Today’s announcement that UT San Diego and its eight regional publications will be acquired by Tribune Publishing’s Los Angeles Times for a slightly better-than-fire sale price of $85 million (plus $100 million in pension liabilities) points to several things.

1. The price is probably a flat fee for the brand and expectations of selling regional advertising throughout southern California.
2. Individual components such as subscriber counts include a certain number of online subscribers. But there aren’t many online-only subs in this case.
3. UT San Diego’s various online and mobile services really aren’t factored in.

The U-T reported Sunday circulation of 271,564 for 1Q, 2015. On other days, circulation ranged between 169,484-222,479. The LA Times reported Sunday circulation of 965,598 and average weekday circulation of 650,718 for the six months that ended Sept. 30.

The LA Times will be able to save some costs with the acquisition by cutting circulation, printing, sales and perhaps, content costs. It will also more effectively sell regional accounts to large advertisers, specifically retailers, auto makers and auto dealers and medical. But in the end, online (or mobile) won’t be much of a factor.

That’s a shame. Back in 2002-2004, a former colleague of mine developed a general hypothesis that if a traditional media property could show recurring value in online properties, it would be able to boost its sale price by X percent — probably 20 percent or more. It was a major reason to double down on digital growth. But this clearly hasn’t happened.

I was chatting about this with BIA/Kelsey Senior Vice President and Chief Economist Mark Fratrik. He notes that online revenues accounted for 16.4 percent of newspaper revenue in 2014, and will be 17.9 percent in 2015. The forecast is for online revenues to grow slightly to 22.9 percent by 2019. This reflects some additional online revenue, but as he points out, it also reflects BIA/Kelsey’s expectations that print revenues will decline.

It is true that online could add value to traditional value property in some cases, says Fratrik. But San Diego is full of online competition from TV station sites, alternative sites and news start-ups.

The Times of San Diego, for instance, now reaches 150,000 unique users a month. Publisher Chris Jennewein — a former leader of UT San Diego’s digital operations — notes that 26 percent of his readers are aged 25-34 and seventy-five percent are under 55. “Our readers probably didn’t read either of the two newspapers to begin with,” he told me this morning via email.

For me, it is a sad situation. I lived in San Diego for 11 years, and occasionally did consulting projects for the newspaper. UT San Diego always had innovative online projects going on, and several strong leaders at the digital helm. It got deeply involved in email marketing services, online directories, Spanish language media, hyperlocal editions, premium iPad editions, video services, mobile headlines, entertainment publications, prepaid deals and loyalty services. But in the end, none of it seemed to matter very much.

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The daily deals business isn’t dead, but it isn’t growing either. At this point, they aren’t the anchor for SMB digital solutions that had been hoped. The question is whether more sustainable loyalty and rewards programs – many putting their customers directly into the transaction funnel — will take their place.

Media companies such as Gannett and U-T San Diego are betting that rewards programs will be an answer. U-T San Diego, for instance, began its deals business a few years ago, after President Mike Hodges saw Groupon founder Andrew Mason keynote BIA/Kelsey’s Marketplaces event in San Diego.

It initially did well, and the company bought out Discover SD, another local deals business. But a few years ago, the deals business started to slide as “many local merchants became uncomfortable with the large discounts and heavy revenue sharing,” notes Hodges.

“We had to come up with a product that helped them build new and more importantly repeat customers,” says Hodges. “That is what we have built with U-T Rewards. Merchants love the pay for performance model we have designed. The data we are able to provide them in terms of purchase history, price per visit, repeat purchases, etc. is something local merchants are not used to seeing.”

Hodges adds that the new Rewards program also leverages U-T’s multi-media platform (print, digital, TV). It drives “our subscribers into participating merchant stores. It is a win for all parties.”

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For newspaper publishers and newspaper readers, iPad apps tend to be nice to have but not especially important. Given the choice of rich newspaper apps like The New York Times and The Wall Street Journal, I actually opt for the browser versions over the apps: I can see a lot more at once, they’re updated more often, and they load faster.

But I’ve found that newspaper apps for “lite” newspapers are much better. USA Today’s headline and short story format is perfect for the iPad. The Washington Post (not such a lite paper) has a great iPad app, too.

In early December, The San Diego Union-Tribune — a truly lite newspaper but with good local news and features — also launched an iPad app. The result is vastly superior to the print and browser version of the newspaper. More than 11,000 downloads have already taken place.

The U-T’s iPad launch coincides with the elevation of digital chief Mike Hodges to president and COO, and today, a rebranding of the newspaper company, which recently changed hands, to U-T San Diego. The new name also does away with the dated “Sign On San Diego” city guide moniker.

An announcement on the company’s website notes that “We will now use one company name and logo on all of our media products and communications: U-T San Diego. This change marks a new era in our company’s history. It will help us unify our print and digital products under a single brand with a clear and consistent expectation of quality. SignOnSanDiego.com is now UTSanDiego.com, to match the nameplate of the newspaper and our newly released iPad app.”

Hodges, a digital real estate marketing vet prior to joining Freedom Communications and then The U-T, has been responsible for several new revenue initiatives. These include a heavy emphasis on the local daily deal, bolstered by the acquisition of Discover SD, an events guide and deals platform for a younger demographic.

Hodges notes that the iPad app was specifically designed to have an entertainment orientation. “The primary time that people are looking at it is after 6 p.m., when people want to lean back after dinner and watch TV. They’re often reading the app as well,” he says.

The app, designed by MindGruve Interactive, is geo-enabled for traffic and Surfline surf reports. It features a FlipBoard-like news page, along with dropdown “sections” for easy access. The sections include a full graphic on the Daily Deal — it shows up very well. It also prominently highlights features that were obscured in print and on the website, including arts, photos and videos.

Notably, in an effort to keep it simple, The U-T App doesn’t offer newspaper content such as comics, a television programming guide, letters to the editor, user-generated content or local news — although Hodges says a major local initiative will launch in early January. Other Phase 2 items will include more in-depth, iPad-only content. It might also include more localized weather (the temperature in the San Diego region varies by as much as 15 degrees from one area to the next).

Much has been made of the iPad’s appeal for advertisers. The charter advertiser for The U-T’s free phase is Cadillac. When the app goes to a premium model next quarter after an introductory period, sponsorship will be available for multiple sponsors on a premium basis.

Pricing for the app, however, is still being finalized. When it is introduced during Q1, there is likely to be an a la carte three month subscription for users who just want the app, especially those outside the San Diego area. My guess is it might be priced in the neighborhood of $5 a month. But there will also be bundles for people who want seven-day delivery or three-day weekend delivery.

We’ll see whether The U-T pulls the trigger on a firewall for the app. Several other publishers have announced plans to charge but haven’t done so.

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