Tribune Records Modest Ad Growth, Cites Circulation Scandal

by Ross Fadner, Oct 14, 2005, 8:15 AM

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Tribune Company Thursday reported modest third-quarter advertising gains, driven primarily by increases in classified ad revenue. The media giant, whose properties include 11 daily newspapers, 26 television stations, and the Chicago Cubs, saw a 2 percent overall increase in ad revenue for the third quarter.

Revenues declined slightly, nevertheless--from $1.41 billion to $1.4 billion; this was in line with Wall Street's expectations. "Our third-quarter results reflect the continuing soft ad environment, which is impacting both our newspaper and television groups," Chairman and CEO Dennis FitzSimons said during a conference call.

"Newspaper ad revenues were higher than forecast, but overall costs were as well," noted Lauren Rich Fine, a Merrill Lynch analyst, in her report. She added that the company ended the quarter on a high: "September was up 4 percent--a really good showing in our view and possibly the positive impact of having cycled the Newsday rate cut a year ago."

In fact, Tribune claimed in its report that without Newsday--forced to implement lower ad rates after a circulation scandal in 2004--quarterly newspaper ad revenues would have risen to 3 percent.

For the quarter, classified advertising rose 7 percent year-over-year on the strength of help wanted (up 17 percent) and real estate ads (up 16 percent), while automotive classifieds fell 4 percent. Interactive revenues, which spread across all advertising categories, rose 46 percent to $47 million, also aided by strong classified help-wanted ads.

Other revenue increases came from the hardware/home improvement and financial categories, while there were decreases in several national advertising sectors--particularly wireless, movies, food and drug, technology, and transportation.

FitzSimons noted that circulation, while 7 percent lower than last year, "showed meaningful improvement" from earlier in the year, which caused stocks to rise 2.5 percent yesterday on better-than-expected results. Rich Fine agreed that circulation numbers showed "a vast improvement from prior quarters," pointing out that weekday and Sunday circulation only fell 2.3 percent and 3 percent, respectively, from last year. Total third-quarter revenue from Tribune's publishing division, which includes The Chicago Tribune and the Los Angeles Times, remained flat at $980 million. Revenue from its broadcasting unit fell 2 percent to $422 million, the company said, pointing to weak spending in the movie, telecom and automobile categories.

However, the company's net income plunged--down 82 percent to $21.9 million from $119.6 million a year ago. The dramatic decreases were the result of a federal court ruling forcing the company to pay taxes on its reorganization of Matthew Bender, a Times Mirror subsidiary Tribune acquired in 2000. The company said the ruling cost $150 million.

For the future, FitzSimons said the company, which recently made job cuts at the Los Angeles Times and Newsday, will be "looking at structural changes where they make sense."

Tribune's lukewarm earnings reflect a newspaper market that is facing weaker demand from advertisers, as many migrate online for cheaper, more measurable ad buys.

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