DEADLINE USA
USA Today dubs itself the nation's newspaper. But the Journal and the Times want that title too.

By Nicholas Stein
FORTUNE   July 8, 2002

EVERY SPRING, A FEW WEEKS BEFORE THE KENTUCKY DERBY, the newspaper industry stages its own high-stakes run for the roses: the Pulitzer Prizes. Though the mudslinging in this 85-year-old competition is purely metaphorical, the jockeying for journalism's highest honor is every bit as fierce. In recent years it has often come down to a race between the Wall Street Journal and the New York Times, the second and third most widely circulated newspapers in America. The Journal held the edge between 1999 and 2001, winning six Pulitzers to the Times' four. This year the Times has reasserted itself, capturing awards in an unprecedented seven of 14 categories, while the Journal took only one.

A perennial also-ran in the Pulitzer race is the newspaper with the country's largest readership--USA Today (circulation: 2.2 million). In its 20-year history, the paper has not won a single prize. How ironic, then, that USA Today has become the newspaper both the Times and the Journal are striving to emulate. For the two are rivals in a competition just as intense as the Pulitzers and ultimately more important to their future: the battle to supplant USA Today as America's largest national newspaper.

Not surprisingly, the idea of a showdown with USA Today--famously nicknamed McPaper for its "lite" approach to the news--makes the august editorial staffs at the Journal and the Times mildly uncomfortable. When the Journal's page one editor, Mike Miller, is asked to list his paper's chief rivals, he rattles off half a dozen--from which one name is conspicuously absent. "Oh, yeah... and USA Today," he adds a bit sheepishly after a visitor jogs his memory. A former Times editor says, "It's tough for me to think that anyone at the Times views USA Today as a real competitor, editorially speaking. I don't remember picking up a copy the entire time I was there."

Their colleagues on the business side think differently. In April the Journal and the Times unveiled sections clearly inspired by their lowbrow competitor. The Journal's thrice-weekly Personal Journal and the Times' new Friday supplement, Escapes, both focus on travel, health, cars, and personal finance--all service-oriented staples of USA Today.

The notion of an old-fashioned, bare-knuckled newspaper war seems a throwback to another time. After all, a wave of consolidation by media conglomerates, including the Tribune Co., Knight-Ridder, and USA Today's parent company, Gannett, has turned most of the country's municipalities into one-newspaper towns. The newspapers that survive face mounting pressure from an endless array of 24-hour cable networks and Internet news sites.

Paradoxically, the fragmentary nature of the 500-channel universe has helped the handful of papers with enough stature to achieve a national presence. Most television programs and magazines increasingly focus on niche audiences, so advertisers that want to target affluent, educated consumers across the country have turned to national newspapers. "Fewer than a dozen TV programs still reach more than 10% of the population at any one time," says Miles Groves, a newspaper consultant at the Barry Group, a Maryland media consultancy. "As a result, national newspapers have increased their share of the advertising pie." The nationals are also less reliant than local papers on classified ads, which have lost revenues to Monster.com and other Internet sites. Even with a recession-fueled decline last year, annual spending by advertisers in national newspapers was 24% higher in 2001 than in 1998, according to a Merrill Lynch study, while local newspaper advertising grew by just 3%, and classifieds decreased by 6%. "An awful lot of people pick up these newspapers," says Monica Karo, a media director of advertising firm TBWA/Chiat/Day. "And they are exactly the type of people I am trying to reach."

Though a number of papers have national editions, including the Financial Times and Investor's Business Daily, only the New York Times, the Journal, and USA Today have the wherewithal to play coast to coast on any kind of scale. But in doing so, the three publications--which once had very different missions, audiences, and advertisers--now find themselves converging. The Times, no longer satisfied with its largely East Coast readership and advertising base, has embarked on an ambitious nationwide expansion plan. The Journal, intent on lessening its reliance on middle-aged businessmen and the advertisers that court them, has just finished a costly redesign and repositioning. And while they are loath to admit it, their efforts have made each paper just a little bit more like USA Today.

Anyone searching for proof of escalating competition need look no further than the discounts all three are offering advertisers. USA Today has always been willing to drop its rates, but until recently the other two were not. This year, though, the Times offered one major luxury-goods advertiser a full-page, four-color ad for $57,000, or 46% below its official rate card. The Journal offered the same advertiser a rate of $95,000, 43% below its published prices. "We are about to witness a knockdown, drag-out fight," says Alex Jones, a former Pulitzer Prize-winning Times reporter and currently director of the Joan Shorenstein Center on the Press, Politics, and Public Policy at Harvard--"one not likely to be settled for quite some time."

When Gannett Chairman Allen Neuharth launched USA Today in 1982, media observers thought he was nuts, and summarily dismissed the new paper as an exercise in hubris. Though he had built Gannett into the largest newspaper publisher in the country, Neuharth's 84 dailies played mostly in the minor leagues. His hopes for USA Today were baldly stated by its front-page motto: THE NATION'S NEWSPAPER. "Al always wanted to be a publisher of a newspaper of importance," said Los Angeles Times Co. scion Otis Chandler at the time. "And he doesn't have any."

USA Today's appearance and content were as daring as its mission. In sharp contrast with other broadsheets, it was bursting with color. Most of the articles, seldom longer than a few paragraphs, focused on entertainment, sports, and popular culture. "We had a deliberate philosophy not to be like other newspapers," says former associate editor Tom McNamara, now Sunday editor at the Philadelphia Inquirer. "We recognized that people were just as interested in sports, Star Wars, and studies about health as they were in traditional news."

Early reviews of the new paper ranged from skeptical to downright nasty. When Ben Bradlee, the legendary executive editor of the Washington Post, was asked whether USA Today could ever be a top newspaper, he said, "If it can, I'm in the wrong business." Newspaper analyst John Morton, speaking for many in the financial community, summed up the paper's chances this way: "The list of large-circulation daily newspapers established since World War II is not just short--it is nonexistent."

USA Today lost an estimated $600 million in its first decade as it slowly established its national presence. But though it had to wait until 1993 to turn a profit, in the process it discovered a class of upscale newspaper readers few had noticed before the 1980s: the business traveler. Airline deregulation had made frequent flying more affordable and spurred a surge in business travel. And when they were on the road, business men and women wanted a way to catch up on at least the broad strokes of national and business news--and follow their home sports teams--over a morning cup of coffee. USA Today filled the void.

The paper found its target readers with a novel distribution strategy: It followed them around, selling large volumes in airports and hotel chains. Nearly half of USA Today's 2.2 million readers (2.6 million for its Friday edition) now pick up a copy in those venues. National advertisers have noticed. In 1986, USA Today took in just $15 million in revenues from hotel, resort, and passenger travel advertising, according to CMR, which tracks ad spending by the media. A decade later the figure had risen by more than 500%, to $96 million.

USA Today's pursuit of the business traveler placed it squarely in conflict with the Wall Street Journal. In 1986 the Journal's travel-related ad revenues totaled $34 million--more than double those of USA Today. But by 1996 the roles had reversed, and the Journal's $47 million in travel advertising was less than half of its rival's. (USA Today's total ad sales are only about half the Journal's, though.)

The Journal's spring makeover is an attempt to regain that ground. Though the Journal has been a national newspaper since the 1940s, it had always positioned itself as the weekday bible for business people rather than a paper for the general reader. But as the interests of its readership expanded, the Journal was forced to follow suit. In the late 1980s it introduced two new sections, Marketplace and Money & Investing, to house expanded coverage in media, marketing, technology, and personal investing. In 1998 it moved beyond its roots with Weekend Journal, its Friday arts and culture supplement.

The new Personal Journal, or PJ, as insiders call it, caters to the millennial road warrior, with stories on personal finance, cars, and travel, leavened with bits of nonbusiness fodder. The inaugural issue featured a story on how to get cheap airfares and hotel rooms over the Internet and a review of a Francis Fukuyama book on biotech. "Twenty years ago a businessman--and it was usually a man--left his work behind when he went home," says Joanne Lipman, the deputy managing editor who developed both Weekend Journal and Personal Journal. "Since then, the definition of business has changed."

Of the other recent alterations, the most notable is the addition of color to page one--the first change to that venerable frontage in 60 years. The Journal's parent, Dow Jones, invested $226 million to refit its 17 printing plants, which can now print 96 pages instead of 80--and 24 color pages instead of eight. Dow Jones Chief Executive Peter Kann says, "We hope the color and new content will bring in additional advertisers, especially health care, luxury goods, and automotive."

The Times' entry into the national newspaper sweepstakes is far more recent. Though the paper has had a nationwide profile for more than a century, it didn't launch a separate national edition until 1980. It made barely a ripple, largely because the Times didn't have a way to circulate its papers widely when they were still fresh. Most out-of-town readers could get the paper only in the mail or on the newsstand. In either case, the issue they received was often several days old. Within the Times, the edition had no real support. "Journalistically the Times has always viewed itself as a national newspaper," says its publisher, Arthur Ochs Sulzberger Jr. "It just took some time for the business side to catch up."

That finally began to happen when Janet Robinson took over as the paper's advertising czar in 1994. "We hadn't positioned ourselves to advertisers as a national newspaper," says Robinson, now president of the newspaper. To give advertisers a truly national audience--and get the paper to readers first thing in the morning--the Times completely overhauled its distribution network. Rather than tying up capital by building new printing plants, the paper subcontracted space from 16 plants across the country, all belonging to local and regional newspapers. The Times arranged for the local papers to handle delivery too. In Atlanta, for example, the Times is printed by the Atlanta Journal-Constitution and delivered in Journal-Constitution trucks. Home delivery is now available in 217 U.S. markets--155 more than just five years ago. The Times also signed a distribution deal with Starbucks to sell the paper in 2,200 of the coffee retailer's American outlets. Those initiatives have helped turn the Times into a real daily across the country. "Even though I live in Maryland," says the Barry Group's Groves, "I now get the Times an hour before the Washington Post."

The Times' new executive editor, Howell Raines, is a big believer in taking the paper westward. "It's a simple numbers game," he says. "There are more people outside New York who don't get the Times than inside New York." In the past year the Times has bulked up the national edition so that it is almost indistinguishable from the hometown version, in effect using the city as a launching pad. Gone is the truncated culture section, Living Arts, replaced by most of the arts, culture, and sports coverage that runs in the New York edition. New to all editions is the Friday Escapes section.

While the first of those changes aimed to pull in new readers, the latter--as Sulzberger freely acknowledges--was designed largely to curry favor with advertisers. "Escapes," he says, "is a section where the needs of readers and advertisers converge."

As their missions intersect, the competition between the Times and the Journal has grown more furious. The Journal beats the Times regularly on business stories but rarely on anything else. And with the Times running nearly as many column inches of business news in a given week, the Journal is under pressure there too. As one former Journal reporter says of his ex-colleagues (some of whom refer to the Times as Brand X), "If there is a story in the Journal that the Times doesn't have, there is glee. But if they see a story in the Times that the Journal doesn't have, there is hell to pay."

Still, the willingness of both papers to emphasize the advertiser-friendliness of their new sections indicates a subtle shift in the nature of the rivalry--that it's more about money than about journalism.

How, then, is this contest shaping up? So far at least, better for the Times than for the Journal. For proof, just look at what has happened to Dow Jones recently. And listen to the things the people at the Journal have to say about the Times.

By going national, the Times escaped the sharp declines in circulation experienced by most large dailies over the past decade. The Journal still sells many more copies--1.8 million, to 1.2 million for the Times (1.6 million on Sundays). And most Times readers do still live on the East Coast, as people at the Journal like to point out. "I can't ever imagine the Times selling more subscriptions in California than they do in New York," says Peter Kann. "They would have to completely reinvent themselves." But the Times' circulation has increased by nearly 100,000 since 1998, while the Journal's--in a period that witnessed a surge in Americans' interest in business--has basically stayed flat. And all of the Times' circulation gains came from outside metropolitan New York.

The Times' strength in circulation has also been a boon for the New York Times Co., which relies on the paper for 58% of its revenues. In 2001, circulation brought in revenues of $508 million--nearly twice the amount generated by the Journal (in part because the Times has a Sunday edition; the Journal does provide a business section for many metro Sunday papers, which brings in both circulation and ad revenues).

The Times' appeal to national advertisers has grown too. In 1996 only 34% of the paper's ads ran in the national edition. By 2001 the figure had swelled to more than 86%. The result is that the Times is suddenly encroaching on territory the Journal and USA Today long had to themselves.

The barbs flying from the Journal suggest that the Times is hitting the mark. "The New York Times is definitely becoming more of a competitor as they continue to broaden their distribution nationally," says Dow Jones CFO Richard Zannino. "But we are a much more serious, meaningful, informative business read." Zannino also can't resist pointing out the similarity between the Times' new Friday Escapes section and the Journal's Friday supplement. "Imitation is the sincerest form of flattery," he says. Adds page one editor Miller: "No matter how much the Times wants to be like the Journal, they will never be the Journal. They have a different mission. They aren't a business paper."

Then again, no matter how much the Journal wants to be like the Times, it will never be the Times. "The Journal is still somewhat intimidating to the lay person," says Lauren Rich Fine, newspaper analyst at Merrill Lynch. "The redesign has not really alleviated that concern." The Journal's image as a business paper has also left it dangerously dependent on a couple of advertising categories. Last year 41% of the Journal's $700 million in ad revenues came from finance and technology. That focus may have served the paper well during the boom of the late '90s, but not now. In early June, Dow Jones announced that it would miss consensus earnings estimates for the second quarter in part because of steep declines in those two categories.

Incredibly, many of the Journal's top editors and executives seem to feel that the paper has no serious challengers in the newspaper world. An oft-spoken phrase at Dow Jones headquarters, in South Brunswick, N.J., is "There is no Pepsi to the Journal's Coke"--meaning that the Journal has no direct competitors. Paul Steiger, the Journal's managing editor, embodies that credo quite nicely. "We are going after the business reader, and it seems to me our most important competitors remain FORTUNE, Business Week, and the weekly newsmagazines," he says. "I see the New York Times and USA Today trying to slug it out for the general-interest reader.... Now, that would be a fun competition to cover." When asked to respond, Arthur Sulzberger breaks into a demure, Gray Lady-like smile. "We clearly see them as a competitor," he says. "One of the reasons we see them expanding into nonbusiness areas is their recognition that a broad, diverse advertising base is a good thing."

The Times has also gained ground on USA Today, which is still the front-runner in the national newspaper race. USA Today's sports coverage remains unmatched, with the Times' largely regional in scope (and of course the Journal runs only occasional sports stories). USA Today also has the backing of Gannett, a vast media enterprise far larger and more diverse than the other two. Every morning, anchors on 22 Gannett television stations spend ten minutes summarizing that morning's USA Today. "Our presence on the networks," says USA Today editor Karen Jurgensen, "reinforces the notion to viewers that we are a national news organization."

Yet some of USA Today's traditional strengths are beginning to cut the wrong way. The massive distribution in hotels and airports must take some of the blame, especially since many recipients don't pay to get the paper. "USA Today is crammed under so many hotel room doors that the circulation integrity is compromised," says Eric Dochtermann, CEO of Katz Dochtermann & Epstein, whose ad agency represents Swatch and other watch brands. "Partly for this reason, we recently decided to take out a full-page color ad in the Times instead of in USA Today."

The paper's jazzy pop-culture focus also fosters a downmarket reputation. To change those perceptions, the paper has made stories longer and given greater priority to hard news. "In the early days, stories stopped just at the point they were getting interesting," says publisher Tom Curley.

San Jose Mercury News managing editor Susan Goldberg, who left the News to join USA Today in the late 1980s, contends that her old paper may finally be getting some respect. "When I joined USA Today, people said I was crazy," she says. "And then a few years later they began to call me for jobs. That's when I knew things had changed."

This year's Pulitzers suggested that Goldberg may be right. USA Today received its first-ever finalist nomination for reporting. Then again, the prize ended up going to the Times.