Business News

John Georges' Big Gamble

by Patrick Flanagan

One year later, is his expansion plan paying off?

This story originally appeared in Baton Rouge's Business Report and is its copyrighted material. © 2014 Baton Rouge Business Report reserves all rights to the story.

Photos by Robin May

[Editor's Note: In an announcement released after this article went to press, the Advocate unveiled its newest strategy for the Acadiana market: A collaborative agreement with KATC TV3 for investigative reporting and shared sports and news coverage. The station, it's worth noting, previously had a similar arrangement with The Daily Advertiser, but that collaboration eventually unraveled for unknown reasons.]

A little over a year ago, John Georges launched an experiment that flew in the face of conventional wisdom: He bought The Advocate, a daily newspaper, and instead of going digital, like other newspapers around the country, he expanded his printed product and took it regional.

In the 15 months since, the New Orleans business executive has spent untold millions changing the paper, growing it and developing a new business model built around publishing three distinct editions of the paper every day and delivering them across south Louisiana to readers in New Orleans, Baton Rouge and Lafayette.

Along the way, he has brought in new management, hired top-flight journalists with well-known bylines, and rolled out an aggressive marketing and advertising campaign. He even bought a historic building in New Orleans' Central Business District that will serve as the chic new headquarters for The New Orleans Advocate.

To David Manship, the former publisher and owner of The Advocate, it's all a little mind-boggling.

"He's putting out three editions every day," Manship says. "I don't know what his numbers are, but he is obviously pouring money into it."

Georges won't disclose how much he is spending on The Advocate publications or how much he is putting in the bank. He will only say a previously reported $50 million estimated sale price is incorrect and that the April 2013 acquisition was not financed with any debt. He also says he has a line of credit for working capital, and that The New Orleans Advocate is making money.

"Of course it is," he says, as if the answer were obvious.

Whether Georges' mini-empire is a viable profit-maker over the long term is not an idle question, though. In a media landscape that is littered with the husks of failed daily newspapers, Georges is making a big gamble on an ambitious expansion program. While publishers in virtually every other market in the country are pulling in their horns or calling it quits, Georges, who made his fortune in the grocery wholesale business, remains publicly exuberant about the wisdom of his business plan.

"We're going to be as successful in the space of media as we are in groceries," he says. "There are going to be winners and losers in the field of media. We are positioning ourselves to be the winner."

Since he acquired The Advocate, Georges has said repeatedly that his main reason for doing so was to perform a civic duty by restoring daily newspaper service to New Orleanians - something they lost when The Times-Picayune cut its print publication to three days a week in favor of digital. That doesn't sound like a profit-driven motive, but ultimately, Georges has to make the numbers work if he is to fulfill his civic ambition.

John Georges

It's too soon to know whether he has enough publisher's ink in his veins to pull off this gamble. National circulation data confirms that Georges has increased The Advocate's reach and that more people are reading the paper. But those same numbers also show that all of those new readers have come from New Orleans and Lafayette. In Baton Rouge, readership has continued a decline that began several years ago.

Advertisers, meanwhile, have been slow to warm to The New Orleans Advocate, where the paper is aggressively trying to make inroads against The Times-Picayune. The New Orleans Advocate's penetration in the Crescent City is growing, but it's still less than one-third of The Times-Picayune's. Some advertisers are starting to buy. Others are sitting on the sidelines, waiting to see if the paper's circulation increases before making a decision. Then there are those who have given up on newspaper advertising altogether.

The expenses of publishing and distributing three daily papers must also be taken into account, to say nothing of the new, better-paid writers he has hired in New Orleans and the $1.7 million building he is renovating there. While printing three separate daily editions is not as costly as it was when printing presses had to be manually plated and reset between editions, it's still a pricey undertaking.

"Newsprint is the biggest [incremental] cost" in printing multiple editions of a newspaper," says veteran newspaper consultant Alan Flaherty in Cincinnati. "Newsprint costs on the order of $3 per thousand pages, so if you're printing 30,000 copies of a 30-page paper, your cost of newsprint is $2,700 a day."

The Advocate's cost of the high-speed, high-volume press it operates in Baton Rouge - and operators' salaries and benefits - is already baked into the expense of doing business, so its incremental, non-newsroom costs are for paper, ink and transportation.

Based on The Advocate's published rate card, "it looks like they can get about twice the cost of the newsprint in ad revenues in New Orleans," Flaherty says. "As an entry strategy into the market, that's not a bad strategy. The question is how long you want to continue it and whether you can ever get to the point that you've got something close to a free-standing, self-sustaining product in New Orleans. I would have to think there's some subsidization going on," whereby the Baton Rouge mother ship covers some costs of printing and distributing The New Orleans Advocate.

One other expense to cover: home delivery and newsstand operations in New Orleans. To deliver 30,000 papers in metropolitan New Orleans, "I imagine he's got some pretty expensive circulation costs down there," Flaherty says.

Georges downplays the cost and says publishing multiple editions every day is "not really" more expensive than printing just one edition. The biggest challenge is the amount of time it takes to run the presses and the deadline pressure that creates.

"But printing costs, circulation, advertising that doesn't matter," he says. "The bigger issue is, did we clear the beach at Normandy? Are we there yet? Yeah, pretty much."

In reflecting on his first year as a newspaper publisher, Georges says it was busier than he would have imagined. He crisscrossed the state, traveling among the three cities, making speeches at Rotary and Kiwanis clubs, meeting business leaders and attending countless civic and community events.

He jokes that he attends as many functions in Baton Rouge as Mayor Kip Holden.

"We almost run out of things to talk about, we see each other so much," he says.

He has also gotten an earful from readers in all three cities. As a publisher, he hears it all - a late paper, a wet paper, a sports score that didn't make it in because the game ran late.

He hears, too, the more pointed comments about changes to the paper's look and editorial content. Some people love it. Some people, not so much.

Everyone has an opinion. Lafayette, he says, has been particularly receptive to The Advocate and, anecdotally, very complimentary. Baton Rouge and New Orleans have been a little tougher.

Personally, he is very proud of the well-known writers who have joined The Advocate staff. He points specifically to New Orleans social columnist Nell Nolan, who chronicled the social scene of well-heeled New Orleanians for decades at The Times-Picayune before Georges hired her away. He also nabbed two-time Pulitzer Prize-winning editorial cartoonist Walt Handlesman, conservative pundit Quin Hillyer and political analyst Stephanie Grace.

He also touts the paper's more aggressive and comprehensive coverage. It sent a reporter and photographer to the Middle East to report on Pope Francis' recent trip there. It contracted with former Wall Street Journal editor Steve Garbarino to write freelance business features that rival, in style and substance, those found in national publications.

Georges says those measures have improved the quality of the paper, and industry expert Rick Edmonds, of the Poynter Institute, agrees. Whether that translates into more readers - and by extension, more advertisers - is another matter.

"I'll certainly give them credit: If you want to be a serious competitor, bringing in good writers and columnists is a good strategy," says Edmonds. "But broadly speaking, readers pay a lot less attention to bylines than we in the industry do, so it's some help but not as much as you may think."

Judging from the statistics, more readers are picking up The Advocate, but they're not necessarily attracted by the better journalism it offers, and they're not in Baton Rouge. Rather, they're new readers in Lafayette and New Orleans.

According to the most recent report from the Alliance of Audited Media, the national organization that tracks newspaper circulation, The Advocate's average Sunday circulation was nearly 31,000 in New Orleans and Lafayette combined, a 32% increase over the 23,500 the two cities had last fall, the last time a circulation report was published.

It's unclear from the report, however, how that circulation figure breaks down between the two cities. Such data will not be available until a more comprehensive report is issued by the AAM later this year.

It's also unclear whether much of that growth has come from New Orleans at all. Last fall, when the reported circulation was 23,500, The Acadiana Advocate had not yet been launched. Given the size of the market area and all the fanfare that accompanied The New Orleans Advocate's high-profile entry into New Orleans, Edmonds at the Poynter Institute is not terribly impressed by AAM's recent figure.

"That's not knock your socks off' by any means," he says. "If they were at 50,000 or even 40,000 that would be pretty good. ... But 30,000 seems to be pretty flat."

Perhaps more troubling is that while The Advocate's circulation figures were up overall because of the growth in Lafayette and New Orleans, in Baton Rouge they were down. Circulation dropped 6% on Sundays over the previous reporting period, to some 65,600 from 70,000. Weekday circulation, meanwhile, inched down 1% to roughly 53,100 from 54,000. Those declines are smaller than in the past few years, which is encouraging. But experts say the numbers speak to a larger trend that is going on in Baton Rouge as it is elsewhere.

"The figures verify what everyone knows," says Jerry Ceppos, dean of the LSU Manship School of Mass Communication. "The decline in print circulation is inexorable."

Georges disputes that The Advocate is continuing to lose readers in its Baton Rouge home base, arguing that the circulation numbers referenced are obsolete. The spring AAM report is averaged from the preceding six months, which means it dates back to last September-right about the time Georges was getting his feet on the ground and getting ready to roll out a major advertising campaign for his paper. In the months since, he says, the paper has stopped losing readers in Baton Rouge.

"The declines in circulation that occurred in Baton Rouge for the years and months prior to our ownership have ceased," he says. "The [circulation] reports lag and are averaged, so they don't reflect the recovery in stopping the losses."

He also points out that The Advocate in Baton Rouge enjoys the distinction of having the highest market penetration rate in the U.S., according to Scarborough Research, a national market research company. The paper reaches more than 63% of Baton Rouge residents every day. So while the circulation figures may be dropping, at least the decline is not as fast here-a traditional, Southern, newspaper town - as in other markets.

Media buyers, who place ads for their clients, say all those statistics are important, and they keep an eye on them. But they also take them with a grain of salt.

"You don't need the audit company to tell you that newspaper readership has gone down," says local media buyer Julie Joubert. "It's a digital world, and everyone is moving to digital. That's just the reality of it."

One measure of how challenging the market is for newspapers is the change in the number of ads they contain. Anyone who reads the newspaper knows they're not as fat as they once were because advertisers aren't buying as much space in them as they once did.

Dorignac's Food Center supermarket in Metairie is a case in point. For years, the grocery store's weekly full-page ad in The Times-Picayune was as predictable as the recipes that appeared in the weekly food section.

Later this summer, however, Dorignac's will stop running its weekly ads in The Times-Picayune in favor of periodic ads during certain key times of year like the holidays. The decision to move away from print wasn't an easy one, but it made sense.

"Newspaper is just not bringing the value we need," says Stuart Feigley, whose Baton Rouge firm, Wright Feigley Communications, handles the store's advertising. "We're trying to reach a broader group of people with a set, finite budget. It's a numbers game."

The Dorignac's situation illustrates the challenge The New Orleans Advocate faces as it tries to make inroads in the New Orleans market. Feigley says the supermarket considered The New Orleans Advocate and even bought ads in it a couple of times last year, when the paper had attractive, low-priced introductory rates.

But the client didn't see much return from those buys, and for now Feigley is still watching The New Orleans Advocate's circulation numbers to see what happens.

"We're trying to bring our demographic [age of the customer] down, and there are many other ways to do that," he says. "Print doesn't seem to be that medium."

Furniture store owner Mitchell Mintz is of like mind. For decades, his swanky Hurwitz-Mintz placed weekly full-page and double-truck ads that showcased the store's upscale sofas, dining rooms and bedroom sets. The buys were huge. But Mintz stopped advertising in The Times-Picayune a couple of years ago, and he isn't bothering to try The New Orleans Advocate. His store faces more competition than it once did, and he's trying to reach younger shoppers.

"Older people read the newspaper, but they're not the people buying furniture," he says. "If we have to use our dollars more effectively, we have to use it to the best advantage. So we have to try other media."

Not all advertisers agree. Jewelry stores have long been big newspaper advertisers. They still are. Jeweler Lee Michaels regularly buys ads in The Times-Picayune and in both the New Orleans and Baton Rouge editions of The Advocate. So does Adler's, which has retail outlets in Baton Rouge and New Orleans. What makes The Advocate particularly attractive for such retailers is the deals it offers. The paper's ad space has always cost considerably less than that of The Times-Picayune, with the cost of a display ad averaging about 40% of a comparable ad in The Times-Picayune.

Now it's an even better bargain. Advertisers say they can buy an ad in the Baton Rouge edition, and for as little as a 5% to 10% premium, it can also run in New Orleans and/or Lafayette.

"I show their numbers as being a really good value," says Nathan Miller, whose New Orleans ad agency, Hoffman Miller, handles advertising for Adler's. "Their reach is a lot smaller than The Times-Picayune's but they're reaching at a far smaller cost, so it makes sense from a cost standpoint.

Just because one paper may have 10 times more circulation, it still may be more efficient or cheaper per thousand people to buy the little guy."

Another advantage The Advocate claims, in New Orleans at least, is that it reaches a more affluent, professional reader. Georges says the paper's demographics are very strong and that the average reader of The New Orleans Advocate has an income of between $70,000 and $80,000 per year.

They are readers, generally, who are plugged into the business climate across south Louisiana and therefore appreciate The Advocate's regional coverage.

"We took the cream first," Georges says of the paper's readership.

Ochsner marketing executives say that claim has been supported by their experience with The New Orleans Advocate. Terri McNorton, vice president of marketing for Ochsner Health Systems, says the hospital places targeted media buys in The Times Picayune, The Advocate and The New Orleans Advocate, depending on the nature of the ad. If she wants to advertise an executive wellness program, for instance, she specifically buys The New Orleans Advocate because she feels it's the most effective way to reach her target audience.

"It seems to have a stronger base with business leaders," she says. "The size of The Times-Picayune certainly gives them a broader demographic group, but we have seen that the entrepreneurial, business leader is looking to The Advocate to understand what is going on across the region."

Georges hopes to build on that kind of sentiment. He has become more personally active and aggressive in courting advertisers, picking up the phone, calling local CEOs he knows as friends and colleagues, and paving the way for his paper's sales reps to follow up with calls. He says it is making a difference, pointing to a major furniture store that now advertises in The New Orleans Advocate and a local car dealer that soon will also.

In his second year, he will spend more time working on the sales side of the paper's business.

"Once you clear the beaches at Normandy, you can kick back and be a little more strategic," he says.

Part of that strategy will involve shoring up The Advocate's new zoned editions: community weekly sections that began appearing on Thursdays earlier this year. So far, New Orleans has two: The Crescent City Advocate and The St. Tammany Advocate. Baton Rouge has three - The Southside Advocate, The Ascension Advocate and Livingston-Tangipahoa Advocate. Lafayette doesn't have one yet.

The community weeklies are devoted to community news - stories about local graduations, Little League championships, and the kind of garden club contests that might not make it into the big paper. The weeklies are more popular with readers than one might suspect because they're full of pictures and short write-ups about the everyday things that everyday people do.

But the real purpose of the community weeklies is to attract small businesses that can't afford to advertise in the big paper and prefer the lower price and targeted reach of a zoned edition. Matherne's Supermarket, for example, hadn't advertised in The Advocate since the early 2000s. Lately, though, it has been buying a full-page ad in The Southside Advocate, which sells for around $1,100 and reaches some 20,000 readers.

"It's goes to the ZIP codes where our stores are, and it was well-priced," Tony Matherne says. "So we decided to try it again."

Another new strategy of The Advocate is to compete for legal classified ads in Orleans and Jefferson parishes. During the recent legislative session, the paper lobbied lawmakers to change state law and drop the requirement that a publication be in business at least five years in the parish in order to be eligible to bid for the ads. The Times-Picayune fought the move, but The Advocate prevailed and has already picked up one contract from the city of Kenner. Ironically, though, there was a misunderstanding over its quoted bid, and The New Orleans Advocate was awarded the contract for a paltry 8.3 cents per column inch, which amounts to about $10,000.

Georges says it doesn't matter how much the final amount turns out to be. Legal classifieds are not vital to the paper's financial picture. They are, however, another source of revenue and, the businessman in Georges says, every penny counts.

Perhaps the most significant change Georges is making to The Advocate pertains to its digital products. The paper upgraded and improved its websites in recent months. It also introduced mobile apps that make all three editions accessible on a smartphone, and it is growing its online readership.

Digital circulation - which includes readers who have downloaded the paper's mobile app and also those who subscribe to its e-edition online - tops 27,000, according to the AAM. That figure includes digital circulation for Baton Rouge, Lafayette and New Orleans; it's not clear how it breaks down among the three cities.

There are no figures from the same period in 2013 against which to measure the progress. But the digital circulation during the same period for Times-Picayune - which has aggressively promoted its digital product - can serve as a point of comparison. It was slightly more than 31,000, only about 12% more than The Advocate.

Georges has downplayed The Advocate's digital product until now, promoting, instead, the print editions of The New Orleans Advocate and The Acadiana Advocate. But there are clear indications it is enhancing its digital product and preparing to do more in the future. The new headquarters of The New Orleans Advocate will have a ground-floor studio for video production.

"We're not entering the digital space out of necessity," Georges says. "It's a natural evolution of what we're doing."

But Georges believes there is still a viable market in three cities across south Louisiana for a daily, print version of The Advocate. Through all the growth, challenges and lessons learned in the past 15 months he continues to maintain that his business model is a sound one.

"The future is still bright for us. It's not like we've hit a wall or that the trends are going in another way," he says. "We're still smiling."

This story originally appeared in Baton Rouge's Business Report and is its copyrighted material. © 2014 Baton Rouge Business Report reserves all rights to the story.