A Free Newspaper With Every Cable Tv Guide

Newsroom smart alecks called it Vietnam. That's how swampy the battle had grown in California's Orange County for the Los Angeles Times. Lured by the county's growth and a median family income that this year may top $56,000, the Times tried to gain on The Orange County Register. Yet from 1979 to 1989, as the Register's daily circulation in the county soared 56%, the Times's grew 3%. By 1989, the Register was selling more than 135,000 more Sunday papers than a decade earlier; the Times, just 909 more.

Well, you can forget Vietnam now. In the nearly two years since Publisher David Laventhol took command and Editor Shelby Coffey III unveiled a front-to- back makeover, total circulation of the nation's largest metropolitan daily has climbed approximately 12%, to more than 1.2 million. More heartening, the Times saw daily circulation in Orange County increase 11%--and a phenomenal 26% on Sunday (chart). The Register, while holding its lead, grew only about 7.5%. This is all a dramatic reversal of a trend in which suburban dailies have been blunting the spread of large, established papers beyond their core markets.Was it the Times's new "faster format," which offers news digests on each section front? Or its coverage of the gulf war, which Laventhol says was "as good as the Times has ever done"? Or the death of rival Los Angeles Herald Examiner in 1989? All of those helped. But the Times's killer weapon proved to be as unlikely as it was deadly--a revamped Sunday television guide geared to a reader's own cable-TV service and the patchwork of cable networks in the L. A. area. "Their cable book has cost us a lot of money," says Register circulation chief Patrick H. Elster.

For all its 27 foreign bureaus and growing international prestige, the Times is paying as much or more attention to Costa Mesa as Nicosia. As part of that strategy, the paper a few years back began signing up cable operators in Orange County and the San Fernando Valley, home of another competitor, the Daily News. Now, every household in those areas can get the Times's weekly TV Times, the official customized guide to local cable programming. It's an easy sell: Viewers need just one guide to know what channel in their area carries, say, ESPN, which different cable systems put on different channels. One Times executive reckons that since its debut in February, 1990, the guide was responsible for signing 90% of the Sunday Times's new Orange County subscribers.

The cable book slammed like a cruise missile into the Register, which rushed to redo its own guide. "For the first time in 10 years, they're reacting to us," crows the Times's Orange County Edition President Lawrence M. Higby. That name may ring a bell: Higby served as an aide in the Nixon White House during Watergate. In the book All the President's Men, Deep Throat dismisses him as "a young-punk nobody who does what he is told." But from there, Higby spent 10 years at PepsiCo in marketing before joining the Times's cable-TV affiliate. He moved to the paper in 1989, where he helped engineer the makeover of TV Times. Years of selling soft drinks have clearly left an impression. Says Higby: "We treated the paper like you would treat any new consumer product, and guess what? It worked."

'STAGGERING.' Still unknown is whether the paper can turn its new readers into fresh earnings. With a market it sees stretching across California from Santa Barbara to San Diego, the paper must keep facing down 41 smaller rivals. And right now, each is competing for ads in a newspaper slump Laventhol calls "the worst in memory." Even with higher circulation, first-quarter newspaper revenue at parent Times Mirror Co. sank 7%, to $479.1 million. Operating profit for the group, of which the Times makes up about half, plunged 73%, to $14.8 million.

Withering profits have employees worrying. Laventhol says he plans no layoffs, though the Times has a hiring freeze in place. The paper's total advertising fell 18.8% in the first five months of 1991. So unless ads rebound smartly, it may be some time before the Times's investment in circulation pays off. Told of the Los Angeles Times's circulation gains, Arthur Ochs Sulzberger Jr., deputy publisher of The New York Times, jabs: "Good for them. I wonder how much it's costing?"

Excellent question--and one Laventhol isn't answering. But a look at how the Times has built circulation in key areas suggests the new readers are costing plenty. In Orange County, the paper doubled the ranks of workers selling subscriptions. At its two circulation offices in the county, the Times has installed a state-of-the-art automated dialing system developed by Rockwell International Corp. With two shifts of 32 solicitors working 12 hours a day, the system can make 4,800 contacts a day. Delivery agents also leave free samples of the paper on thousands of doorsteps in Orange County. Later, salespeople are sent door-to-door to call on these homes.

The Times is also slashing subscription rates: New subscribers can get the paper daily and Sunday at 40% off the usual four-week rate of $11.40. The Register discounts, too, but in April, it boosted its nominal monthly rate for Sunday and daily delivery by $1.50, to $9. A month earlier, the Times had exempted Orange County from an 8.8% subscription increase it had slapped on readers in other areas.

But those selling costs add up to mere nickels and dimes next to what the revamped TV Times costs. The paper had to pay cable operators to land multiyear contracts that designate the Times as their official guide. Laventhol won't disclose how much, but the Register's Elster says he dropped out of the bidding for one system after the Times "threw out some figures that were pretty staggering." Daily News Publisher David J. Auger claims he abandoned hope of tying up other cable systems once the Times bid over $500,000. "They shelled out huge amounts," he says.

Because the Times moved silently at first, most of its deals with cable operators probably didn't cost nearly that much. To ensure that the 14 different editions of TV Times reach the right readers, the paper had to work with dozens of delivery agents to redraw delivery zones. The Times must also pay extra to publish 14 distinct TV magazines. And it's forgoing circulation revenue from cable viewers who choose to subscribe through their cable operator. Those readers get the Sunday paper for 50~ a week, not the ordinary $1 price.

An immediate payoff is not in sight. Lynch, Jones & Ryan Inc.'s John Morton worries that even in a recovery, retail ads--a Times mainstay--won't bounce back to previous levels. Nor do rivals see a quick end to the ad slump. "Our basic business plan assumes a continued depressed, recessed economy," says Register Publisher R. David Threshie.

Willard Colston, the Times's director of development, takes the long view of the TV Times investment. "It will pay out better when the economy improves," he says, adding, "it's pretty hard to be a newspaper without circulation." Higby claims the extra circulation is paying off already. Twice in the past year, he says, the Times boosted ad rates higher than it could have with fewer readers.

Whether those hikes also acted to suppress demand for ad space is a matter of conjecture. Meanwhile, Higby's rivals won't call a truce on the circulation front. The Daily News has fielded 130 new door-to-door solicitors. And the Register has slashed its rates, too, to build its daily circulation margin over the Times to a record 160,754.

Yet Laventhol points to the latest Sunday numbers, which show the Times still gaining in market share on the most important advertising day of the week. As for Higby, he seems anything but crushed. After his tour of duty in Orange County, Laventhol promoted him and gave him the extra job of circulation chief for the whole paper. Not bad for a "young-punk nobody"--and a sure sign that the Times will stay fiercely competitive in the war for Orange County.

Before it's here, it's on the Bloomberg Terminal.