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Dolan Media: A local publisher whose revenues are going up

It was truly man-bites-dog last week when Minneapolis-based Dolan Media Company — owners of Finance and Commerce, Minnesota Lawyer, Politics in Minnesota and the St. Paul Legal Ledger, and several dozen titles nationwide — reported that third-quarter publishing-division revenue went up 0.1 percent from a year ago.

Yes, up. At a time when 20-30 percent declines are far more typical.

How did Dolan beat the industry? In a word, coercion.

OK, that’s harsh, but let me explain. Dolan had no magic formula when it came to display and classified ads; according to the company’s release, those sales were down 22 percent. And circulation revenue — which has grown at the Strib and PiPress due to strategic price hikes — was down 4.9 percent. (Dolan was able to get more circ revenue per customer, since they lost 8.2 percent of paid subscribers for the year ending Sept. 30.)

So what overcame this all? Public notices; announcements of foreclosures and other legal and government deals. Revenue there increased 21 percent year-over-year, as total public notice ads went up 9 percent.

Public notices are government-compelled advertising. In most jurisdictions, they must appear in print. It’s an important subsidy to many a small-town newspaper — one reason legislatures never muster enough votes to move them online-only. Public notices are a major and time-honored government subsidy (both direct, since jurisdictions buy ads, and indirect, in forcing businesses and individuals to) often overlooked in the more recent debate about taxpayer-funded reporting.

I’ve written about Dolan’s model before, but to reprise: the company has smartly invested in processing infrastructure that eases ad-taking, enhances data-aggregation and creates value-added products. (There are other public-notice papers in town, but none offer much competition on rates and service.) At times like this, public notices are awesomely counter-cyclical. Prime example: foreclosure notices in a single state, Maryland, accounted for more than half the public-notice revenue increase.

F&C and Legal Ledger exist as a repository for such notices; they employ reporters because the law requires that 25 percent of a paper’s news columns be “devoted to news of local interest to the community which it purports to serve.” Politics in Minnesota, whose expansion plans have had a lengthy gestation period, and Minnesota Lawyer are more classic niche ventures.

Haug Scharnowski, Dolan’s director of investor relations, says revenue and operating cash flow is up at both Finance and Commerce and the Legal Ledger, due to public notices. Display and classified ads there are down, just like for everyone else.

Scharnowski said he did not have data on Politics in Minnesota and Minnesota Lawyer because those titles are relatively small within Dolan’s empire, which now consists of 64 print, 49 online and 33 event publications.

Asked about Dolan’s relatively large circulation-revenue drop, Scharnowski says much of it comes from businesses that once bought bulk subscriptions cutting back. “You’d see the larger law firms who got 100 now getting 50. We’ve played around with our web strategy, and we’ve moved almost all of our content behind the paid wall now. In markets where we’ve done that, subscriptions are coming in again.

Overall, Dolan Media is less and less a media company. For the nine months ending Sept. 30, 2008, 52.6 percent of revenues came from the business information division. The rest came from the professional services division, which, for example, provides mortgage default servicing to lawyers. By this September, the media division accounted for only 34.6 percent, due in part to acquisitions and expansion on the professional services side.

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