Red all over By Stephen Bar

After 10 years of publication, 'USA Today' has yet to turn a profit. But that could change as more advertisers learn to appreciate the paper.

In the most aggressive effort yet to give advertisers an intimate feel for its operation, USA Today brought more than 300 agency executives and clients to its suburban Washington headquarters last year for day-long briefings. The visitors toured production facilities, lunched with managing editors and brainstormed with the ad sales staff. And then they asked the inevitable question: When will USA Today be profitable?
Publisher Tom Curley, after nearly two years at the helm, has grown used to the query. “I feel I deserve it,” he says. There have been months and quarters in the black, but never an annual profit. Now, with the paper in its 10th year and parent Gannett due to report 1992 results next week, the question is as timely as ever.
Gannett does not break out its numbers, but Curley expects USA Today to lose $8-10 million for 1992–a 50% cut from 1991 losses.
Still, the biggest hits are behind USA Today (most of its $800 million-plus in losses occurred in the first five years) and recently it has taken some major strides. Last September, it surpassed The Wall Street Journal as the nation’s biggest newspaper (circulation now tops 1.9 million). For 1992, advertising revenues rose 5% to record levels. It also logged nearly 2 million “reader contacts”—USA Today-speak for letters, calls, faxes, panels and polling answers– last year. It even has begun to garner respect from its peers (a recent Washington Post story noted a “harder edge” to McPaper’s much-ridiculed upbeat formula).
Meanwhile, it continues to win fans among advertisers. “USA Today is a special medium unto itself,” says Steven Greenberger, vp/director of print media at Grey Advertising. “It’s a quick reach, high-lmpact forum and a cross between a magazine and a newspaper.”
Although that hybrid status made the paper a tough sell at first, it has become an asset as economic realities have pushed agencies to seek alternatives for their clients. Says associate publisher Carolyn Vesper, “Nothing’s an automatic buy anymore, and that’s helped us, because we were never automatic.”
The low rates and deep discounts that once encouraged advertisers to sample the paper have been replaced by sales efforts geared to the medium’s merits. Evidence of stable numbers and strong demographics, along with a readership that has climbed steadily to 6.6 million, have changed the attitudes of ad execs.
“For the right accounts it’s nicely targeted,” says Beth Rockwood, executive vp/associate director of communications services at Young & Rubicam, which last year placed about $8 million in ads in the paper for such clients as Holiday Inn, AT&T and Xerox.
USA Today offers an audience profile comparable to newsweeklies and business magazines, but provides the immediacy and page size of a daily paper. Add its high-quality color reproduction, and it tends to work best for product announcements, new campaigns, series and tie-ins with TV flights. “I wouldn’t use it as a mass buy,” says Rockwood.
Wall Street analysts say USA Today could easily make a profit by upping its 50-cent newsstand price. But that strategy has been rejected in favor of cutting costs, improving production efficiencies and selling more ads. Meanwhile, with circulation up and ad rates firm for the third year in row, the paper has been touting a declining CPM even as competitors like Time and The Wall Street Journal have been losing tens of thousands of readers.
USA Today also has been pushing flexibility and innovation, such as quick production turnaround; more positioning opportunities; print ads made from TV-spot images; and even data-base marketing using “reader contacts.”
These tactics seem to be working. Vesper says contracts and commitments going into 1993 are up 100% over last year. Given that USA Today is not among the top 30 publications in print ad volume, it still has plenty of room to grow. With auto and travel as strengths, much of the focus will be on weaker categories like financial services, computers and retail.
As for the dreaded matter of profitability, it doesn’t appear to be much of a factor. Gannett is firmly behind the paper (the USA Today brand name enhances the company’s image and affords tremendous spinoff potential). And advertisers say the lack of profits doesn’t affect readers and readership-there’s been no move to control costs by reducing quality or contracting circulation–and therefore doesn’t really affect them. “It’s not an ovewhelming concern,” says Charles Rutman, executive vp/media manager at Backer Spielvogel Bates/Worldwide.
Still, Curley believes a year in the black could work wonders. “It would give us some momentum in categories where advertisers are reluctant,” he savs. It would also give him a break from the same old question.
Copyright Adweek L.P. (1993)