Star Advertiser Adopts ‘Shocking’ New Ad Rates – State Balks at Paying

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BY JIM DOOLEY – Since becoming Hawaii’s only daily statewide newspaper, the Honolulu Star Advertiser has raised advertising rates 762 percent for weekday classified ads and 1,373 percent for Sunday classifieds, according to documents posted on a state website.

Similar steep increases have been imposed for retail and legal advertising.

The base price of a weekday classified ad has jumped from $9.75 to $84. On Sundays, the prices increased from $11 to as much as $216.

“My clients are absolutely shocked by the increases,” says one executive at a local advertising agency.

The numbers are revealed in a state procurement document, which says that Oahu Publications, publisher of the Star Advertiser, refused a state request for a year-long extension of current rates charged for government advertising.

View the document at: http://hawaii.gov/spo2/exempt103d/attachments/form071080.PDF or see it here: star advertiser rates

Oahu Publications did agree to a one-year contract extension but only if the new higher ad rates were accepted by the state.

All other publications around the state, which print government advertising agreed to extend their contracts at no change in price.

Because the Star Advertiser is now the only daily newspaper of general circulation on Oahu, Molokai and Lanai, it is the only publication that meets state specifications for government advertising on those islands, according to the document.

In a Sept. 29 request to Chief Procurement Officer Aaron Fujioka, state Comptroller Russell Saito, asked for approval to award a non-bid, one-year $300,000 contract extension to Oahu Publications to pay for government advertising at the inflated rates.

The new charges were supposed to take effect Nov. 1, but Fujioka has yet to approve the request, according to the procurement office website paperwork.

Fujioka said this morning he will “probably disapprove” the requested contract extension but is still considering the issue.

This afternoon, Comptroller Saito said he has withdrawn the requested contract extension.

“There was just no way I could accept those kinds of price increases,” Saito says.

“I think they (Oahu Publications) are having second thoughts now,” Saito says.

“I understand they want to talk to the procurement office about the issues,” says Saito.

Dennis Francis, president and publisher of Oahu Publications, said earlier today that previous advertising rates were artificially low because of a “newspaper war” between Oahu Publication’s Honolulu Star-Bulletin and the other daily, The Honolulu Advertiser.

Oahu Publications bought the Advertiser from Gannett Corp. and merged the two in June into the sole surviving daily, the Star Advertiser.

Since the merger, “our circulation and costs changed, thus the new price(s),” Francis says.

He pointed out that advertising rates charged to government customers “are still substantially less” than what the general public now must pay.

And the new prices are lower than what was charged for advertising by the newspapers when they were jointly operated in the 1990s and charged common advertising rates, Francis says.

The new government rate “is close to 44 percent lower than what the rate for the same contract was 10 years ago,” Francis says.

In his now-withdrawn request for approval of the contract extension, Comptroller Saito said the new, higher government charges are “fair because the rates are lower than what is offered to the public and businesses.”

Exactly what prices are being charged the state now for advertising – since the old contract expired and the new one has not been executed – is unclear.

“We are not at liberty to disclose that yet as we are still discussing (it) with the state,” Francis says.

Saito says that that state government agencies that now need to place legal ads must negotiate prices directly with the Star Advertiser.

“Maybe they can get lower prices,” he says.

Executives of local advertising agencies contacted by Hawaii Reporter about the new rates charged to the public said their clients have been shaken by the new Star Advertiser ad prices.

None of the executives would be quoted by name, saying they must deal with the Star Advertiser regularly and didn’t want to give offense.

“They (the Star Advertiser) are the only game in town now and they’re going to do whatever they want to do,” one executive says.

“The new expenses come at a very difficult economic time for businesses, large and small, in Hawaii,” says another. “My clients are scrambling for alternative ways to get out their messages.”

Rick Edmonds, a media business analyst at the Poynter Institute in Florida, says, “A consolidation of previously competing papers almost always brings rate increases.”

Some states have tried to reduce their legal advertising costs by “allowing electronic alternatives” to print publications, Edmonds says. But he adds that newspapers “typically lobby for protection” against such alternatives.

Saito told Hawaii Reporter this afternoon that new legislation may be sought next year that would allow for “new alternatives” in the publication of government advertisements.

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Jim Dooley joined the Hawaii Reporter staff as an investigative reporter in October 2010. Before that, he has worked as a print and television reporter in Hawaii since 1973, beginning as a wire service reporter with United Press International. He joined Honolulu Advertiser in 1974, working as general assignment and City Hall reporter until 1978. In 1978, he moved to full-time investigative reporting in for The Advertiser; he joined KITV news in 1996 as investigative reporter. Jim returned to Advertiser 2001, working as investigative reporter and court reporter until 2010. Reach him at Jim@hawaiireporter.com

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