer Bergdorf Goodman, a longtime prominent advertiser in the Times, plans to advertise in the new Journal section. "We're going to try it and see," spokeswoman Ginger Reeder says. "We always look for new ways to reach our customers." It's not yet clear whether Bergdorf will reduce its advertising in the Times.

Times President and General Manager Scott Heekin-Canedy says several prominent advertisers have assured him that their promotions in the Journal's new section will not come at the expense of the Times. He declined to name the advertisers.

"We won't get in a pricing war," he says.

News Corp. said Murdoch, 79, was not available for an interview. But he has been open about his goal of using his media properties to challenge what he considers a left-leaning news establishment in the U.S.

And he took a swipe at the Times in a speech to New York real estate executives last month. "We believe that in its pursuit of journalism prizes and a national reputation, a certain other New York daily has essentially stopped covering the city the way it once did," he said.

Times Co. CEO Janet Robinson fired back Thursday. "When you're the lead dog, people are constantly going to go after you," she told financial analysts. But she argued that the Times has a better case to make with advertisers.

"They are aware of the fact certainly that we have a larger female audience. They are aware of the fact that there's more time spent with our newspaper and website than the Wall Street Journal," she said.

Going after the Times is the fight Murdoch had in mind when News Corp. bought the Journal and its parent Dow Jones & Co. for $5 billion in 2007.

Since then, he has tried to broaden the newspaper's appeal by remaking the Journal's front page. Last year it surpassed USA Today as the nation's most widely circulated newspaper.

The new Journal splashes color photos in place of its customary small, black-and-white renderings and includes more coverage of topics outside of business and finance. One recent edition carried a photo of the volcanic eruption in Iceland across the top of the page.

To fill its new metro section, the Journal has hired several former staffers of The New York Sun. The Sun, a feisty upstart that -- like the Journal -- had conservative opinion pages, spent six years trying to rival the Times with aggressive local coverage before going out of business in 2008. John Seeley, the Sun's former deputy managing editor, will lead the Journal's new metro section. Pia Catton, the Sun's former culture editor, has been named the section's lead arts and leisure reporter.

"They are hiring people trained to compete with the Times," says one former Sun contributor who was approached about a job with the new section. He spoke on condition of anonymity because his discussions with the Journal were supposed to be confidential.

Murdoch has relished similar competitions.

After buying the Times of London in 1981, he grabbed circulation from The Daily Telegraph by slashing subscription prices and introducing coupon promotions and prize raffles.

As the owner of the Telegraph, Conrad Black battled Murdoch before Black was convicted of defrauding his own company in 2007. The Telegraph survived, but in an e-mail from prison Black wrote that if his experience is any guide, The New York Times could struggle to "absorb the kind of price-cutting and profligate expenses Murdoch will pour on."

As owner of The New York Post, Murdoch has been willing to cut newsstand prices and lose tens of millions of dollars in his bid to outsell the New York Daily News. In 2000, the Post sold about 435,000 copies on an average weekday, compared with 714,000 for the Daily News. By 2009, the Post was up to roughly 530,000 copies while the Daily News had sunk to 570,000.

And Murdoch's underlings have been accused of using rougher tactics than just price cutting or promotions.

News Corp. subsidiary News America, which prints coupons and grocery store ads and is led by New York Post publisher Paul Carlucci, agreed in January to pay $500 million to settle a lawsuit with rival Valassis Communications. Valassis had accused News America of using its market clout to demand that customers advertise exclusively with News America. It likened Carlucci to the gangster Al Capone beating his enemies with a baseball bat in the film "The Untouchables."

News Corp. would not make Carlucci available for comment. In a statement, the company said it settled the lawsuit because "significant risks were developing in presenting this case to a jury."

So far, competition between the Journal and the Times has taken a less cinematic course.

The newspapers have shadowed each other's moves across the country over the past year by opening sections devoted to local issues for readers in San Francisco and Chicago.

But those new sections are running once or twice a week. The Journal has shuffled resources to staff its sections and hasn't done any hiring. The Times has sought partnerships with local media rather than add staff.

By contrast, the Journal is hiring about 35 reporters for its New York section, which will run about 10 pages every day. It will include color -- a critical feature for advertisers who want to stand out. And it will mimic the wide range of coverage offered by the Times, including stories on local politics, culture and sports. Murdoch is willing to put $30 million into the section over the next two fiscal years, according to a person familiar with the Journal's finances who was given anonymity to speak about internal company figures.

The Times has countered with an ad campaign boasting that twice as many business professionals in the New York market read the Times as the Journal, based on surveys by the research group Scarborough.

The Journal sells almost 2 million copies a day nationwide, and the Times sells about 900,000. But the advantage is reversed in the New York market, which includes the city and parts of New Jersey, Connecticut and Pennsylvania. The Times sold an average of 406,000 copies in the area on weekdays and the Journal sold 294,000 in the year that ended Sept. 30, based on Audit Bureau of Circulations figures.

Even so, Murdoch still could reshape the local ad market. News Corp. is offering a discount for advertising in both the Journal and the Post and could package ads with other outlets it owns, such as the local Fox TV station. The Times essentially just has itself.

Roberta Garfinkle, who heads print advertising strategy at the New York ad firm TargetCast, called Murdoch's plan a "smart move" because it will offer advertisers a cheaper way to target wealthy New Yorkers than having to pay for ads that run nationally.

For instance, a full-page black-and-white ad in the Journal's national edition costs about $223,000 per day, while the same ad in the eastern edition -- delivered from Alabama to Maine -- costs about $102,000. (Both figures assume no volume discounts.) An ad that runs just in the New York market will cost even less. Materials prepared for one advertiser by the Journal and reviewed by The Associated Press offer a full-page ad in the New York section of the Journal -- plus a full-page ad in the Post -- for less than $20,000. Dow Jones says such promotions have been offered to a small number of advertisers.

The heightened competition for ad dollars comes as nearly every newspaper has lost advertising to the Internet. The newspapers' own websites haven't yielded the same kind of income that printed newspapers are used to.

The Times Co. unit that includes its flagship newspaper lost more than 25 percent of its overall ad revenue last year and might not see it come back.

News Corp. doesn't disclose the Journal's advertising figures or profits. But there are clear signs the newspaper has been struggling financially. It cut staff last year. According to the person knowledgeable about its finances, the Journal lost more than $80 million in the fiscal year that ended June 30. Journal spokeswoman Emily Edmonds would not confirm or deny the figure.

However, if it comes down to who can hold his breath longer while the ad slump continues, Murdoch would appear to have the odds.

News Corp. has more flexibility. Some of its businesses, such as Fox News and other cable channels, are larger than the entire Times Co. Analysts expect the movie "Avatar" alone will earn News Corp. as much as $400 million in operating profit. The Times Co. had an operating profit of just $74 million last year.

As Starkman, the former Journal reporter, put it, "The Times is a cork bobbing in a pretty big ocean."

[Associated Press; ANDREW VANACORE]

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