Denver's Dueling Dailies: One Paper Backpedals

IT'S the country's fiercest and longest-running newspaper battle.

For the past 100 years, the Colorado's Rocky Mountain News - a scrappy tabloid - has gone toe-to-toe with the broadsheet Denver Post. But to the dismay of some Centennial State readers, the News has just bugled a strategic retreat.

Last month, it eliminated statewide home delivery to cut costs. The 137-year-old publication is now restricting distribution to its core Denver-area market. The Post meanwhile continues to deliver throughout Colorado, with a virtual monopoly in the state's 48 outlying counties.

Restricting circulation to a core market reflects a national trend among large metropolitan newspapers. Throughout the industry, newspapers are struggling to stay competitive with other media sources and to stay profitable as newsprint costs soar. The Miami Herald, Los Angeles Times, Chicago Tribune, and Kansas City Star all recently dropped home delivery to customers outside their primary markets.

But this trend toward retrenchment is heightening the enduring tension between a newspaper's public service mission and its ability to operate as a viable business. Perhaps nowhere is that tension as pronounced as in Denver, one of the nation's last major two-newspaper markets.

Larry Strutton, publisher and president of the News, says shifting the circulation focus to the economic backbone of Colorado is "an aggressive business strategy" that will benefit advertisers. "This new distribution area accounts for 69 percent of all retail spending in the state. We know it's the area most essential to our advertisers."

Rocky Mountain News executives chose to jettison distribution to distant parts of the state because it was the least cost-effective circulation. A subscriber in Alamosa, 228 miles from Denver, for example, paid $4.75 a month for home delivery. But the monthly cost to produce and deliver the paper was $35.

Still, Kirk McDonald, executive vice president at the Post, says advertisers may balk at the News strategy. "Colorado is not a typical state, such as California or Florida or Texas, with multiple retail trade areas. Consequently, the areas outside the core Denver market take on greater significance," he says. "Our research shows that the 1.3 million people who live in the 48 outlying counties spend $1.3 billion in the Denver retail-trade area annually."

But Linda Sease, vice president of marketing for the News, says advertisers get more bang for their buck in Denver County and the 12 counties that surround it. Since the consolidation move 45 days ago, Ms. Sease says the News has gained "a number of exclusive advertisers" and "a big increase" in circulation.

Over at the Post, the mood is easily as jubilant. "Rarely do you see a newspaper shrink itself to success. Certainly that is not a victory strategy," says Vernon Mallinen, the Post's vice president of marketing.

But he says it's not realistic to gauge the results of the rival paper's plan so soon. Advertising decisions are typically made in annual budgets, and circulation changes won't be evident until the next circulation audit report. "This September," Mr. Mallinen predicts, "the News will trail the Denver Post."

Scaled-back distribution of the News as much as guarantees the Post a 7 percent circulation increase - equivalent to the number of subscribers dropped by the News.

In January, the News and the Post were running neck-and-neck: Although the News held the daily circulation lead (331,044 to the Post's 303,357), the Post led on Sunday (456,391 subscribers to the News' 436,079). But the Post had the clear hold on momentum, and was steadily closing the gap on daily numbers. Over the past five years, the Post's Denver-area circulation increased 39 percent on weekdays and 20 percent on Sundays. During the same period, the News' gains were only 1 percent and 15 percent, respectively.

Colorado's population explosion in the '90s was a key factor in the rapid growth of the Post. The Post's broadsheet format was more familiar and appealing to newcomers, most of whom were from California. Suddenly, tens of thousands of new residents were signing up for the Post, translating to a subscriber gain of 100,000 in just five years.

"The Post has been one of the fastest growing newspapers in the country," says Harry Dubroff, editor of the Denver Business Journal.

"If there's going to be a fight to the finish, it's the newspaper with momentum that comes out on top," he says.

Lack of momentum, media insiders say, is what did in the Arkansas Gazette in Little Rock, the Houston Post, and the Dallas Times Herald in those two-paper markets. Can two major dailies continue to coexist in Denver?

"I don't think we'll know that for several years," says Mr. Dubroff. At the very least, the News now has a chance to get its costs in line and reposition itself. And the News is not without strengths: Its parent company, the publicly held E.W. Scripps Co., is financially solid. Company shares rose on Wall Street after the News announced its new distribution strategy.

But Mallinen - who was marketing director at the News before joining the Post staff five years ago - says both papers have never been profitable at the same time. "Can the city continue to support two papers? It could be said that the city hasn't done that for the last 15 years," he says. "I think the question has already been answered."

Nonetheless, "The city is better off with two papers," says Marge Eastman of the Colorado Press Association. "They both have top-notch people. Having both is more stimulating, and people have a choice of papers."

Over a mountain pass in Alamosa, "customers are highly upset," says Charles Rodriquez, who runs the Stop 'n Shop in the center of town.

"They keep asking us why we can't get the Rocky Mountain News anymore. A lot of people preferred the News. Now they have to settle for the Post," he says.