The Providence Journal’s revenue and circulation are far from what they once were. But don’t underestimate how many people still look to the local daily for news and information.

On an average week last year, 49% of adults in the Providence area – 608,727 in all – either read The Journal’s print edition, visited Projo.com, or did both, according to a Scarborough Research report obtained by WPRI.com. That was down from 54% of adults – 676,746 in all – in 2009, but it’s still a formidable audience.

The nation’s 20 most-read newspapers reached between 72% and 53% of adults in their metro areas on an average week last year, with the Rochester Democrat and Chronicle topping the list, according to Scarborough.

One worrying sign for The Journal: its five-point decline in total reach between 2009 and 2010 was larger than those experienced by many of the 20 top papers. That’s partly explained by its plunging print circulation, which last fall was down 10% compared with 2009 and 41% compared with 2000.

As Poynter’s Rick Edmonds points out, the loss of readers despite a boom in digital media also goes against “a standard line from individual papers and the Newspaper Association of America that total audience, when digital is included, is growing or stable – not declining, as paid circulation numbers alone would suggest.”

Gary Meo, Scarborough’s senior vice president of print and digital services, acknowledged that problem. “They’re growing their audiences online, so there are increases in audience online,” he told me. “But they’re not increasing fast enough to ameliorate the declines in print.”

Still, Melo said he finds it “pretty remarkable” that The Journal and other papers manage to reach half of their region’s adults in any given week given the amount of competition they face across the media landscape. He also noted that the Projo’s market area (like WPRI’s) stretches out to New Bedford, past its daily coverage zone.

I also asked “Newsonomics” author Ken Doctor what he made of The Journal’s 49% reach and five-point decline. In an e-mail, he described its print circulation drop as “breathtaking” and suggested Projo.com’s stale Web design doesn’t help, but he also questioned the metric’s modern relevancy:

Reach is increasingly an old-fashioned metric. Why do papers care about reach? For advertisers. And advertisers increasingly can target audience by geography, by gender, by time of day, by interest (clickstream, content type) and more. So, if I’m an advertiser and know only that someone has read a paper sometime within a given week, or visited at least one page on a website at least once in a given week, I don’t think that tells me much. I’m throwing darts, still, but the dartboard has gotten a bit smaller.

It’s a big question for publishers: What do they count, and what do they count that advertisers care about? The answers are changing everyday.

Another question: if the Projo does put much of its content behind a paywall this summer as expected, how many of those adults will stick with the paper – and pay money for the privilege?

The Providence Journal is a much smaller business today than it was half a decade ago.

The Journal’s total revenue dropped for a fifth straight year in 2010 to $99.9 million, parent company A.H. Belo disclosed in an SEC filing late Friday – the lowest amount in at least 15 years and perhaps far longer than that after adjusting for inflation.

The $99.9 million total was off 40% from 2005, when the paper booked $166 million in revenue. Its annual revenue was $125 million back in 1995, archived SEC documents show.

The Journal’s advertising sales plunged by more than half between 2005 and 2010, from $137 million down to $60 million, the filing said. Ominously, even digital advertising on Projo.com and its affiliate sites declined significantly, falling from $9.7 million in 2008 to $7.6 million in 2010.

Circulation and printing/distribution revenue has increased over the same period thanks to price increases and new contracts. Here’s a chart breaking down The Journal’s revenue picture:

The good news for The Journal is that the pace of its financial deterioration is slowing down. While advertising sales fell 10.1% in the fourth quarter of 2010 compared with a year earlier, that was the smallest decrease in three years. And last year’s 5% drop in total revenue was far below the declines of 20% in 2009 and 14% in 2008.

A.H. Belo executives, like their peers at other publishers, are trying to become less reliant on advertising revenue as more of that spending moves online, and they’re turning to readers to make up some of the difference.

Advertising sales made up 82% of the Projo’s total revenue in 2005 but only 60% in 2010, while circulation’s share of the shrinking pie doubled from 17% to 35%. “The company expects newspaper advertising revenues will continue to decrease in 2011, although at a lower rate of decline,” the SEC filing said.

The trend of increased reliance on circulation dollars will continue if The Journal follows through with its long-discussed plans to start forcing online readers to pay later this year. Its sister paper, The Dallas Morning News, started charging $17 a month last week to read its content on Dallasnews.com and through iPhones and iPads.

“I think you’ll see some improved performance during 2011, assuming the economy and all such things hold up,” Jim Moroney, executive vice president of A.H. Belo and the Dallas paper’s publisher, told investors in a conference call last month.

The Journal sold an average of 101,123 copies on weekdays last year, down from 163,909 in 2005, A.H. Belo said. Sunday circulation fell to 137,339, down from 231,593 in 2005, a decrease of 41%. Figures released last fall showed weekday circulation is now below 100,000.

One thing to keep in perspective – even after losing 40% of its revenue, the $99.9 million Projo is still the dominant media player locally. Annual ad revenue for all the TV stations in the Providence/New Bedford market combined totals roughly $60 million, according to BIA Financial Network.

Nor is The Journal’s situation an outlier compared with its two sister papers, The Morning News and California’s Press-Enterprise. While A.H. Belo’s total revenue has decreased from $637 million in 2008 to $487 million in 2010, the Projo’s contribution has remained basically unchanged at about 20%.

A.H. Belo declined to reveal a date for the launch of the Projo’s iPhone and iPad apps in its SEC filing, saying only that they would be introduced “at a later date.” Journal management has said the NYT-designed apps will arrive this summer.

A.H. Belo doesn’t break out how many employees each of its papers has, but the company’s work force totaled 2,200 full-time workers as of Dec. 31, down from 3,400 in 2007, plus 280 part-timers. The Journal had 562 full- and part-time employees as of March 2009 following four rounds of layoffs over the prior six months.

In a footnote, A.H. Belo also disclosed it paid $3.1 million to buy Dallas Morning News president John McKeon’s old home in California as part of his relocation agreement. The company will be hoping to have better luck selling the house than they’ve had unloading the Journal building on Fountain Street.

More Providence Journal coverage on Nesi’s Notes:

• Projo union OKs new 3-year contract with AH Belo (Feb. 16)
• No reason for Belo to sell Projo with price at $51m (Dec. 28)
• Why the Projo’s finances are healthier than you think (Nov. 18)

Today’s the day Projo parent A.H. Belo’s flagship paper, The Dallas Morning News, finally put up its paywall after a short delay. From now on, readers will need to pay at least $17 a month to access all its content on Dallasnews.com and mobile devices, or $34/month with a print subscription thrown in.

Here’s how Morning News publisher Jim Moroney described the changes in a letter distributed to readers:

The journalism you’ve come to value in your print edition is now available in a new, easier-to-use format at dallasnews.com, as well as through new applications for your iPad and iPhone. While these digital versions will be updated at least three times during the day, we’ll also be bringing you breaking stories – complete with stunning photos, video and our first-rate reporting – as they happen.

Each of the paywalled stories on Dallasnews.com is marked with a small lower-case “d” in a circle. The paper says subscribers will only need to register once to get access across all its digital platforms.

It’s hard to say what any of this means for the Projo, but I assume the lessons learned in Dallas will be shared with management here in Providence as they prepare to move forward with their own online pay strategy.

In a memo leaked to Dave Scharfenberg last October, Journal publisher Howard Sutton said the paper would unveil a new Projo.com, plus NYT-designed iPhone and iPad apps, this coming summer. As I’ve said before, enlisting the NYT’s design savvy is a good move by A.H. Belo – I test drove the Morning News’ classy apps, also NYT-designed, and they’re quite nice.

But the Projo’s paywall remains a big ol’ question-mark for now. The paper’s executives have been talking about the idea publicly for almost a year and a half now, but it still hasn’t seen the light of day. The last we heard was October’s report of a “Diet Projo” plan, with short summaries of longer print stories posted online.

That doesn’t bear any resemblance to what the Morning News is doing, though, which raises the question of whether the Providence paper has changed its plan again – or is going its own way within A.H. Belo.

Time will tell. In the meantime, check out Pegasus News founder Mike Orren’s post from yesterday featuring Jim Moroney’s memo and Orren’s own thoughts on the Morning News’ strategy.

(photo: A.H. Belo)

Providence Journal parent company A.H. Belo’s stock dropped nearly 11% today – but why?

The company released a so-so fourth-quarter earnings report this morning, but that doesn’t explain the precipitous drop in the shares that began just before 2 p.m., six hours after that news came out. And the S&P 500 only lost 2% today.

Here’s today’s A.H. Belo stock performance via Yahoo! Finance; the red line is yesterday’s closing price:

Divining the meaning of stock market gyrations is a mug’s game, of course. But seeing a chart like that made my wonder what happened on A.H. Belo’s quarterly conference call with investors, which started at 2:30 p.m. our time. (Granted, the stock was already falling by then.)

But I turned up mostly empty after listening to the call. A.H. Belo executives reiterated that they will have to use $55 million of its cash stockpile – currently at $86 million – to shore up its pension plan this year. They also said it will take five to seven years to get the plan “pretty close to fully funded.”

It’s possible, then, the stock’s nosedive wasn’t related to the call at all – it doesn’t take a lot for a company with a small market cap like A.H. Belo to see a big gyration. Strange.

Other highlights from the call:

• The Dallas Morning News’ new iPhone and iPad apps were downloaded 22,000 and 14,000 times, respectively, in the month since they became available. The company will begin charging non-print subscribers $16.95/month for full digital access to Morning News content and $9.99/month for access through one digital platform, like the website or an app, on March 1.

• It doesn’t sound like the Projo’s brick headquarters on Fountain Street will be sold anytime soon. A.H. Belo first put the property, along with other Projo-owned facilities nearby, on the market in late 2008 and last year the company tried to get the City of Providence to buy it for $9.75 million – no dice. “Frankly, there aren’t any particularly strong signs that the commercial real estate market relative to those properties is picking up steam,” CEO Robert Decherd said today. A parking garage did get sold last year.

• A.H. Belo will spend $13 million to $15 million on capital expenditures this year, much of it new investments in technology to upgrade and harmonize its systems at The Journal and its other two papers. A new Projo.com with a paywall is slated to debut this summer.

• The company cut about 100 jobs combined in Providence and Riverside last year in what an executive termed “selective and very specific reductions” in certain departments. Decherd says current staffing levels should stay the same as long as revenue doesn’t decline further.

• A.H. Belo’s content chief Jim Moroney, who’s also publisher of the Dallas Morning News, acknowledged the company did not make its digital strategy a top priority until recently. “We’ve had two primary focuses over the last 12 to 18 months,” he said – increasing circulation revenue and getting more commercial printing work. “I would then acknowledge that we have not put as much of our attention and focus on the digital part of our business, in terms of ad sales, as we might have had we not had so much focus on these other two initiatives,” he said.

Providence Journal parent A.H. Belo was drowning in red ink during the last three months of 2010 after being forced to shovel $132.3 million into its pension plan.

Dallas-based A.H. Belo reported a fourth-quarter loss of $119.5 million, or $5.65 a share, compared with a fourth-quarter profit of $5.6 million, or 27 cents a share, a year earlier. Total revenue fell 3% year-over-year to $130.8 million, while advertising revenue fell 6%.

Investors weren’t thrilled. A.H. Belo stock fell 3% to $8.21 a share at 11 a.m. on the New York Stock Exchange. But that doesn’t look all that bad when you consider the stock slid to just 68 cents amid broader economic panic back in March 2009.

Nor is the loss a huge surprise; A.H. Belo executives have been warning for months that they were facing some big pension costs as part of the split with Belo Corp., which spun off its three newspapers to create A.H. Belo back in 2008. The company said it will have to put more money into the pension plan during the first half of this year.

And despite the pension charge, A.H. Belo still managed a slight increase in the size of its cash and equivalents on hand, which rose from $81 million to $86 million between Sept. 30 and Dec. 31.

The earnings report contained some bad news for The Journal specifically. Once again, the Projo’s advertising revenue – print and digital – decreased by the most among A.H. Belo’s three papers percentage-wise, both in the fourth quarter and for 2010 as a whole. (No numbers were attached.)

On the side of the ledger, the company said circulation revenue and other products like commercial printing gave the Projo a boost.

CEO Robert Decherd said in a statement A.H. Belo’s “top three priorities” for this year will be “executing on revenue initiatives, remaining vigilant on expenses, and maximizing operating cash flow.”

Stepping back, it’s striking what a smaller company A.H. Belo is now compared with just a few years ago.

In 2005, the company’s revenue totaled $822 million; in 2010, it was only $487 million. That’s 40% of revenue gone in just five years. Few statistics explain the newspaper industry’s plight better than that.

For more on The Journal’s finances, check out my “Why the Projo’s finances are healthier than you think” piece from November.

The media world is buzzing about AOL’s decision to buy The Huffington Post for $315 million – and wondering whether it’s really possible for the acquisition to pay off financially.

The Wall Street Journal’s Deal Journal blog concluded that the deal “is truly transformational” – and “may be crazy.” The WSJ points out that HuffPo is expected to have $50 million in sales this year, putting its valuation at a rather pricey 6.3 times projected revenue. And to put that in perspective, the blog used an example that should hit close to home for local readers:

Just for a sense of scale about that $50 million. Newspaper company A.H. Belo – owner of just four [sic] major daily papers - generated $119 million of revenue just in the third quarter of 2010. Yes, A.H. Belo’s revenue is shrinking and HuffPo’s is growing rapidly. But if nothing else, the fact that HuffPo is considered a wild digital media success story is a sign of how hard it is to mint money out of online ads.

Amen to that – a good reminder of how the beleaguered newspaper business can still be a pretty solid cash generator even in this late stage of the game. The gap is even more yawning when you look at A.H. Belo’s full-year 2009 revenue of $518 million – 10 times as much as HuffPo. (Full-year figures for 2010 aren’t out yet.) But you’d rather have HuffPo’s trend than A.H. Belo’s.

Locally, one of the big questions is what the HuffPo acquisition will mean for Patch, AOL’s network of hyperlocal news sites, which has already set up shop in almost half of Rhode Island’s 39 communities and quite a few in Southeastern Massachusetts, too.

Patch will be folded into AOL’s newly created Huffington Post Media Group division, and one of the company’s goals is to look for ways to have the Patch sites and HuffPo work together. A Patcher I spoke with acknowledged finding that idea a little disconcerting, since HuffPo’s unabashedly liberal reputation is quite different from Patch’s middle-of-the-road, hometown-newspaper ethos.

In the meantime, I’m eagerly awaiting AOL’s $315 million offer for Nesi’s Notes. I’m willing to negotiate!

The Providence Journal and its largest union, the Providence Newspaper Guild, have reached a tentative deal on a new three-year contract that will freeze wages and raise medical costs for the union’s roughly 250 members.

“We will lose some ground economically under the proposed agreement, and if this were five years ago, we wouldn’t even consider it,” the Guild said in a statement.

“But when you look at the devastating job losses in the newspaper business nationally and the downward trend in salaries and benefits in New England [newspaper employee] contracts over the past three years, we feel this is a deal we can live with,” it continued.

Guild President John Hill could not immediately be reached for comment. The new contract is scheduled to take effect on April 1, and its provisions include:

• on health insurance, 10% co-pays for most medical services, a new deductible, and higher premium contributions
• a wage freeze that calls for no raises at the Projo until other A.H. Belo employees receive cumulative increases of more than 2.5%, because Guild members did not take a companywide 2.5% pay cut in 2009
• three paid days off in the contract’s first year if other A.H. Belo workers get a raise

Judging by the Guild’s statement, the health changes will be the toughest for its members to swallow. Here’s the union’s explanation of why it agreed to what it did:

The major changes in the agreement are in how we pay for our health insurance. Our current health plan was negotiated in 2007, well before the credit collapse triggered a near-depression in the news business that has seen papers across the country either go out of business or shed a quarter to a third of their staffs.

Our current health coverage plan was negotiated with a Providence Journal Co. that had 120 more employees than it does now, before three straight years of double-digit revenue drops.

In the surveys we distributed last fall, a huge majority said your top priority was protecting our health coverage – and you said you were willing to pay more to do that. That’s what this agreement does.

The changes don’t affect coverage. The doctor networks remain the same. The conditions and procedures that were covered before, except for in-vitro fertilization, remain covered in the proposed agreement. What changes is how much we pay. …

These are significant changes, especially when you look at our 2007 plan, which, but for a few office visit copays, essentially provided completely covered medical care. But when you look at the rest of Belo, we are still far, far better off.

I’ll update with more information if I can get John Hill on the phone. The Projo has about 320 workers who are unionized in total, so about 70 of them won’t be covered by this contract – although their contracts usually track the Guild’s.

For more on the Projo, check out my catch-all post from November.

A.H. Belo executives gave a presentation to Wall Street investors at a Citigroup media conference last week. I didn’t hear anything surprising in their comments, which mainly focused on the Dallas Morning News’ new paywall. The Providence Journal wasn’t discussed much, which may not be a huge surprise since it only contributes 20% of A.H. Belo’s annual revenue.

CEO Robert Decherd offered some cautious optimism about the company’s outlook. ”While it is not our practice to provide [earnings] guidance, our current thinking about 2011 is that 2010′s positive momentum could continue, and – together with improvements in sales force effectiveness – could result in [A. H. Belo's] revenue being flat year-over-year,” he said. (For newspapers, flat is the new growth.)

One question the event did raise for me is whether the Projo will make major changes to its popular 7 to 7 News Blog once its own “Diet Projo” paywall is put in place. Journal executives have said in the past that 7 to 7 is a big driver of traffic to Projo.com.

During his presentation, Decherd said “breaking news, wire [service] stories, classified content and other commercial content will remain free” on the Dallas paper’s site even after its paywall starts Feb. 15. “There will still be free content on the website,” Morning News publisher Jim Moroney added. “A lot of national, international news, breaking news – things that are commodity news.”

If similar rules are put in place at the Projo, I’m curious how “breaking news” will be defined. Sometimes The Journal will publish lengthy stories on 7 to 7 that are either exclusive to the paper or mirror the following day’s print story. Will those be held back, or not posted until after the morning paper is out? The fear among papers is that if they put too much news behind the paywall, they will drive readers to competing outlets. On the other hand, the more news The Journal posts for free on 7 to 7, the less need there is to buy a subscription.

Moroney also acknowledged how difficult it will be to get consumers to pay for newspaper content online, considering how long they haven’t had to do so. I think it’s worth quoting him at length to get a sense of the new strategy at A.H. Belo, which is very iPad-focused:

Do you really expect people to pay you for access to what they’ve been getting on the desktop for free for 15 years? And the answer is no – not really.

But if you take a tablet, an iPad, a [Samsung] Galaxy – and let’s take the iPad. You open it up and you’ve got a Safari icon on there and you’ve got a DallasNews app on there. If they hit the Safari icon and type in DallasNews.com and there up comes our website and it’s all for free, and then they hit the app and it says $9.99, and they say, you know, what kind of fool do they take me for? Do they think I’m going to pay them for this when I can basically get a little different presentation but all the same content for free?

So our strategy is, you’re going to have to make all of the digital channels that people can access your content through [work so that you get it] only by paying for it, or you’re never going to find out if they’re going to pay for it on one of them – particularly when you can access those two channels, a Web browser or an application, off the same device.

And so our real strategy … is pointed toward the tablets. We think there is an opportunity to start at the beginning and have people pay for access on a tablet, and let the website just sort of take care of itself.

Two points for honesty: Just a day after Projo sister paper the Dallas Morning News said it will start charging $203 a year to access all its content online, A.H. Belo executive Jim Moroney acknowledged the company has no idea if its plan is going to work. Here’s some of what he said in an interview with Harvard’s Nieman Journalism Lab:

When the publisher of the News told his staff about the decision, he said they must be prepared to be ridiculed and vilified for putting their content behind a paywall.

“This is a big risk — I’m not confident we’re going to succeed,” Moroney told me. “But we’ve got to try something. We’ve got to try different things.” …

Moroney is pragmatic about the paper going to a paid model. “It’s not an over-the-cliff strategy,” he said. “If this works, great, it’ll be fantastic. If it doesn’t, we can go back to providing access at a lower price or free.”

The post is well worth a read to get a sense of how A.H. Belo is thinking about paid digital content, particularly since Moroney is close to CEO Robert Decherd and likely will be involved in putting together the Journal’s “Diet Projo” paywall strategy later this year.

Moroney said he expects the Morning News’ monthly page views will drop by half after the paywall is put in place Feb. 15. If the same thing happened at Projo.com, its page views would shrink from 10.9 million to about 5.5 million each month. (Page views refers to every time a page gets loaded, as opposed to “unique visitors,” which counts individuals no matter how many or how few pages they view.) Moroney said newspapers face no other option if they want to maintain the newsrooms they have today.

A.H. Belo executives, take a bow.

The Providence Journal’s Dallas-based owner was last year’s top performer among the country’s 11 publicly traded newspaper companies, according to an analysis by Alan Mutter, the savvy industry veteran who writes the blog Reflections of a Newsosaur.

A.H. Belo’s stock jumped 51% – from $5.76 a share to $8.7o – over the course of 2010. That was more than the other three double-digit gainers: Scripps (+46%), McClatchy (+32%) and Journal Communications (+30%).

The worst performer among the 11 was GateHouse Media, publisher of the Fall River Herald News, the Taunton Gazette and myriad weeklies like the Norton Mirror and the Mansfield News. GateHouse shares mirrored A.H. Belo’s while traveling in the opposite direction, sliding 51% from 20 cents to 0.099 cents.

Since all these companies are facing the same secular challenge – the transition from print news to digital content – what accounts for the wide disparity in their stock performances? The answer, Mutter says, is debt; A.H. Belo has none while GateHouse is staggering under it.

Here’s Mutter:

The divergent performance of newspaper stocks in 2010 suggests that at least some investors are willing to put their money on companies with low debt burdens in the belief that the publishers will have the ingenuity, revenue and cash flow to morph their companies into successful players in the digital age.

Heavily indebted publishers, on the other hand, are forced to limit investment in their companies, because they have to earmark a disproportionate amount of their profits to interest payments. To maximize profits to pay their hefty interest bills, many publishers have cut staff, squeezed newshole, curtailed circulation and taken other, similarly counterintuitve actions to come up with the money necessary to stay one step ahead of their creditors.

The selloff in highly leveraged newspaper companies means that Wall Street is rejecting publishers who are not able to invest in the long-term growth of their businesses.

This is further evidence for the argument I made last fall about why the Projo is in better financial shape than a lot of people may think. As Mutter makes clear, the absence of debt is a huge advantage for A.H. Belo compared with a number of its peers (though the company will have to shell out significant money over the next few years to deal with its pension obligations).

A.H. Belo’s relative strength could also bolster the bargaining position of the Providence Newspaper Guild, which has hit a stalemate in its negotiations over a new contract for reporters and other Journal staffers to replace the one that expired Dec. 31.

Projo executives are pointing to wage and benefit cuts at papers like those owned by The New York Times Co. in an effort to wring concessions from the Guild. But union representatives can make a credible case that A.H. Belo’s situation is at least somewhat different from the NYT’s.

Update: A knowledgeable source tells me “stalemate” is too strong a word to describe the current situation in negotiations between the Providence Newspaper Guild and Projo management, though the source acknowledges it’s a “struggle.”

WRNI’s Scott MacKay, whose reporting I cited above for that characterization, also now says the talks are “bogged down.” (MacKay worked at The Journal from 1984 until 2008, when he accepted a buyout and took his current job as a political analyst at the state’s NPR station.)

The Guild and Projo management are scheduled to hold two more negotiating sessions this week, which should give an indication of whether the sides are making progress toward reaching an agreement.

(chart: Alan Mutter)

The Providence Journal’s sister paper, the Dallas Morning News, will begin charging readers to access some of its content online next month, the paper reported today – and the Morning News’ plan may signal what The Journal’s “Diet Projo” paywall plan will look like when it starts later in the year.

The Morning News will offer two subscription packages:

Print+digital: The price of a print subscription, which buys delivery of the newspaper plus full access to its digital offerings, rose 13% to $33.95 per month ($407 annually) on New Year’s Day. That’s slightly less than a Journal subscription, which currently costs $416 a year.

Digital-only: The price of a digital subscription – which buys a daily e-edition, stories behind the paywall on DallasNews.com, and iPad and iPhone app access – will be $16.95 per month, or $203 annually.

So what’s going to go behind the paywall and what will remain available to anybody? “Subscriber content will include proprietary news and information produced by The News,” the paper explained. “Headlines, breaking news, most blogs, obituaries, classifieds and nonproprietary content such as syndicated wire stories will remain free.”

The Morning News’ iPhone and iPad apps, which will use The New York Times’ new Press Engine platform, will launch on Jan. 18, the same day a redesigned version of its website goes live. (The Projo’s apps and a new Projo.com are also supposed to debut later this year.) The Morning News says it’s working on Android and BlackBerry apps, too.

A free trial period for all the Morning News’ digital content will take place from Jan. 18 to Feb. 14. After that, online readers will be asked to subscribe if they want full online and mobile access.

“Newsonomics” author Ken Doctor, whom I interviewed for my story last week about the Projo’s valuation, told the Morning News he expects about six major metropolitan daily papers to be charging by midyear. The New York Times and the NYT-owned Boston Globe both plan to start doing so within a few months.

“If the product is substantial enough and meaningful enough in people’s lives, then I think they’re willing to pay for it,” Doctor said. “The biggest question I think is metros that have cut back so substantially that they have brought into question their value proposition to their readers.”

Update: The paywall announcement wasn’t the only news out of A.H. Belo. The company also said it has finished splitting its pension plan off from regular Belo (which spun off its newspapers into A.H. Belo in 2008).

I’m not an expert on corporate pension accounting, but the Morning News’ story on the transaction implies that A.H. Belo will need to fork over $53 million to its pension fund this year. That would be about 65% of the $81 million in cash and equivalents the company had stockpiled as of Sept. 30, which may help explain why A.H. Belo’s execs have been so hesitant about spending that money.

In a comment about my Projo valuation story, Jef Nickerson asked a good question:

I think an interesting thing to look at is not so much the loss of valuation, but what exactly was wrong with the world when the Journal was bought for $500 million (and the Times bought the Globe for what, somewhere in the neighborhood of a $billion?). Why did anyone ever think these properties were worth so much? When did the valuations get so out of control?

I won’t claim to be a total expert on this, but I can offer some of the history.

One factor is poor timing. The New York Times Co. paid $1.1 billion for The Boston Globe in 1993, and Belo paid $1.5 billion for The Providence Journal Co. (including its nine TV stations) in 1997. Newspapers still looked to be in good shape then – the World Wide Web was only opened to the public in 1993, and while circulation had been shrinking for years, ad revenue wouldn’t peak until 2005.

Sentiment can play a role, too; the romance of owning a newspaper helped convince Rupert Murdoch to overpay for The Wall Street Journal a few years back. Times Co. executives were enamored with the idea of owning two of the nation’s great papers, which seems to have led them to pay a premium for The Globe. Plus, the newspaper industry had been consolidating for years by the time the two transactions happened.

That said, both purchases did raise eyebrows at the time among skeptics who questioned whether either company should be paying as much as they were.

Belo paid “a very full price” for the Journal Co., one analyst told The New York Times in October 1996, and that same month the paper called the $1.5 billion price tag “a big premium.” And in the case of the NYT-Globe tie-up, this June 1993 Times story shows some experts doubted its wisdom, too:

In all of the places where the $1.1 billion deal was being studied, questions were raised that went to the heart of the modern newspaper business: Will the industry’s once-high profit margins return? Does conglomerate ownership of news-gathering businesses hurt the news? Is the newspaper business still the future?

Again and again, in meetings with securities analysts and in news conferences in Boston and New York, Mr. Taylor, Mr. Sulzberger and their executives worked to convince the skeptics. Why, Times executives were asked again and again, would the company make such a huge investment in a newspaper market so much like New York or, for that matter, in a newspaper at all?

“It is a true diversification,” the president of the Times Company, Lance R. Primis, answered. The economies of Boston and New York, he said, are different. As a strong regional newspaper, The Globe, which is much more dominant in Boston than The Times is in New York, is a different type of paper than any the company has owned before, he said.

And Mr. Primis said there were possibilities for joint distribution, advertising sales and new newspaper ventures like efforts to use the huge amounts of data they collect in new commercial ways.

$51 million.

That’s how much one top media appraiser told me he thinks The Providence Journal would sell for in today’s depressed market for newspapers. Other experts said the number could be somewhat higher, but not by much, as I report in a new WPRI.com In-Depth article:

A buyer would probably be willing to pay between $42 million and $51 million for The Journal, Kevin Kamen of Kamen & Co. Group Services in Baldwin, N.Y., told WPRI.com. “It’s not worth a dime more than that,” he said. …

While it’s hard to say exactly how much of the $1.5 billion price tag for the Providence Journal Co. in 1997 represented the value of the actual newspaper, one-third of the total would put it at $500 million.

By that measure, Kamen’s current estimate of $51 million represents a 90 percent slump in value over 13 years. “It’s like winning the lottery and putting all the money in a pocket with a hole in it,” he said. “It’s really incredible how it has gone down in value.” …

Kamen’s estimate of a $42 million to $51 million purchase price for The Journal “sounds reasonable,” Rick Edmonds, media business analyst at the nonprofit Poynter Institute in Florida, wrote in an e-mail.

It’s unlikely A.H. Belo would be interested in selling The Journal at that price, Edmonds said. “Valuations like that keep all but the most motivated sellers” – like the Copleys in San Diego – “from actually going through with transactions. Better to hold on and see if they can rebuild the franchise over a few years.”

You can read the whole story here, and naturally I hope you do. Along with Kamen and Edmonds, I also got input from John Morton, the dean of newspaper industry analysts; “Newsonomics” guru Ken Doctor; and Reed Phillips, a big-time media i-banker in New York.

I’ve actually been working on this story since October, when Aaron Kushner came forward to announce he was planning an unsolicited bid for The Boston Globe. At the time I wondered whether a local buyer might try to purchase The Journal. After publishing that post, a few people asked me how much it would cost to buy the paper; I didn’t know, so I figured I’d try and find out.

Reporting out this story convinced me there is very, very little chance The Journal (or, indeed, most big daily newspapers) will be under new ownership anytime soon. That makes it all the more vital for their current managers to find a profitable path forward – because it’s almost unfathomable to imagine a healthy civic life without them, even if Clay Shirky says we need to be prepared for just that possibility.

Lastly, if you missed it last month, check out my post on why the Projo’s finances are healthier than most people think. I’d say that still holds, too; there’s a big difference between a company’s valuation in the eyes of buyers and sellers and its quarter-to-quarter fiscal position, although the slide in valuation reflects concerns about the latter over the long term.

Thomas Matlack was The Providence Journal Co.’s chief financial officer in 1996, the year Dallas-based Belo Corp. purchased the company for $1.5 billion. He’s now a writer who writes for something called The Good Men Project, but he offered a brief inside look at how the Belo-Projo tie-up in a vignette published on The Huffington Post.

The story is eerily reminiscent of the one told by Sarah Ellison in her recent book “War at The Wall Street Journal,” about the Bancroft family’s sale of Dow Jones to Rupert Murdoch’s News Corp. Here’s Matlack:

The board of the Providence Journal Company assembled on Monday, Sept. 3, 1996, in a private room at the Four Seasons in Boston. Steve [Hamblett], the chairman, CEO and publisher, was paranoid about leaks. None of them knew what was coming; the short notice and abnormal location had everyone on edge.

After some introductory remarks, Steve turned the meeting over to me. I reported how we had traveled to Dallas to talk to A.H. Belo about a potential merger. Steve had made it clear that we weren’t interested in anything less than double our IPO price, and their CEO had balked, bringing the discussion to a quick close.

I took a momentary breath of air, looking around the room. My eyes passed over the older, Yankee-looking men, sporting an assortment of horn-rimmed glasses and bowties. The distinguished group was stone faced, silently waiting to hear what I was going to say next, anticipating where I might be headed.

(more…)

It’s not hard to paint a grim picture of The Providence Journal these days. Like most newspapers, its circulation is tumbling, its ad sales are falling and its staff has shrunk considerably since 2008.

But The Journal may be in better financial health than the conventional wisdom would have you think. To paraphrase Mark Twain, rumors of the Projo’s demise have been greatly exaggerated.

That possibility struck me earlier this month while I was listening to Journal parent A.H. Belo’s third-quarter conference call with investors. The news was hardly rosy – revenue at the company’s three papers fell 6.1% compared with a year earlier, with advertising alone down 11.2% – and A.H. Belo executives acknowledged they have no clearer a sense of where the newspaper industry is headed than their peers at other print firms do.

For the Projo specifically, ad revenue was down 17.1% from last year’s already depressed levels, and weekday circulation fell to 96,595 as of Sept. 30, compared with 163,122 a decade ago.

With all that in mind, why do I think there’s room for optimism on Fountain Street? Because The Journal is consistently earning more money than its two sister papers.

(more…)

I’m heading out to the EDC for the 38 Studios press conference, but wanted to quickly note that Providence Journal parent company A.H. Belo of Dallas reported its third-quarter earnings this morning.

The company posted a profit of $4.6 million – a good sign for a company that has mostly lost money since it was spun off from broadcaster Belo back in 2008. But the company’s revenue is still falling by double-digits, dropping 11% compared with the third quarter of last year.

“Our corporate and operating unit teams have worked intensely for the past two years to reach this relative stability in an industry environment that continues to change at a rapid pace,” CEO Robert Decherd said in a statement.

In short, A.H. Belo’s bottom line is healthy, though not because of any rebound in its top line. The company is stockpiling cash though, with $81.3 million on hand as of Sept. 30, so it’s not hemorrhaging money by any means.

There was no mention of The Journal’s performance in A.H. Belo’s official press release.

In other local corporate news, it was a rough third quarter for Woonsocket’s CVS Caremark, which saw its profit drop 20%. That helps explain why the company is laying off 300 people nationwide, 150 of them here in Rhode Island.

Dallas Morning News front page, 10/1/2010

The Dallas Morning News, which has been the Projo’s sister paper since Belo bought The Providence Journal Co. in 1996, is celebrating its 125th anniversary today with a special section on its website and in print. (The Morning News is a much younger sister, considering the Projo is 181 years old this year.)

I was particularly interested in the package’s Q&As with A.H. Belo CEO Robert Decherd and Morning News Publisher Jim Moroney, the latter of whom plays a key role in plotting the three-paper company’s strategy both in Dallas and elsewhere. Here’s what Moroney – who last year expressed doubts about Amazon’s Kindle and newspapers – had to say about the future of news:

There is a group of people — I’ve got plenty of research data to validate what I’m going to say — they do not see accessing of news and information through electronic media as a substitute for reading the newspaper. That experience of reading a newspaper for them is not the same thing as getting the same news on a desktop, smart phone or watching television news. They still want to read it in the newspaper. That group of people is diminishing over time, it’s not the behavior of a younger cohort, but will there be enough people that you could profitably publish an edition of The Dallas Morning News in 20 years? I think there will be. Will it cost more? Yes.

I think it will be much more about perspective, interpretation, context and analysis. The who, what, when and where will be available anywhere and everywhere for everyone all the time. But the why, that perspective, interpretation, context, analysis — that part of reporting and telling the news — will be what the newspaper will be about.

And here’s Decherd – the great-grandson of Morning News founder G.B. Dealey – talking about Belo’s decision to become a public company back in 1981, and how the company’s finances are doing now:

Taking that approach has given us the ability to work through several challenging business cycles and industry conditions to be where we are today, although a much smaller company after the spin-off. We own three wonderful newspapers with high standards and records of achievement, and we have a balance sheet to support the philosophy that we have applied through all these years.

We have no debt. We are very careful about how we managed profitability so we have resources to invest. We are in a very enviable position to pursue the philosophy that served us as a company and our city so well. That’s really why we’re in it.

Projo insiders also may chuckle to read Decherd’s comparison of Belo’s infamous CueCat device to an iPad app.

(image credit: Newseum)

Update: The Providence Journal’s iPhone/iPad app is scheduled to debut next spring – specifically, in the second quarter (April-June) of 2011, Jennifer Wesley, The Dallas Morning News’ spokeswoman, just told me in an e-mail.

The New York Times Co. said Monday it will begin licensing Press Engine, the software behind its popular iPhone and iPad apps, in the fall. And among the first adopters is A.H. Belo Corp., which owns The Providence Journal.

What’s not clear is when The Journal will launch its apps. The Dallas Morning News plans to introduce its iPad app around the start of 2011, after the company figures out how to charge, A.H. Belo exec James Moroney told AdAge on Monday. He didn’t mention The Journal, though. (I’ve e-mailed an A.H. Belo spokeswoman for comment, and will update if I hear back.)

Unfortunately for Journal readers, so far A.H. Belo appears to have been focusing its digital efforts on The Morning News. The Dallas paper already has both an e-edition and an iPhone app, while the ProJo has neither. But today’s press release certainly makes it sound like the ProJo will be part of the launch.

Also unclear is how this interacts with previously discussed plans for the ProJo to start charging for some stories and perhaps raise the price of the print copy. (The NYT itself is planning to introduce a pay wall early next year.)

For both Times Co. and A.H. Belo, though, this seems like a smart strategy. The NYT’s embrace of technology has been widely praised, and its iPhone app has been downloaded 4.5 million times over the past two years. Its Times Reader desktop application also deserves to be better known. Why should a small publisher like A.H. Belo try to reinvent the wheel, and why shouldn’t the NYT try and make some more money off its investment in R&D?

For more on the NYT’s strategy with Press Engine, check out this solid analysis from Fast Company’s Kit Eaton.