Cover Story

Image: Kate Paine

Playing Media Monopoly

As Honolulu’s only daily newspaper reduces access and raises rates, consumers, advertisers and competitors are the losers

Cover

Cover image for Sep 14, 2011

On Aug. 31, the Justice Department sued to stop AT&T’s acquisition of rival T-Mobile, USA on grounds that the merger would result in higher prices and fewer consumer choices. But justice slept during the mergers of three Hawaii tv stations, Comcast with NBC and two Honolulu daily newspapers. Here’s a look at how media consolidation hurts us all.


Fourteen months after merging Honolulu’s two daily newspapers and jettisoning over 400 jobs, owner Oahu Publications began charging for access to the Star-Advertiser’s formerly free “premium content.” Since last month, any article on [Star-Advertiser.com] that is marked with a blue star means only paid subscribers can read it.

In an industry where it’s assumed that print is dying and newspaper “apps” and instant online breaking news are the new black, paywalls for web content are fast becoming standard. Other newspapers are following the lead of TheNew York Times and Wall Street Journal–which compete with each other,as well the Daily News, the New York Post and Newsday,in New York City. Honolulu’s problem is that we’re a one-newspaper town. “I personally believe that the Star-Advertiser gives us only a shadow of what we used to get when there were two competing newspapers,” says Chris Conybeare, president of Media Council Hawaii (MCH).

Two years ago, MCH filed a complaint with the Federal Communication Commission (FCC) about a merger between television stations KGMB 9, KHNL 13 and KFVE 5. “This action is still pending, and the FCC says that they will soon announce a decision,” Conybeare says. Meanwhile, this year, the Star-Advertiser entered into a partnership with Hawaii News Now, and Conybeare says that he’s drafting a letter to the Justice Department requesting an investigation.

Consolidated media exposes us to selective reporting and agenda. The press is supposed to serve as a watchdog for an informed citizenry. But in the absence of competition, who, to invoke Cicero, will guard the guardians?

Do Not Pass Go–Unless You Pay

A major factor in the quality of the news citizens get is the number of competitors offering original local content. Honolulu Civil Beat ([civilbeat.com]), a daily e-newspaper, was started a year and a half ago by eBay founder Pierre Omidyar’s Peer News. In a phone interview, Civil Beat editor John Temple told the Weekly, “We were sad to see a newspaper go out of business. We’re kind of doing something different, though. They do what they’re doing, we do what we’re doing. We think there’s room for both.”

The Star-Advertiser’s actions seem to indicate a different mindset. Undercutting Civil Beat’s $19.99 subscription rate, it priced Internet-only access at $9.99 per month for Oahu residents, $4.99 for outer islanders and $1.99 for out-of-staters. As a result, Civil Beat knocked down their monthly access price to $9.99. “Oahu will effectively become a laboratory for studying the effects of a paywall on a single, fairly concentrated market,” wrote blogger Justin Ellis of Nieman Journalism Labs.

Ironically, on Aug. 23, after the paywall for the Star-Advertiser had been erected, a breaking news story (newly considered “premium content” on their website) was made available to anyone, reporting that the paper was suing Gov. Abercrombie for failure to submit documents on judicial nominees that the Star-Advertiser claimed should be available to the public.

From Park Place to Baltic Avenue: Take a Rent Hike

In the game of Monopoly, the more hotels you have on your property, the higher the rent you can charge–to the point where you can wipe out the other player if they are unfortunate enough to land there. In Honolulu, David Black’s Oahu Publications also owns Midweek, the free ad-heavy weekly that’s mailed to just about every household on Oahu. Black owns more than 170 newspapers in the US and Canada.

In the real-life Honolulu media marketplace, Oahu Publications’ dominance, which includes ownership of the only high-quality newspaper printing press, allows it to demand higher prices from–or simply refuse business to–other printed news publications.

Before the merger, Honolulu Weekly had a printing relationship with the then-Star Bulletin. When Black merged the Bulletin and the Advertiser, “They moved everyone over the press in Kapolei and said ‘here’s your new printing rate,’” Laurie V. Carlson, publisher of Honolulu Weekly, says.

Had the Weekly agreed to the new demands, they would have lost money both in higher production costs and in reduced paper space.

“The paper would have lost five inches off the top, reducing us from 16 to 11 inches in height. That’s over 32 percent less editorial space. It was a huge difference,” Carlson says. In addition, there was a significant price hike for the smaller publication.

Carlson says that she believes Oahu Publications’ motive is to squeeze as much money as possible out of the printing market.

Honolulu Weekly had experienced only one price increase over many years,” Star-Advertiser President Dennis Francis responded in an email.

The Weekly eventually moved its printing to Maui, as did Ka Leo, another refugee from Oahu Publications’ Kapolei printing press. Pacific Business News (PBN) had already moved its printing to Maui before the merger.

Prior to the merger, the Advertiser printed the student newspaper three times a week. Two weeks before their signed contract was enacted, the new Star-Advertiser told the paper they could no longer honor their agreement, said Rob Reilly, a UH staff member and advertising manager.

“They [backed out] in mid-June of 2010, and we had basically only a month and a half to find a new printing press. It was up to the wire. For a while we had to consider that we may not have been able to publish three times a week.”

While the Star-Advertiser offered to print the paper one time a week, Reilly says the logistics and complications of printing with separate businesses on different days was too complicated.

The result: “It costs [us] between $75,000 to $100,000 more a year to print. The shipping costs [to and from Maui] are huge,” Reilly said. He added that he felt the Star-Advertiser could have accommodated the three-day-a-week Ka Leo printing schedule, but “from what I understand there were more profitable contracts that they had preference for.”

Reilly commented that Ka Leo does well enough bringing in advertisers because of their student audience, which may have been a factor in the Star-Advertiser’s decision. Ka Leo has also been a constant resource for the Star-Advertiser, serving as a pool for interns and full-time staffers.

“We simply determined Ka Leo not to be a good fit due to their printing requirements. We offered them solutions and options… They chose not to take them and print elsewhere,” Francis replied. Asked whether eliminating competition played a part in the rates raise at the Weekly and letting Ka Leo go, he said, “No, I do not see these two publications as competition; we serve different audiences and vastly different scales.” However, a recent Star-Advertiser ad features Honolulu Weekly and PBN as competitors for Oahu readership (see illustration, near right). In addition, the calling-in of the $20,000 owed by the Weekly to Oahu Publications for printing–immediately and in its entirety, under threat of litigation–almost had the effect of driving the Weekly out of business.

Advertisers Roll the Dice

Other effects of a single daily paper include the rising cost for individuals, business and government to run ads there. With the merger, the “new” paper raised the cost of a daily classified from $9.75 to $84 (762 percent) and from $11 to $216 for a Sunday classified (1,373 percent). As one reader said to me, “The days of having a $10 classified to sell kittens is o-v-e-r.”

In addition, when it comes to announcements that a property is being foreclosed, the law mandates that a legal representative place an announcement in the most circulated daily paper in the county.

“The Star-Advertiser has had a monopoly on Oahu since that law was passed. People have to spend a lot more money on those ads,” said Carlson.

In the advertising world, according to Louise Saffery, owner of the ad agency Inter-Media Inc, “[The merger] has far-reaching effects. It reaches a lot of advertising agencies in town, [some of whom] are behind in their payments to the media and are letting people go…it’s impacting everyone.” Safferey said that for many of her clients, the Star-Advertiser is “the only game in town.” She added, “the problem is when you have no choices.”

Aaron Fujioka, chief officer at the State Procurement Office, was open about his dissatisfaction with the newly priced rates. With the huge jump in costs, Fujioka told [HawaiiReporter.com] that he wasn’t sure if the state could even sign the Star-Advertiser contract at the requested rates. The original budget for government ads was set at $757,200. Ruth Yamaguchi, assistant administrator to Fujioka, confirmed that the contract has been settled at much higher rates than they paid the previous year.

Asked for comment, Francis emailed, “I have no idea what you are referring to when you say sharp rise in advertising rates since the merger. Our rates simply reflect the new level of circulation, higher than the old Star Bulletin [which averaged nearly 100,000 copies less] but comparable to the old Advertiser.”

Ad rates are based on circulation. Confusing the issue, some media executives say, is the extreme difficulty of getting a certified circulation number for the paper.

Elusive Circulation: Forget Boardwalk

When the Star-Bulletin and the Advertiser merged, some might have assumed that their new readership figure would be a combination of the two papers. That is questionable. The now-defunct Star-Bulletin claimed they had 55,000 daily readers and asserted the combined circulation with the now-defunct Advertiser to be 135,000 to 140,000.

With regard to the Star-Advertiser, one media buyer, whose client has seen 25 percent rate increases annually, claimed that “the most up-to-date, [official] circulation information we had available for negotiating 2011 rates [in October/November 2010] was an Audit Bureau of Circulations [ABC] report, received from the Star-Advertiser, from March 2010. It details Sunday circulation at 123,411, which was a 10 percent decrease from the year prior.” In response, Francis wrote, “We have been audited by ABC for period ending 12/31, 2010. Our next audit will be for the calendar year 2011.” The Dec. 31 readership rates were 118,807 daily and 130,757 on Sunday. On its website, the Star-Advertiser lists their average daily circulation as 120,720 daily, but with the annotation, “subject to audit.”

Star-Zilla: Go to Jail!

Where once the major local papers were a regular outlet for her clients, “Now there are other options,” Saffrey says, noting that retail and other advertisers have the luxury of turning to other outlets. “Clients are saying they won’t go to the Star-Advertiser because they can do it on television for the same amount of money as a print ad. Everyone is looking at the most cost efficient way to advertise.”

Francis wrote that he’s not worried. “If a media buyer claims they can buy TV for the same price as an ad in the Star-Advertiser, then I would say the TV ad price would be quite high when you compare audience reach. In most cases, you would need to buy multiple TV stations to equal the reach of one ad in the Star-Advertiser.”

He has at least one other reason to be confident: The partnership between the Star-Advertiser and Hawaii News Now.

But Francis, Black and Raycom have a couple of reasons to worry. The FCC’s recent action against the AT&T/T Mobile merger may signal a new stricter scrutiny policy–and the Honolulu community, in its recent outpouring of contributions to save the Weekly from Black’s threatening lawsuit, demonstrated that demand for diversity of choice in media is strong.

Merger Mania!

The roll of the dice in Hawaii has resulted in the consolidation of media across the board: print/online, television and radio news.

Print/Online

The Honolulu Star-Advertiser (subscription, $19.95 daily, $9.99 web-only) and Midweek (free) are owned by Oahu Publications.

Television

KGMB (CBS) and KHNL (NBC) are owned by Raycom Media, and their newsrooms have been combined into Hawaii News Now.

KFVE is owned by MCG Capital, the parent company of HITV, in a Shared Services Agreement (SSA) with Raycom Media.

Media Council Hawaii (MCH) filed a complaint about the SSA, saying it violates FCC rules; a study by the University of Delaware found the agreement between Raycom and HITV has a negative impact on Hawaii’s news quality, diversity and competition.

Clear Channel owns KSSK (92.3FM), KHJZ (93.9FM), KDNN (98.5FM), KUCD (101.9FM), KSSK (590AM), KHVH (830AM), KIKI (990AM)

Cox Radio owns KRTR (650AM, 96.3FM), KCCN (100.3FM), KPHW (104.3FM), KINE (105.1FM), KKEA (1420AM), KKNE (940AM)

Salem Communications owns KHNR (690AM), KGU (760AM), KAIM (95.5FM), KHCM (97.5FM), KHUI (99.5FM), KKOL (107.9FM)