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US newspapers face more bad news as advertising revenue drops
(Associated Press WorldStream Via Acquire Media NewsEdge) NEW YORK_U.S. regional and national newspaper publishers, already staggering with a drop in ad revenue more severe than the industry has seen since the Great Depression, say the second half of 2008 may be even worse.
Three publishers _ McClatchy Co., Lee Enterprises Inc. and E.W. Scripps Co. _ reported Thursday that their profits had fallen by nearly half in the second quarter compared to last year.
They joined industry heavyweights New York Times Co. and Gannet Co., which reported earnings Wednesday and last week, in saying double-digit drops in ad revenue were most to blame for plunging profits, though rising costs played a role too.
All five publishers said ad revenue fell fastest in June, and most said July is looking as bad or worse.
"It really shows we haven't yet reached a bottom for revenue declines," said Mike Simonton, a media analyst with Fitch Ratings.
Also Thursday, new government unemployment figures and housing market data from the National Association of Realtors offered gloomier portraits of the economy than expected. All the reports buffeted an industry reeling from almost daily announcements of layoffs and other cost-cutting measures that continued this week.
Thursday afternoon, The Copley Press Inc., parent company of the San Diego Union-Tribune, where the work force was cut 10 percent this year, announced it was exploring a sale. Executives cited the impact of the housing slump and falling ad revenue as the two main factors in the company's decision.
E.W. Scripps, the newspaper and broadcast TV company, which spun off its Internet and cable divisions on July 1, warned Thursday that its third-quarter earnings would fall short of analysts' expectations. After it reviews the fair value of its assets, the company said, it may post a non-cash charge to reflect how far the value has fallen.
E.W. Scripps, in its final combined earnings report, said newspaper revenue fell 13 percent, to $144 million, and profits dropped to $16.3 million. It expects another 13 percent to 15 percent decline in newspaper revenue in the third-quarter.
In contrast, its online and cable operations, now separately known as Scripps Networks Interactive Inc., saw ad revenue rise 13 percent in the second quarter and profits rise nearly 10 percent.
McClatchy Co., whose papers include The Miami Herald and The Sacramento Bee, said Thursday the market for ad spending will not improve until the current economic slump abates.
"Whether revenues improve from recent trends depends upon the direction of the overall economy," Chairman and Chief Executive Gary Pruitt said in a statement.
The Sacramento-based publisher's second-quarter earnings tumbled 44 percent as ad revenue continued to shrink in the company's key markets. Net income slid to $19.7 million. Adjusted to exclude one-time items, the profit fell to $17.3 million, or 21 cents per share, matching the average estimate of analysts surveyed by Thomson Financial.
Revenue dropped 16 percent to $489.7 million and missed Wall Street's projection of $495 million. Advertising revenue fell 17 percent, circulation revenue 5 percent.
Ad sales "continued to be hurt by the weak economy and the secular shift in advertising to the internet," Pruitt said.
The earnings decline was more pronounced at Lee Enterprises Inc., where profit tumbled 87 percent to $2.8 million, or 6 cents per share, in its fiscal third quarter. Excluding one-time charges, partly to write down the declining implied value of its newspaper brands, Lee earned $12.6 million, or 28 cents per share, down 44 percent from the third quarter of 2007.
Revenue fell 8 percent to $256.4 million. Davenport, Iowa-based Lee counts the St. Louis Post-Dispatch among its 50 daily papers.
Each publisher reported the sharpest ad declines in classifieds, with job ads faring worst as employers cut hiring. Data released Thursday showed a bigger-than-expected increase in jobless claims for the last week.
Simonton praised McClatchy's and Times Co.'s hikes in online ad revenue beyond 12 percent of total revenue. In addition to trimming costs, the publishers' strategy, to varying degrees, has been to invest in increasing online ad sales.
But Simonton said even the best online ad growth rates seen so far won't offset the decline in print advertising.
McClatchy is eliminating 1,400 jobs, or about 10 percent of its staff, and said Thursday that its board will review the company's dividend policy when it meets this quarter.
The Times Co. announced 100 newsroom layoffs at its flagship paper this year. Smaller newspapers around the country, including most recently the Santa Fe New Mexican and Portland Press Herald, are also cutting scores of jobs, while The Los Angeles Times, owned by Chicago-based Tribune Co., is trimming 250.
The major costs hitting publishers are in distribution and newsprint. Scores of papers have reduced their newsprint consumption by trimming the number or size of pages they print.
Copyright ? 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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