Last Updated: May 26, 1999
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USA Today at 15
Good news for ‘McPaper’
After 15 years it climbs from money pit to profitability
By Paul Farhi
From its inception, USA Today was designed to be different.
It livened up the dreary gray prairies of traditional newspaper makeup
with bold color photographs, snappy news "graphics" and a nearly hallucinogenic
national weather map.
It organized itself into four distinct sections every day, each with
a rigidly unvarying format, a radical departure from the haphazard organization
of many local papers.
It digested the day’s news into tight, bright stories studded with sentences
that often began with typographical "bullets," like this: >.
Another thing was different about it, too: Unlike most daily papers,
USA Today lost buckets of money.
Despite being an almost instant hit with readers (its Friday edition
with a circulation of more than 2 million copies is the most widely read
paper in America), USA Today’s business operation was a problem child for
years. The paper ranks as one of the most expensive media start-ups ever,
and one of the slowest to show consistent profit.
This month, on its 15th anniversary, the flagship of Gannett no longer
seems so radical and daring. Many of the paper’s editorial innovations
— the subject of hot debate within journalism circles a decade ago — have
been widely copied. And at a time when the mainstream is moving closer
to USA Today, USA Today itself has moved closer to the mainstream. The
newspaper once derided as "McPaper" has become more serious, more mature
— more, it seems, conventional.
The self-declared "Nation’s Newspaper" has also evolved into something
it never was: a solidly profitable business.
USA Today edged slightly into the black for the first time in 1993,
and it has been building momentum since then. Last year, according to projections
by Smith, Barney & Co., the paper had an operating profit of $38.9
million on $464 million in revenue. While that’s a modest return in an
industry accustomed to profit margins of about 15 percent, USA Today’s
bottom line was more than three times fatter than it has ever been.
This year, thanks to declining newsprint costs and a surging national
economy, the paper could nearly double its earnings again, to about $70
million, according to Smith, Barney.
In fact, says President and Publisher Tom Curley, the paper could be
the single largest source of profit for Gannett this year — no small feat
considering the roaring river of money that Gannett’s 89 daily newspapers,
18 TV stations and five radio stations have been churning up of late.
The trend-setting newspaper is bucking another trend. USA Today’s circulation
grew in the six months ended in March — a period in which 18 of the 25
largest newspapers in America lost readers.
Curley says he expects circulation to jump 3 to 4 percent this year,
pushing USA Today over 1.7 million paid copies daily and to 2.1 million
copies on Fridays. Meanwhile, ad pages are up 8 percent and revenue is
running 12 percent ahead of last year’s first half.
"The future of this newspaper is grand," declares Curley. "We are just
beginning to see what it can be."
It has been a long time coming.
USA Today did many things right, right from the start. Its printing
and circulation operations set standards for the industry. Through a nationwide
network of 33 printing sites, it was the first newspaper that could consistently
give sports fanatics late West Coast scores. Its Money section made the
world of stocks and bonds seem accessible to ordinary mortals, and its
personal finance columns were there at the start of the mutual-fund boom.
It continues to offer dogged coverage of airline fare wars, capitalizing
on its franchise with business travelers.
A billion-dollar risk
But the paper’s founder, former Gannett chief executive Allen H. Neuharth,
says in hindsight that advertisers didn’t know what to make of his creation.
USA Today wasn’t quite a newspaper in the traditional sense, nor was it
a newsmagazine. Madison Avenue wasn’t quite sure who would read such a
paper, particularly since the number of home subscribers was (and remains)
minimal.
"We used to read about (our demise) all the time," chuckles Neuharth.
"We knew we were in for a long, tough haul, but we knew the trends were
moving in the right direction — some slower, some faster. We were pretty
confident it was a matter of time."
Advertisers eventually followed the readers, but not before Gannett’s
patience and financial benevolence were put to the test.
According to "The Making of McPaper," an in-house account of USA Today’s
early years by former editor Peter Prichard, USA Today lost $458 million
before taxes during its first four years. Over the next six years, analyst
William G. Bird of Smith, Barney calculates, it added an additional $75
million in pretax losses.
Even those figures understate the depth of the USA Today money pit,
Prichard acknowledges. The stated losses don’t include the cost of printing
plants and other capital investments Neuharth made to create and sustain
the paper.
For accounting purposes, these costs were often assigned to Gannett’s
local newspapers and to its commercial printing business, which sometimes
used the printing plants. Gannett’s local properties also picked up the
cost of distributing the paper and the salaries of its work force. Neuharth,
for example, used "loaners" — reporters and editors on temporary assignment
from Gannett’s field papers — to produce USA Today in its early days.
All told, Gannett invested well over $1 billion in USA Today’s start-up,
says John K. Hartman, a journalism professor at Central Michigan University
who studied the paper for a 1992 book. "A profit is nice," says Hartman,
"but the company’s never going to get that money back."
Well . . .
Some argue that USA Today’s value to Gannett far outweighs what shows
up on its financial statements. The newspaper gave Gannett — which had
operated generally small, undistinguished papers — a high-profile brand
name.
What’s more, John Morton, the dean of newspaper stock analysts, who
has followed USA Today since its inception, said the investment in the
paper was not unusually large when compared with the cost of buying an
existing newspaper. Knight-Ridder., for example, recently bought four papers,
including the Fort Worth (Texas) Star-Telegram and the Kansas City (Mo.)
Star, from Walt Disney Co. for $1.6 billion.
"In USA Today’s case, we’re now talking about a paper that is worth
billions of dollars, not hundreds of millions," says Morton. "It’s a hell
of an achievement."
The road to respectability
Although Neuharth says now he never gave serious thought to folding
USA Today in its deepest money-losing phase, the paper fell short of even
his early projections. Neuharth’s original business plan, which sold Gannett’s
board on launching the paper, envisioned his paper turning a profit within
three to five years, with circulation between 1 million and 2 million copies
daily and annual revenue of $250 million. It reached the latter two goals
on schedule; the profit part took nine years.
"We expected when we started that it would be highly profitable," says
Neuharth today. He adds, "It just took a little longer than we thought."
USA Today, to be fair, took some getting used to. It looked different,
and it certainly read that way. There was little or no foreign news. There
were no reports about the school board or local crimes, or most of the
other staples of hometown papers.
It was, however, chatty and friendly, with loads of sports, entertainment
and news-you-can-use features.
As has been often noted, USA Today was the first newspaper designed
to appeal to a generation raised on TV — a younger, time-strapped reader
who might want a quick take on the day’s news, particularly one traveling
away from home. The paper consciously tried to mimic the visual flash of
the tube, from its news "nuggets" and flashy graphics to newsracks resembling
19-inch Sonys.
Many critics, however, thought it simply dumbed down the news. Former
editor John Quinn once joked that USA Today had become famous for "bringing
new depth to the definition of shallow" and that if it ever won a Pulitzer
Prize, it would be for "best investigative paragraph."
One edition of the paper in 1987, for instance, led with news stories
about the Academy Awards and an NCAA basketball game. A semi-famous USA
Today headline from 1983 reported: "Men, women: We’re still different."
Neuharth called USA Today’s breezy style "the journalism of hope," distinguishing
it from the serious, even depressing tone of many papers.
In hindsight, publisher Curley and editor Dave Mazzarella say USA Today
could have grown up a little sooner. Being so different in its look and
format, they say, it didn’t need to be so different in its selection of
news.
"I fought for hard news from the start," says Curley, a slender, intense
man with a faint resemblance to the actor Nicholas Cage (Curley and his
older brother John, USA Today’s first editor and Neuharth’s successor as
Gannett’s chief executive, were part of the team that developed the paper.)
"We found enormous satisfaction with daily newspapers when we were researching
the idea. Al would throw The New York Times and The Washington Post on
the floor and say, ‘Daily newspapers are crap.’ I said, ‘We don’t see that
(in the research), Al.’ "
USA Today is still tight and bright, but it’s also more orthodox about
what it deems newsworthy. Its lead stories now aren’t much different from
those of other large papers.
At the same time, the paper has beefed up its staff and the depth of
its reporting. It opened its first international bureau, in Hong Kong,
in 1995, and added a London bureau earlier this year. Several recent "enterprise"
packages have included reports on the reaction of the International Red
Cross to the Holocaust during World War II; the hazards posed by lingering
nuclear fallout; and an investigation into the murder of an American businessman
in Russia. A recent Money section feature on retirement planning drew 700,000
requests for reprints.
"We’re not denying our past," says Mazzarella. "It’s still our intention
to keep providing news that’s easy to read, in small bites. But we want
to add to that an element of depth that makes the news more understandable
to our readers."
While it may seem obvious for a newspaper to sell news, USA Today’s
turn from fluff to harder stuff fits in with its overall marketing strategy.
For one thing, a strong headline can make a big difference in the number
of papers sold on a given day. That’s because most of USA Today’s sales
are made at newsstands (less than 10 percent of copies are home-delivered
and about 20 percent are sold in bulk and given away to hotel guests and
airline passengers). Those sales figures are the opposite of most newspapers,
which sell about 75 percent of their papers through subscriptions.
Serious news also helps attract the kind of readers advertisers like
— relatively well educated, relatively upscale and willing to invest 50
cents day after day. Curley says USA Today’s typical reader has educational
and income levels superior to the typical reader of the leading newsmagazines,
though the paper’s readers aren’t as upscale as The Wall Street Journal’s.
Its readership is also about two-thirds men, unusual compared with the
more balanced male-female ratio of most newspapers. "We’d like to get more
professional women reading this paper," he says.
The publisher notes, with evident satisfaction, that his paper, designed
to compete with television, is now beating TV at its own game. USA Today
has held on to its readers, he points out, at a time when the major television
network news programs have seen their audience splintered by a thousand
electronic competitors.
It’s possible to argue that USA Today did more than just figure out
how to compete in a hyper-competitive news environment; it may have taught
the rest of the newspaper industry how to do it, too. Many of USA Today’s
innovations are now de rigeur.
Color is now used widely in newspaper news columns; story lengths have
shrunk; USA Today-like "infographics" appear everywhere, including the
front page of the New York Times and Washington Post. As veteran USA Today
editorial staffer J. Taylor Buckley once put it, "The same newspaper editors
who call us McPaper have been stealing our McNuggets."
"They have caused the entire industry to rethink the way this business
is run at all levels," says Hartman, the journalism professor. "Yes, it’s
a more serious product now. But the thing that recommends it is the fact
that it still retains some of its original excitement and stimulation,
the flash and pizazz. And what’s wrong with pizazz?"
© 1997 The Washington Post. Reprinted with permission.
Farhi is a staff writer for The Washington Post, where this article
originally appeared.
