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2/8/00 University of Hawaii students are being aced out of half-price
subscriptions to the Star-Bulletin but still being offered good
deals on the Advertiser by HNA. The Gannett paper is even being
given away free on campus, an obvious attempt to artificially
boost circulation figures. Annoyed by this, I wrote an examination
of the street-sales issue for the SOS site:
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Put the Racks Back, Jack!
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Call them street racks, honor boxes or news stands, the metal
and glass newspaper dispensers scattered throughout a community
are a direct reflection of a newspaper's capability of reaching
their readers. The removal of Star-Bulletin racks -- and grudging,
tardy replacement -- by the Gannett-owned Hawaii Newspaper Agency
is a serious issue that illuminates deeper problems in the tangled
relationship between Honolulu's daily newspapers.
When the Honolulu Star-Bulletin and the Honolulu Advertiser merged
operations in 1961-'62, a third company was formed, the Hawaii
Newspaper Agency, in order to handle all the tasks involved in
producing a newspaper that did not involve the editorial content,
such as advertising sales, production, printing and distribution.
HNA provided Hawaii businesses an opportunity to advertise in
both newspapers, and in return were promised full-market coverage.
The Failing Newspaper Act (FNA) of the late '60s gave a governmental
stamp of approval on this collusion between separate corporate
entities. A Joint Operating Agreement, or JOA, between the two
newspapers and the government allowed Star-Bulletin owner Gannett
Inc. to reap huge profits from the relationship and post these
monies to corporate headquarters during the 1970s and '80s. The
amount of these profits has never been made public, but conservative
estimates by the Hawaii Newspaper Guild during this period figure
a 40 to 50 percent profit margin.
The Hawaii Newspaper Agency, or HNA, was jointly owned by the
Advertiser and the Star-Bulletin/Gannett, and the Advertiser used
their position to leverage distribution concessions from the Star-Bulletin,
who gave up distribution of the product to the neighbor islands
in the early 1970s. They had little choice: if Gannett opposed
this move, they would be in violation of the spirit of the FNA
and the legal status of the JOA would be jeopardized. Besides,
the move did not cut into their profits, which came from a percentage
of advertising sales from both papers.
So matters stood for two decades. In that time period, the public's
general preference swung toward morning rather than evening newspapers,
and the Advertiser gained on the Star-Bulletin. Since the market
slide didn't affect Gannett's bottom line, the newspaper giant
made no efforts to rebuild Star-Bulletin circulation.
The situation changed dramtically in 1992, when Advertiser owners
offered the morning newspaper to Gannett. Gannett, in the position
of being able to seize not only the competition but able to pick
and choose their own future partner, transferred all of the physical
assets jointly owned by both newspapers to themselves, making
it impossible to sell the Star-Bulletin to any responsible business
other than a Gannett puppet -- which they provided in Rupert Phillips
and Liberty Newspapers.
This arrangement, created in secrecy by Gannett and Liberty, was
not examined by the Justice Department, although it would seem
to be in violation of the principles and purpose of the FNA. The
primary reason Justice allowed it to pass without scrutiny was
that when the deal was completed, there were still two newspapers
in Honolulu, and the the partners had publically pledged to maintain
the status quo for many years to come.
The 1992 pact, however, left the Star-Bulletin voiceless in matters
of crucial importance to any business, such as promotion, scheduling
and product'delivery. The Hawaii Newspaper Agency, now wholly
Gannett-operated (Liberty is a 'limited partner'), began further
steps to cripple the Star-Bulletin, so that they could later claim
that declining circulation would trigger Liberty's 1999 sell-out.
Gannett's claim is that market forces beyond their control created
the sell-out scenario, when in fact Gannett completely controlled
the market.
The irony is that the Star-Bulletin's production and distribution
is now in the hands of a corporation that is going to court in
order to kill the Star-Bulletin.
Because these actions were conducted under the aegis of the 1992
JOA between Gannett and Liberty and the Justice Department, a
case can be made that the 1992 agreement and sale represents an
attempt to defraud the U.S. government, using the FNA as cover.
Evidence of motive and opportunity continues to pile up, throwing
a spotlight on Gannett's possibly illegal -- and certainly unethical
-- attempts to strangle the Star-Bulletin:
* The 1992 agreement removed the Star-Bulletin from the Sunday edition,
which had been previously co-produced by both newspapers. The
Sunday Advertiser is forced upon Star-Bulletin subscribers. The
Star-Bulletin does not even have say over which color comic strips
are run on Sunday. This meant not only that the Star-Bulletin
ceased to be a daily newspaper in 1992, but that Gannett completely
dominated the most lucrative day of the week, in advertising,
editorial content and promotion.
* Gannett's HNA withdrew the Star-Bulletin from many outlying districts
on Oahu, cutting into home delivery.
* Even so, home-delivery figures for both the Advertiser and the
Star-Bulletin remain pretty-much neck-and-neck, making street
and rack sales for both newspapers vitally important in determining
circulation.
* Immediately upon announcement of the closure, HNA removed more
than 150 Star-Bulletin racks from the streets, approximately a
fifth of the total number. Although HNA head Michael Fisch claimed
-- without offering substatiation -- that these racks were slow
earners in outlying distracts, a glance at the map above shows
that the locations of these missing racks are in the highly trafficked
urban core of Honolulu. Fisch also publically fudged the numbers.
And even if they were only selling a few papers a day, this adds
up to hundreds of lost Star-Bulletin sales a day.
* The racks remained missing during the planned January Audit Bureau
of Circulations survey of Honolulu. Fisch claimed they would be
replaced in February -- after the damage has been done. Some of
those that have been replaced are in different locations.
* Of the few racks that have been replaced, some have been repainted
in Advertiser white (possibly at the request of fast-food operators),
further reducing the Star-Bulletin's public presence.
* Far more Advertiser racks than Star-Bulletin racks are in place,
and they dominate prime traffic sites such as malls and bus stops.
The actual number of racks is a Gannett secret, even though they
are placed on public property.
* Following the 1992 agreement, the Star-Bulletin's street and home
editions were combined into one 'night final' edition. Street
sellers complain that the Star-Bulletin's small-type home-edition
layouts are extremely difficult to hawk to drivers and passersby.
* Citizens complain that outside sales and marketing businesses
used to promote subscriptions use rude salespeople, that special
deals are offered to lure Advertiser readers only, that HNA circulation
managers lie about where the Star-Bulletin is available, that
free Advertisers are given away wholesale, particularly during
ABC's audit months.
* The Star-Bulletin's promotional budget vanished with the closure
announcement and the ad agency that created the Star-Bulletin's
campaign was hired away by the Advertiser.
* 'Banner' ads for websites were offered by HNA for the Advertiser
site first, even though starbulletin.com was set up to handle
banner ads a year before.
* Mysterious slow-downs have delayed the Star-Bulletin's printing
schedule on an almost-daily basis since the closure notice.
* HNA president Fisch has reacted to public complaints about Star-Bulletin
circulation with hostility -- even though increased Star-Bulletin
sales mean a higher profit margin for HNA.
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Don Baker
