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Democrat vs. Gazette: The Great Newspaper War

Walter E. Hussman Jr., who was inducted into the Arkansas Business Hall of Fame on Friday night, knew by 1977 that he had to change directions at the Arkansas Democrat.

The Hussman family had owned the afternoon newspaper in Little Rock for three years, and there were some tough decisions that had to be made.

Newspaper employees had voted to decertify four unions, and costs had come down during that three-year period.

Revenues, however, were flat.

And the handwriting was on the wall across the country for afternoon newspapers in two-newspaper markets.

Hussman approached Arkansas Gazette publisher Hugh Patterson Jr. with the idea of a joint operating agreement after having studied the 22 such agreements already in place nationwide.

Under the agreement he proposed, the Gazette would receive 100 percent of profits until it had made as much money as the year before.

Hussman thought it was a generous agreement. Patterson disagreed. He refused Hussman’s offer.

“I’ll never forget what he told me,” Hussman said during a recent visit in his downtown Little Rock office. “He said, ‘I can’t believe I would make any more money by doing this.’

“Our company had never failed at anything. We had entered the radio business in the 1930s. We had entered the television business in the 1950s. We had entered the cable television business in the 1960s. We really didn’t want to fail at this, either.

“I looked around at the strategies being used by afternoon newspapers in places such as Dallas, Chattanooga and even Winnipeg in Canada. I wanted to at least be able to say we had tried everything before giving up.”

At that point, Hussman made the bold decision to go head to head with the Gazette.

He said his father “reluctantly consented” but was not excited about the idea.

Walter Hussman Sr.’s tepid response: “Maybe it’s worth a try.”

In 1979, the Democrat began publishing a morning edition in an effort to reverse years of declining market share.

The newspaper also offered free want ads to non-commercial advertisers, doubled the size of its news staff and increased the size of the newshole by 58 percent. Front-page color appeared. Expenses subsequently soared.

“We caught a tiger by the tail that was bounding through the jungle, but he was going so fast we couldn’t get off,” Hussman said.

Those who underestimated Hussman did so at their peril.

When Editor & Publisher named Hussman its publisher of the year in 2008, his longtime right-hand man, Paul Smith, told the magazine: “Walter’s so polite and such a nice guy that some people perceive that to be a lack of aggression. He’s very aggressive. He just doesn’t telegraph it. And that makes him the most dangerous.”

In 1982, Hussman decided to increase the monthly subscription rate for the Democrat from $3.60 to $4.25. His veteran circulation director, Bill Taylor, told him: “If we do that, we’re going to go out of business.”

Despite the price increase, the newspaper’s circulation continued to rise.

A year later, Hussman increased the monthly rate to $4.95. Taylor again advised against the move. Once more, circulation increased.

In 1984, the price was increased to $5.75 per month, higher than the Gazette.

In April 1984, the Democrat produced its first profit since its purchase by the Hussman family in 1974. The profit was divided between the newspaper’s 352 employees.

Hussman had buttons made that said, “We’re In The Black.”

There was also a small profit in May 1984. Huge losses would follow in the years ahead, but that was a turning point in the newspaper war.

“I think the owners of the Gazette realized that once we made money, we weren’t going away,” Hussman said.

The Democrat had increased its revenues from $6.7 million in 1979 to $18.4 million in 1984. Daily circulation had increased from 53,671 to 76,199 in that same period. Sunday circulation had soared from 98,237 to 140,642.

Trying to stop the Democrat gains, the Gazette filed a federal antitrust suit against the Democrat in 1984. The lawsuit accused Hussman of trying to put the Gazette out of business. Hussman responded that he was only trying to remain competitive and that none of his practices were intended to run the Gazette out of business.

On March 26, 1986, a jury in the court of U.S. District Judge William Overton found the Democrat innocent of all allegations.

Hugh Patterson knew it was time to sell the newspaper.

On Oct. 30, 1986, it was announced that the Gazette had been purchased by the Gannett Corp., the nation’s largest newspaper chain. The sale would be effective on Dec. 1 of that year.

I was the Washington correspondent for the Democrat at the time. I can vividly remember getting a phone call from the late Ray Hobbs, one of my editors.

“Gannett just bought the Gazette,” he said. “We’re screwed.”

I crossed the river from Washington to Arlington, Va., to visit Gannett headquarters and come up with several stories on our new competition. Those of us who worked at the Democrat were scared about what the future held.

Hussman recently admitted to me that he was scared, too.

In fact, he met secretly in Shreveport with Gannett’s vice chairman at the time, Doug McCorkingdale, to propose a joint operating agreement that would preserve newspaper competition in Little Rock. Under Hussman’s proposal, one entity would put out two newspapers with the profits split 50-50.

As a native Arkansan, Hussman would run the new company. McCorkingdale listened politely to the proposal, but Gannett wouldn’t bite.

The newspaper war would continue.

“I knew I had a chance of losing everything,” Hussman said.

For five more years, the two Little Rock newspapers would bleed money.

In 1990, another landmark moment occurred when the Democrat passed the Gazette in Sunday circulation. Hussman threw a huge party downtown, bringing in the Temptations and the Four Tops to perform. Advertisers from across the state were invited.

The message was clear: There was a new leader in the newspaper war.

In March 1991, Hussman bought a vacation home in Vail, Colo.

Gannett’s McCorkingdale heard about the purchase and mentioned it in a visit with Hussman. Looking back, the Democrat-Gazette publisher thinks the home purchase had a psychological effect on Gannett executives, making them believe the Democrat was doing better financially than it really was.

“Buying that house in Vail may have been the best business move I ever made,” Hussman said with a smile.

Hussman only had to answer to himself and his family.

As a public company, Gannett had to answer to shareholders nationwide and explain its continuing losses in Little Rock.

Quietly, Gannett chose to pull the plug on the Gazette. Talks commenced in April 1991. An agreement was signed on July 3, 1991, at the Gannett headquarters in Virginia.

U.S. Justice Department approval was still required, and both sides had to remain silent. Phil Anderson, Hussman’s Little Rock attorney, was with him when the agreement was signed. The two men didn’t go into Washington and throw a Fourth of July party. They returned to Little Rock since Hussman had promised to take his family on vacation to a dude ranch in Wyoming.

He found himself fishing on a mountain stream on a clear day. After 17 years of heated competition, the newspaper war was coming to an end.

“I remember thinking, ‘Is this a dream?”’ Hussman said.

It wasn’t.

The final edition of the Arkansas Gazette was published on Oct. 18, 1991.

The first edition of the Arkansas Democrat-Gazette was published the next day.

No one had come forward to make an offer to keep the Gazette alive.

“That was the first time in my life that I refused to talk to the media,” Hussman said of those long days in July, August and September after the agreement had been signed. “I was just not in a position to say anything.”

Hussman has remained bullish on the newspaper industry.

In 1998, he purchased the Chattanooga Free Press. That was followed by the purchase of the Chattanooga Times in January 1999. The two publications were then combined.

On May 1, 2008, he purchased three newspapers in Missouri.

Then in November 2009, the Democrat-Gazette and Stephens Media combined the operations of their publications in northwest Arkansas to form a new company, Northwest Arkansas Newspapers LLC.

In a September 2009 speech to the Chattanooga Rotary Club, Hussman said: “We’ve been in this business 100 years, and we think it will still be around 100 years from now.”

The Democrat-Gazette is one of the few newspapers in the country that still has statewide circulation.

“We’re trying to hang in until the bitter end on that,” Hussman said. “We’ve been willing to take a contrarian view on things because we were contrarians for 17 years during the newspaper war. That gave us the confidence we needed to hang in there for the long term.”

He earlier had told Editor & Publisher: “When you’re a state newspaper, your reputation is enhanced, and you’re a little more influential. It would be more profitable not to be statewide, but we look at it like a public service.”

So at a time when others are writing obits for the newspaper industry, Hussman and his team press on.

Here’s how Paul Smith put it in that interview with Editor & Publisher: “The key to understanding this newspaper is the 17 years we spent fighting for our own lives. We have had the benefit of having gone through some really tough times, and I think the difference is most people have never seen this kind of adversity. The only question for them was whether they could keep the margins high, not fighting for their lives.”

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