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— The Northwest Arkansas media landscape changed dramatically Thursday as the two newspaper companies competing against each other in the region announced a proposed merger.

Stephens Media, LLC, and Arkansas Democrat-Gazette, Inc., which is owned by WEHCO Media, have asked the U.S. Department of Justice to approve a joint venture in which each entity would own 50 percent of a new company called Northwest Arkansas Newspapers, LLC.

WEHCO Media, in addition to owning the statewide Arkansas Democrat-Gazette, owns the Northwest Arkansas Times, The Benton County Daily Record in Bentonville and nine weeklies in Benton and Washington counties - including the Decatur Herald, the Gentry Courier-Journal, the Gravette News-Herald and the Siloam Springs Herald-Leader.

Stephens Media LLC owns The Morning News and some weekly publications in the area.

The Northwest Arkansas assets of each will become property of the new company.

Walter Hussman, chief executive officer of mass media conglomerate WEHCO Media, Inc., announced the proposed agreement at a meeting with Northwest Arkansas employees Thursday morning. Officials at The Morning News held a similar meeting in Springdale at the same time.

Hussman told the gathering at the Fayetteville office of the Times and Democrat-Gazette that challenging economic conditions for the industry and the nation as a whole prompted the plan.

"A lot of towns are struggling to support one newspaper," he said. "We need to make sure there's always a newspaper in Fayetteville, Springdale, Rogers and Bentonville."

Hussman called the arrangement a "pretty unique formula for a newspaper in America," but he declined to say who made the initial approach between the two companies.

"Basically, the economy approached both of us," he said.

A statement issued after the meetings said that despite cost-cutting measures, the newspaper companies continue to have "significant operating losses."

The proposed joint venture will be reviewed by the U.S. Department of Justice's Antitrust Division, which becomes involved because of the potential that joint ventures can lessen competition for advertisers and readers. The agency generally must become convinced that there is no other reasonable option that might sustain two independent, financially viable newspaper operations.

"We're aware of it," said Gina Talamona, an antitrust public affairs specialist with the Justice Department in Washington, D.C. She said the agency had no further comment.

In the new company, Jeff Jeffus will serve as president. He is currently publisher of the Northwest Arkansas Times and is vice president of operations for the Arkansas Democrat-Gazette.

The Stephens Media part of the new organization will have direct responsibility for the news coverage and other editorial functions of the local dailies - the Times, The Daily Record and The Morning News of Springdale and Rogers - and all the weeklies involved.

The Northwest Arkansas Times will continue to publish and be delivered with the Democrat-Gazette as it has since an alliance was formed in 2000 between WEHCO and Community Publishers, Inc., of Bentonville, which then owned the Times.

Hussman ended the alliance in 2005 when he exercised an option to buy the Times and related newspapers from CPI. Jeffus said Thursday that such details as where each local newspaper will be delivered with the Arkansas Democrat-Gazette within Northwest Arkansas remain to be worked out.

"We don't plan to give up the identity of the local newspapers," Hussman said in an interview.

The Morning News will become a local edition for Springdale and Rogers. The Morning News' local section will be delivered to readers with the Arkansas Democrat-Gazette's Northwest Arkansas edition of the statewide newspaper.

"We will give the communities the locally-zoned paper that best suits their reading habits," Jeffus said.

The new organization will strive to reduce duplication. For example, the newspapers will all share a common classifieds section.

Hussman said the joint operation will be good for readers and advertisers because "the current competition is not sustainable." The arrangement will ensure that local readers will continue to have an option to subscribe to local, daily newspaper in each of Northwest Arkansas' four major communities, he said.

For advertisers, the change has the potential to be positive because it creates the ability to place one ad that reaches all newspaper readers, said Mike Sells of the Sells Agency, an advertising and public relations agency in Fayetteville and Little Rock.

"From an advertising standpoint, I think it's a good move, assuming the joint venture can maintain strong readership and household penetration," Sells said.

The announcement sent shock waves throughout the journalism community. Hoyt Purvis, a University of Arkansas journalism professor and a weekly columnist for the Northwest Arkansas Times, said he and journalism students on the Fayetteville campus were trying to figure out the complicated arrangement Thursday afternoon.

"It appears to be an effort to find a solution that in one way or another manages to keep newspapers alive when in many other parts of the country they're just falling by the wayside," Purvis said. "It's a different media world, and when you throw in the economic problems facing the country, it's almost inevitable, I suppose, but I find it regrettable that direct competition may be a thing of the past."

The two newspaper companies said the Department of Justice has asked that Stephens attempt to sell The Morning News to a qualified buyer that would continue the direct competition within the market.

Purvis said a sale is not impossible but unlikely in the industry's current climate.

"Given what's happening across the country and the state of the economy and given what's happening in the media, it's someone taking on a newspaper that is in direct competition with an established newspaper," Purvis said. "That's a tall order for anybody."

Officials said no staffing decisions had been made and would not be until after Justice Department approval.

Tom Stallbaumer, publisher of The Morning News, said early Tuesday evening that he would not comment beyond the statement issued jointly after the meetings with employees and that many details remain to be worked out.

In 1995, after the company that owned The Morning News purchased the Northwest Arkansas Times, the Department of Justice filed a lawsuit challenging the common ownership, citing "serious anti-competitive concerns." In March 1998, a three-judge panel threw out that sale, ruling it violated federal antitrust laws.

In May 1999, Community Publishers. Inc., owner of The Benton County Daily Record and other smaller newspapers, purchased the Times. A little more than a year later, CPI announced a publishing alliance with the Democrat-Gazette that created a single-front newspaper war between the alliance and The Morning News.

Hussman exercised an option to buy out CPI's interests in the alliance in 2005, putting all of the alliance newspapers under common ownership.

Editor's Note: Ther e have been no indication s that the proposed merge r will result in any majo r changes for either the Decatur Herald or the Gentry Courier-Journal.

News, Pages 1, 3 on 09/09/2009

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