As often happens when a new owner takes over a newspaper, the staff of the Orange County Register filed into their Santa Ana offices in late July for an all-hands meeting. What they heard from Aaron Kushner, the new boss, was encouraging, if vague: readers should pay for content, journalism still matters. “It is very hard to justify the talent in this room without charging money for it,” he told the staff the day after his purchase was complete.

Then the staff went back to to their desks to await the inevitable layoffs, the third round of them this year alone. For reporters, it was just another signpost on a long road of cutbacks that took the Register from regional journalism powerhouse to bankruptcy in 2009. The layoffs finally came in mid-August but Kushner, a former greeting card executive who tried in vain to buy the Boston Globe a year and a half ago, had flipped the newspaper industry’s fire-the-reporters playbook on its head: instead of slashing still more newsroom staff, he took a blowtorch to the Register’s digital side, firing or reassigning two dozen interactive and advertising employees. Another 66 digital business-side staff were let go at parent Freedom Communications around the same time—they had been given notice in June while Kushner was finalizing terms in the deal to buy Freedom. In all, Kushner and his partners essentially wiped out the Register’s digital brain trust.

More journalists, really

Since then, Kushner has opened his wallet and his mouth. In four months the Register has added at least 50 newsroom positions including such anachronisms as an investigative team, a dining critic, a Dodgers beat reporter, a USC sports writer and an editor for the paper’s resurrected standalone business section. In September the paper announced a massive new trainee program to take 26 recent college grads into the newsroom with free housing provided. Kushner even ordered the return of color funnies. To the journalists who spent years watching the once-proud newspaper wither, it feels like a miracle—albeit a confusing one.

“We’ve been sitting in this dark prison cell for so many years and someone has come and thrown open the door,” Ken Brusic, the Register’s editor-in-chief told Nieman Journalism Lab last month.

The abrupt U-turn at the Register is perhaps the most glaring example of a sea change in how U.S. newspapers are coping with the economics of online news. After almost two decades of starving print and pumping investment into online in the hopes that free websites would draw lucrative advertising, many newspaper companies are now moving quickly to hang on to valuable print subscribers and boost circulation revenue, traditionally a smaller portion of newspaper profits. Paywalls, membership schemes, events and other non-traditional revenue sources are fast replacing the free online model that relied on clicks and pageviews to generate pennies at a time.

A U-turn for digital

Before Kushner’s group of partners and investors bought Freedom in June for an undisclosed amount (speculation has been in the $100 to $200 million range), the Register had been at the forefront of pushing digital over print. In addition to a slew of popular blogs and numerous websites, the newspaper’s critically acclaimed iPad app The Peel was a hit with readers, who downloaded it over 125,000 times in 12 months. Freedom’s interactive unit had forged partnerships with Google and Yahoo!, the latter of which has become a significant source of revenue for the company, according to Doug Bennett, the former president of Freedom Communications’ interactive group, who lost his job in the takeover. “Digital was the only thing growing at Freedom,” he told Ebyline.

In fact, Freedom’s plan when it emerged from an earlier bankruptcy in 2010 was to shed all of its television stations and most of its newspapers and then to focus on the interactive group. The Register was to increase its digital side from 25 to 35 staffers. All in all the $43 million (sales) interactive division was responsible for monetizing all Freedom publication websites, digital properties and technologies (the flagship OCRegister.com had 1.2 million visitors in October, according to tracking firm Compete.com).

Kushner, just 39 years old and a newspaper novice, and his partners didn’t see it that way. “[Digital] was the only revenue that was growing month by month,” explains Bennett, “but it’s still not replacing a four or five percent decline in the print revenue.  When you’re tired of hearing about digital and it hasn’t stopped the decline in print revenue, [you think] ‘Let’s do something else.’” A Register spokesperson declined to comment.
Firing or moving the digital staff was just the beginning. In the next few weeks, OCRegister.com saw half a dozen of its blogs shut down. The Peel, the news app that brought the newspaper a younger group of readers, was unceremoniously dumped, prompting groans from users. Editor Ken Brusic then publicly stated that much of the paper’s content will be behind a paywall in the near future.

Doubts about a print-first strategy

While the journalism community has been heralding the editorial renewal at the Register, there’s plenty of skepticism, and a little grumbling from fired executives, about pushing print.

“We should not be under any illusions about the durability of the print product,” says USC journalism professor and former Wall Street Journal reporter Gabriel Khan. “It’s going to continue to shrink, maybe not at the pace of before but it is not going to be the future of your business.”

One recently departed digital executive said the new bosses had pushed to give away or heavily discount ad space for local businesses that agreed to buy dozens or even hundreds of subscriptions, a practice allowed (if not appreciated by advertisers) by auditors that verify circulation for the setting of ad rates. The Register’s circulation jumped 5% over the last year to 285,000 in September while nationally over the same period newspaper circulation dipped by about 2.7%. Adding a paywall, which the OC Register expects to erect by the end of the year, may boost circulation revenue but will further limit audience gains, especially among new readers, point out critics.

“In big metro areas I don’t see paywalls grabbing a younger demographic,” says Bennett, the former Freedom digital chief. “That’s the challenge, how do you get to where you’re growing your audience and creating an audience that’s willing to pay for your content.”