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weep to the bank
Still cranking 17% profits, even with ad slowdown
By Jeff Bercovici
Newspaper publishers won't have much to celebrate next year, but neither will they have cause for despair.
That's the consensus of media analysts and of the publishers who met last week at a conference in New York City hosted by Credit Suisse First Boston.
Though they’re being careful to leaven their optimism with caution, most analysts and publishers consider a turnaround in the advertising economy possible and even likely in the second half of next year.
Such a turnaround, if it happens, will almost certainly be mild, making 2002 look more like 2001 than like the years leading up to it.
Newspaper analyst John Morton of Morton Research has a fairly representative take, predicting that 2002 ad revenues will be flat with this year at worst and 2 percent up at best.
But even if there's no improvement at all, the vast majority of newspaper companies will weather 2002 just fine, he says.
"They're all on solid footing," says Morton, noting that even with the ad slowdown, the average operating margin for U.S. newspapers in the first nine months of 2001 was 17.1 percent, down only slightly from 22.5 percent the year before.
"Most of the newspapers that were going to close did a long time ago."
For those that remain, he says, it's largely a question of how much they're able to put in the bank.
The newspaper industry may seem to be doing worse than it is because the biggest, most visible newspapers, such as The New York Times, The Wall Street Journal and USA Today, are also the ones that rely most heavily on national advertising, which is highly sensitive to fluctuations in the economy.
Local advertising, which comprises 90 percent or more of the ad sales for all but a few newspapers, is far more resistant to the pressure of a sagging economy.
"With local retailers, there's not usually a calamitous change," says Morton. "That's why newspapers, while certainly not acyclical, are much less cyclical than other advertising-dependent media."
In addition to retail, two other important local categories, real estate and automotive, have held up well this year, he says.
With unemployment on the rise, help-wanted ads have been doing less well. But that's something that papers have increasingly been learning to live without, or at least reconsidering as an online offering. Last week, Dow Jones & Co., The New York Times Co. and the Boston Globe announced plans to form an online recruiting service that will allow employers to place help-wanted ads on the web sites of all three papers simultaneously.
Universal McCann’s Robert Coen released his projections for 2002 last week, and they are similar to those of Morton. McCann says that national advertising in newspapers will be flat with this year at $6.65 billion, and total ad spending in newspapers will be up 1.5 percent to $39 billion.
At last week's Credit Suisse First Boston conference, executives from The New York Times Co. and Gannett Co., the nation's largest newspaper corporation and the publisher of USA Today, said they expect to see a turnaround in the economy in second-half 2002.
Knight Ridder Inc., the country's second-largest newspaper company, said it expected 2002 ad revenue to be flat or down in the single digit percentages.
December 10, 2001
© 2001 Media Life-
Jeff Bercovici is a staff writer for Media Life.
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