By reinventing the venerable Memphis institution, Pepe hopes to attract new niche consumers and quadruple the number of advertisers the CA does business with in the next five years.
The first major change initiated by Pepe occurred earlier this year, a mere four months after his arrival from St. Louis after a five-year stint as publisher at Suburban Journals. The CA was divided like an amoeba into five similar-but-not-the-same, community-specific editions. The idea was to offer more sections, more localized news, and -- most obviously -- more opportunities for luring advertisers who'd been priced out by the paper's previous business model. The controversial change -- especially ironic in a region constantly debating the merits of government and school consolidation -- wasn't initiated with the CA's current subscribers and readers in mind. Pepe says the changes he's made are mostly for those who don't already read the newspaper regularly. He says the new community editions are only the first phase of a bigger plan: to reposition the CA as a "multi-platform content provider."
There's been a lot of talk about "community journalism" emanating from 495 Union Avenue since Chris Peck took over as editor of the CA in 2002, but earlier attempts to provide customized news for Memphis neighborhoods offered an uneven mix of local journalism and reader- and PR-firm-provided content.
The CA has also been plagued with labor disputes in recent years. Under former publisher John Wilcox, who resigned in 2005, the CA underwent several rounds of staff layoffs and buyouts. All three of the paper's unions remain without a contract. Wilcox hired Michael Zinser, a noted anti-labor attorney from Nashville, who negotiated Peck's previous paper, the Spokane Spokesman-Review, through the decertification of its union in 1997.
Between Zinser's battle with the Newspaper Guild, Wilcox's laser focus on cost control, and the realization by staff that fewer people meant increasingly heavy workloads, morale among the rank and file at the CA was low. Business-wise, Pepe describes the newspaper he inherited as in full-on "death mode." Dismissing critics of the paper's suburban-style redesign, Pepe casts himself as a savior of print journalism -- at least as it applies to Memphis' newspaper of record. The Flyer spoke with Pepe last week:
Flyer: The impending doom of daily newspapers seems to be a popular narrative in media reporting these days. Circulation is declining everywhere. Profit margins are down to around 20 percent -- which is low by historical standards but still twice the average margin of a Fortune 500 company. Are newspapers going to find new revenue streams, or are they just going to have to learn to live with lower profits?
Pepe: Both. Newspapers have been very dependent on two main revenue streams: retail and the service sector. They only do business with about 15 percent of the total businesses in their marketplace. They derive their revenue from that 15 percent. So if you reposition yourself as a communications company and you set out as one of your initiatives to help any business in that community grow, you've got to do things differently.
How many businesses only do business with 15 percent [of their market] and not say there's an opportunity? Couple that opportunity with the fact that there's more information coming through [The Commercial Appeal's] door every day than any other business in this community. Because we are a newspaper company and are limited to the number of newsprint pages we print every day, we probably only use 10 to 15 percent of that information. We have to try to find groups, segments, and markets out there that have a need for all of this other information. But [the delivery of this information] doesn't have to be within a newspaper platform. It can be a Web-based platform, or it can be direct mail.
We can develop niche publications. If I want to open up to more people and we have all this information of value to groups, segments, markets, it doesn't always have to be distributed in a newspaper platform.
The Wall Street Journal recently reported that more daily newspapers were exploring niche publications and selling less reach for more money. Is that part of the plan?
Niche publications are only part of it. And I don't want to give the wrong impression, because niche "publications" implies paper. There's new technology out there now -- it looks like a large Etch-A-Sketch -- and it will allow you to transmit PDF files electronically every day. So one day soon we could be looking at transmitting the paper in a PDF file to your home. You get up in the morning and you go pick up your [Etch-A-Sketch] and you read your paper. And it looks like the paper. And it's not like the online experience either, because you're looking at an actual page. It's a paperless newspaper.
So you want to expand your Web-based platforms to distribute more content?
There has to be an a la carte menu for consumers, and you let them decide how they want to receive that information. It can't just be "here's the newspaper, take it or leave it." Take a look at what we're doing right now. We've gone to five news zones and nine advertising zones. The idea was to be more local at the same time that we're metro. We've added sections; we've added pages. And we've been able to get in front of more businesses that are smaller in size. But we can provide a legitimate advertising vehicle for them, because they can buy a smaller pocket of circulation that's a primary market for them without having to provide secondary, or tertiary, and so on.
And advertisers can more easily target their primary markets?
[Our new zones are] more geographic than psychographic or even demographic. Now you can argue that the geography of Memphis has certain demographics tagged to it, which is fine. But it's still a geography-driven concept.
But, what if I'm a Mercedes dealer and only want to run in Germantown?
Yeah. I can do it by zip codes, zones, routes. I can do it any way. We zone advertising nine different ways on the printed page.
Shortly after Chris Peck arrived, the CA tried tailoring the paper for different neighborhoods. It resulted in errors and late delivery, and you stopped doing it. Now that you're printing five versions of the paper, how will you avoid running into the same problems?
We made a lot of changes, including the complete vision and mission for the company. When I got here, if I were to walk around the building and ask folks, "What's your vision? What's your mission? What's your purpose every day when you come to work?" I would have gotten blank looks or "I don't know." When I got here, this newspaper was in total cost-control mode. [The management wasn't] looking for ways to expand markets and grow revenues. They were in total death mode. You're either dying or growing. You've got to pick one.
It may take a business 50 years to die, but the trend line is a death-trend line. And that's the one they chose to be on here. Scripps Howard, the parent company, doesn't make these kinds of decisions. It's the person sitting in [the publisher's] chair. That person [former publisher Wilcox] said we're going to buckle down and we're not going to spend any money. The culture of the paper, and the morale around here, reflected that decision.
Between layoffs, buyouts, attrition, and a recent flurry of exits from the newsroom, it would appear that resources are being stretched thin. Are we going to see further staff reductions?
The first week I was here, there was already a plan for voluntary buyouts in place, and I was praying that not a lot of people would take them. And they didn't. Only about 30 people took the buyout offer.
I want to add people. If we grow, we've got to add people. If you're going to quadruple the number of businesses you do business with, you've got to have people to call on those businesses. If we're going to continue to write local, local, local, and not do so at the expense of what we do well as a major metropolitan newspaper, you've got to have people to do it. We have to fuel our own growth -- to get the zoning project done as quickly as possible -- so we can get back to being a healthier organization and let people feel a sense of accomplishment.
You mentioned your predecessor John Wilcox. He left this job to become the publisher of the San Francisco Examiner, a free-distribution newspaper. You come from The Suburban Journals, a chain of free-distribution papers. Is it possible that we might see the CA become a free-distribution paper?
I think it could be a menu item, if you have multiple platforms. If there's a demand for it, or a need for it, and you can make money doing it, I'm thinking yes. The excitement is in figuring out new platforms to supply.
Everybody's worried about declining circulation. The Examiner significantly boosted its readership when it moved to free distribution.
It's important [when you're talking about readers] to know what you are measuring. If you look at [the Memphis Publishing Company] as a communications company rather than a newspaper, our readership is higher than it's ever been, because we've got readers on the Web too. The measurements tend to be traditional: how many people are buying and reading the paper, the newsprint.
Some argue that a part of a metropolitan daily's job is to unite the region it serves. How would you answer critics who say that breaking the CA into five geographically specific papers divides the city?
I'd say they are absolutely wrong. We're trying to be the best of both worlds. There are differences in our communities, but what we found when we did our research is that interests [in these various communities] are a lot alike. People are interested in education. They are interested in health, in religion, and what's happening in their community. They define "their community" as the area where they live, shop, go to church, and where their kids go to school.
We also found the newspaper reader today is more entrenched. They have lived here for five years and have kids in school. As individuals, they are only interested in the news as it pertains to them. How can we serve that need as a newspaper without printing 300 pages every day? The only way to do it is to take a part of your paper and zone in and out. All the Memphis news -- what used to be local -- is in the "Memphis and Region" section. And then there's also the local section. By structuring the paper this way, we can get 40 more pages of content [every day] without having to use more than eight pages of newsprint.
But even in the terms you've defined, it's not unusual for someone to live in Cordova, have family in Midtown, and work downtown.
That's a point we debated a long time. One of the things we heard all the time [during our studies in DeSoto County] was, "Am I still going to get my Memphis news?" And the answer is yes. And the growth of the DeSoto Appeal has been phenomenal. It's the third-largest paper in Mississippi now.
There's been some harsh criticism of all the changes made to the CA. You've printed many critical letters to the editor. Do you view the change as a success so far?
An overwhelming success. We've had maybe 300 letters and e-mails either asking questions about the changes or coming right out and saying "this sucks." Three hundred responses represents one-eighth of 1 percent of our total circulation. A lot of the changes we are making, if not most or all of them, are for those people who are not reading the paper. We made these changes so we can grow our audience. The goal was to grow the market without pissing off the core readership too badly. We're not pissing them off -- well, some of them. But people are always getting pissed off at the paper. Some people have problems with too many sections, but all the complaints are coming from core readers. And letters are always from people who don't like what you're doing. A lot of readers, especially longtime readers, still think of a paper as a utility. We had one reader ask if we could take all the ads and put them in one section.
You say a lot of the changes you've made are for people who don't read the paper ... .
I want that family that lives in Bartlett, that has kids in school, that doesn't take the paper or only takes it on Sunday to find us compelling. I want them to say, "I've got information here I can't get anywhere else." A mother of three who's making decisions for her family every day wants to know what's going on in her schools, churches, and hospitals.
None of the three unions at the CA has a contract. How would you describe current labor relations?
We are actively in negotiations again with all three unions. But my view on this is simple: If employees feel they need a third party to negotiate their contracts and really believe that this third party represents their best interests, then they have to live with the process. The process is that there are going to be negotiations. When people say we're holding up pay raises -- no, the process is holding it up.
Who is This Guy?
Joseph Pepe, 49, became a newspaper publisher at 26, not long after graduating from the University of Oklahoma. He's had something of a nomadic career, with stops in Bellingham, Washington, Nashville, Munster, Indiana, and St. Louis while working for Howard Publications, the Gannett Co., and Pulitzer, Inc. He joined The Commercial Appeal in November 2005 after five years with The Suburban Journals of St. Louis.
In its story announcing Pepe's hiring, The Commercial Appeal cited Pepe's tenure in the 1990s at The Times of Munster, Indiana, as "the impetus behind his commitment to community-based journalism." Under Pepe's leadership, The Times morphed into nine community-oriented edition, each with its own front page and local news section. (Sound familiar?)
According to the CA, "advertising revenues doubled, and the number of advertisers quadrupled under Pepe's leadership. Circulation increased 71 percent to 94,000."
Pepe is an avid bridge player and golfer and holds a second-degree black belt, according to The Commercial Appeal. His wife's name is Julie, and he has four children, ranging in age from 22 to 3.