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Projo Parent A.H. Belo’s Surprising Success Amid the Storm
Don’t look now, but Providence Journal parent A.H. Belo is gaining a reputation as one of the best-run newspaper companies in the United States.

True, the Projo’s circulation and revenue have fallen steeply over the past five years. But with the digital era threatening the very existence of newspapers, the real question is how a company is managing to make its way through this historic upheaval. And on that score, A.H. Belo is doing as good a job as anybody.

“Last year, the newspaper industry received less than half the advertising revenue they had in 2005,” John Morton, the dean of newspaper industry analysts, told me. “Most other industries that suffered that kind of loss in a principal revenue stream … probably would be out of business by now.”

Start with A.H. Belo’s corporate balance sheet. The Dallas-based company has no debt and grew its stockpile of cash and cash equivalents from less than $7 million in early 2009 to $52 million as of March 31.

That lack of leverage is “a big plus,” said Rick Edmonds, media business analyst at the nonprofit Poynter Institute in Florida. Newspaper firms with minimal or no debt – like A.H. Belo, E.W. Scripps, The Washington Post Co. and Gannett – are in much better shape than highly leveraged peers like Lee Enterprises, McClatchy and WJAR-TV parent Media General, he said.

And while A.H. Belo has lost money in nearly every quarter since its 2008 spin-off from Belo Corp., Edmonds sees a silver lining there, too.

“The very thin profit margins on net earnings … do not delight Wall Street, but I see a positive beneath the surface,” he wrote in April. “As all the [newspaper] companies do their own version of digital transformation, they are investing in new media rather than harvesting operating profits and dropping them to the bottom line.”

That leads to A.H. Belo’s approach to preparing for an uncertain future. Again, the state of the sadly neglected (but soon-to-be upgraded) is misleading – look instead at what the company has done with its flagship paper, the Dallas Morning News.

“I think the Dallas Morning News is a success story in a rather difficult industry,” said Ed Atorino, a veteran media analyst at Benchmark Co. in New York.

In Dallas, A.H. Belo has beefed up the Morning News franchise by expanding its news hole, protecting investigative reporting and adding offshoot publications like Briefing and Al Dia. “Dallas is doing the multiple product approach as well as anyone I can think of,” Edmonds said.

Another smart move was A.H. Belo’s decision last year to license The New York Times Co.’s new Press Engine software to build its iPhone and iPad apps. The Times team has set the gold standard for digital design at a newspaper, and the Morning News iPad app is a pleasure to use. (The Projo’s apps are coming later this year.) Other publishers have tried to build their own apps from scratch, with predictably lousy results, but A.H. Belo’s executives paid for quality – and knew their own limitations.

Finally, there are the tough decisions the company made in the face of the Great Recession.

I can’t cheer for laying off journalists, but there’s no denying A.H. Belo moved swiftly in 2008-2009 to downsize its staff as the economy capsized. Its work force has shrank by a third over the last three years, from 3,680 in 2007 to 2,480 in 2010, with The Journal’s unionized staff falling from 530 to 330.

With advertising dollars disappearing, the company has moved aggressively to tap other sources of revenue like new printing contracts and, especially, higher circulation prices; an annual subscription to the Morning News or The Journal costs more than $400 these days, making them two of the costliest dailies in the United States.

“They’ve done a really good job in basically getting their loyal audience to pay for the paper,” Atorino said.

Earlier this year, the Morning News put up an online paywall that will require readers to pay $17 a month for digital access to all its content. The Projo plans to do the same later this year, and The Press-Enterprise of Riverside, Calif., will follow suit in 2012. There’s no guarantee it will work, but management gets credit for making a move as other newspaper owners remain paralyzed with indecision.

All in all, The Journal seems to be in better hands with A.H. Belo than it would be with, say, Gannett or McClatchy. Unfortunately, though, that’s no guarantee of the statewide daily’s future health.

Advertising is still falling at a faster pace at the Projo than it is at A.H. Belo’s other two papers; Atorino told me he has “been surprised at the weakness” in The Journal’s recovery from the recession, which he attributed primarily to the moribund local economy.

In the end, John Morton said, The Journal will succeed or fail based on the quality of its content. ”I don’t see [A.H. Belo's] papers regularly, so I can’t really judge whether they’ve skimped on or invested in news,” he said. “Almost all other dailies have skimped, which I think will be to their everlasting regret.”

“If Belo maintains its news quality, their papers will be in a better position once the gradual transition from print to digital in all its forms takes place,” Morton said. “If they don’t, there will be hell to pay eventually.”

By Ted Nesi
Published May 18, 2011