Just when it seemed like things were bad, but not unsalvageable, major newspaper companies announced even more ominous results during first-quarter conference calls on Thursday. The new bad news: online ad growth is slowing -- at the very moment newspapers need it more than ever. The Tribune Company, purchased by real-estate mogul Sam Zell, kicked off the bad news with its announcement of first-quarter earnings of $.08 cents a share, versus $.32 in the same period last year. Overall operating revenues slipped 4% to $1.2 billion. Operating profit was down 16% to $181 million. Tribune's publishing operations took the hardest hits, with total revenue falling 5% to $931 million, while profit tumbled 18% to $140 million. Ad revenue in particular fell 6%, or $47 million. Dennis FitzSimons, Tribune's chairman, president and CEO, explained that "the print advertising environment was challenging in the first quarter due to softness in classified categories," accompanied by declines in national advertising. As has become routine, FitzSimons pointed to the continued growth of Tribune's digital operations -- but in a sense, these were the gloomiest figures of all. Although interactive revenues rose 17% to $60 million, this is a climb-down from 29% average annual growth in 2006, compared to 2005: 30% in the first quarter, 27% second quarter, 28% third quarter, and 31% fourth quarter. As the total revenue base remains fairly small in absolute terms -- about 5% of Tribune's total revenue -- the slowdown may point to a quicker tapering off of online revenue growth than previously anticipated, according to Ken Doctor, a newspaper analyst with Outsell, Inc. And that's bad news. "Online growth is slowing at the time the print revenue decline is deepening," Doctor notes. "Those revenues are declining fairly rapidly, and newspaper executives have been hoping the pace of online growth would pick up, rather than slow down." What does the future hold in this gloomy scenario? "As newspaper companies emerge from the transformation, they will emerge as significantly smaller companies," he says. Doctor points to the first-quarter results announced by the New York Times Company on Thursday, indicating the trouble isn't confined to Tribune. In the first quarter of 2006, the company saw print ad revenue decline 3.4%, compared to the same period last year, as total profit fell 9.9% to $54.5 million. As with Tribune, execs were quick to note that Internet revenue rose 21.6%, accounting for about 10% of the company's total revenue. That's double Tribune's proportion, but Doctor again emphasized the year-to-year slowdown from total annual growth of 39% in 2006, compared to 2005: 72.3% in the first quarter, 34.8% in the second quarter, 25.6% third quarter, and 35.3% fourth quarter. The company's About.com property has seen its own slowdown, Doctor added: 21% growth in the first quarter of 2007 is down markedly from an annual growth rate of 50% in 2006 compared to 2005: 98% in the first quarter, 63% second quarter, 29.3% third quarter, 44.8% fourth quarter. Indeed, the first-quarter results suggest the company may have a hard time delivering on CEO Janet Robinson's prediction that in 2007 "digital revenues will grow approximately 30 percent to about $350 million, mainly through organic growth." While newspapers' online properties may continue enjoying double-digit growth throughout 2007, it's increasingly unlikely to offset the big drops in print ad revenue. For the first time, Doctor says, national ad revenue and all three classified sectors -- housing, recruitment and auto listings -- are all falling by double-digits. "It looks like the major inflection point came during the end of 2006-2007, and we're seeing significant declines across the board now." For example, NYTCO's classified revenues fell 8.2% in January, 14.5% in February and 8.2% in March. Tribune's classified revenues fell 14% in the first quarter, according to the company. Joining Tribune and NYTCO in releasing results Thursday was Gannett, the national chain that saw total revenues decline slightly from $1.88 billion in 2006 to $1.87 billion in 2007. Net income fell from $235.3 million in first quarter 2006 to $210.6 million in 2007, a roughly 10.5% drop. Total ad revenues fell 1.9% to $1.24 billion, with national ads down 4% and classifieds falling 3%. Going forward, Doctor sees little choice for the industry, forecasting "more clustering of newspapers, a lot more cost reduction in production costs and as many cuts in circulation costs as they can manage. Then, they'll have to circle the wagons around the newsroom and the advertisers and hunker down."
AT&T, whose telco TV service had a slower-than-promised rollout, is launching a service allowing customers to program DVRs from their cell phones. It gets to the heart of AT&T's goals for the U-verse service, as consumers will have to use an AT&T mobile device for the remote activity. However, the company says it will open it up to other wireless providers in the future. AT&T is looking to outfox cable operators, which have thrived with so-called triple-play TV-phone-Internet packages, by offering the same bundle -- plus its wireless services -- a fourth option MSOs are deciding how to compete against. The DVR programming via cell phones allows U-verse TV and Internet customers to schedule shows to be recorded, as well as delete programs. The new service augments an existing option to program U-verse DVRs remotely via computers. "Any television viewer can relate to the frustration of forgetting to program his or her DVR," says Rick Welday, chief marketing officer-AT&T Consumer. "Now, whether they're at the airport or stuck in traffic, AT&T U-verse customers can rest assured they won't miss their favorite shows." Cable operators have dismissed any imminent threat of telco TV competition from AT&T and Verizon, though the two are slowly ramping up. U-verse now has 18,000 customers -- less than 1% of each of the top-six MSOs. It plans to launch in the Los Angeles market soon, and this year has moved into Kansas City, Dallas and Milwaukee. (Verizon's FiOS service has considerably higher distribution.) AT&T says that on average, it's rolling U-verse out to 2,000 new homes a week. Separately, as AT&T enters the TV distribution business, it's taking steps to reap ad dollars. The company has a deal with Chase credit cards to link with content related to an event fronted by country star Tim McGraw that's available on wireless, TV and computers. The initiative is part of a fledgling three-screen advertising option offered via the AT&T Entertainment Services unit. Chase is the first sponsor. Content from the McGraw-related event will be available for nearly three months; AT&T wireless customers can download ring tones, U-Verse TV customers will have access to some of the performance and behind-the-scenes coverage. Broadband customers will have access to Web videos. AT&T says it has a "vision to be a premier communications and entertainment provider." That sentiment is echoed by MSOs, which are trying to make further strides into the content/ad business to sync with their core service business. AT&T U-verse also offers OnTheGo, which allows customers to watch live TV on a computer anywhere there's a broadband link.
No surprise here -- the Association of National Advertisers has found, that marketers' main goal continues to be building and maintaining brand equity. In a new survey with market researcher Guideline Inc., 75% of marketers say their brand equity is the most important element to a company's success, and that the best way of building that equity -- for 76% of the survey's respondents -- is television. In looking at a key subset of all brands -- younger skewing products -- the survey says Internet brand-building is the most important. In particular, for young and emerging or strong brands, Internet banner advertising, ranked third overall, 56%, as most effective. What are the tell-tale signs of a brand gone wrong? Seventy percent of the time, it results from the customer rate of return business waning; it goes to the competition. High on this critical list: when consumers knock down a brand from a rating of "excellent." Additionally, consumers don't think much of products that are sold through promotions, discounts or price reductions. To combat this devaluation of brands, marketers suggest product innovation, exploring new target consumers, starting up new researching with focus groups and refocusing overall marketing. The ANA/Guideline survey was conducted in February among 300 brand-marketing executives.
Commercial-free cable nets like Independent Film Channel continue to mine the ranks for new TV marketers. Skyy Vodka will be the next to team with IFC for an integrated partnership on the network, specifically focusing on its key Saturday-night programming. Like many spirits advertisers, Skyy hasn't done any TV marketing in past years. Now, Skyy joins those who have made the move to television. Skyy will be a presenting sponsor of IFC's " Blue Room" theme Saturday-night movie programming, starting April 21. The series of independent films includes "Magnolia," "Crash," "Being John Malkovich," "Kill Bill vol. 1," "The Cooler" and "Boogie Nights." One of the key pieces of the promotions is a co-branded introductory on-screen graphic promoting Skyy Vodka, followed by a Skyy Vodka-branded short film before the main event, which runs commercial-free and uncut.. p> "I don't really believe in product placement," says Alan Klein, senior vice president and partnership and licensing for IFC. "It's about bringing in the brand into the whole creative position. We think it's content in context. Our partners get credit for the piece of art -- and then get out of the way." Skyy adds to IFC's growing ad list, which includes Acura, Heineken, Red Bull, yellow tail and Target. Those advertisers sponsor different shows on different nights of the week.Target is a sponsor of "Cinema Red," what IFC calls Monday night; Australian winemaker, yellow tail, sponsors Tuesdays, "The Cellar;" and Heineken presents "Grindhouse" on Fridays, IFC's series of B and C pictures. Acura presents the entire Sunday night, called "Sunday Best." Klein says the effort of the "brand films" is to produce a short movie, with each client's creative agency, into the brand's existing creative. IFC, like its competitor Sundance Film Channel, is also commercial-free. Sundance has also explored this new ground of sponsorship, specifically with new spirits advertisers that have never had a TV presence. Grey Goose Entertainment is a partner and sponsors "Iconoclasts," Sundance's interview talk show.
Trumpeting its viewer-created ad program as ideal for demonstrating high levels of engagement to advertisers, industry veteran Liz Janneman is joining Current TV as ad sales president. Janneman, senior vice president-ad sales at the Weather Channel, joins the network known for its link to former Vice President Al Gore, its chairman. She comes onboard April 30 and will oversee its second upfront this spring. Current, now in 50 million homes, launched in August 2005 and entered the upfront fray in 2006. A Weather Channel rep declined comment on who would replace Janneman or when, as well as the potential impact her departure means for the TWC upfront. Paul Iaffaldano is expected to assume Janneman's duties for now and may oversee the coming upfront there. Iaffaldano, executive vice president/GM of TWC Media Solutions, has been a visible proponent of deals based on engagement metrics, first making them in 2005. Engagement guarantees are expected to be a critical aspect of the coming spring bazaar. Janneman, who was a top sales executive at Turner before joining TWC, will be based in New York and report to Current COO Mark Goldman. Her role is newly created at the network. Current offers marketers the opportunity for viewers to create some of the ads it airs, and advertisers such as Toyota, Sony and Mountain Dew have taken advantage of the V-CAM (viewer-created ad messages) program. Janneman expects more to sign on. "How engaged is your audience when they're creating the ads for you?" Janneman asked. "Peer-to-peer marketing is incredibly strong." Janneman also said Current, which targets the 18-to-34 demo, fills an unmet need in the market. "They've really figured out what this young adult audience is searching for." Current was founded with the promise of giving young people some "ownership" of a network's programming -- before the term "user-generated content" was in vogue. In 2006, YouTube had a meteoric rise, arguably taking stealing some of Current's thunder. But Janneman said Current's business model -- about one-third of its programming is viewer-created -- is sounder. "YouTube is trying to figure out how to make money for advertisers."
Inflated circulation figures are a perennial and growing complaint of consumer magazine media buyers. But over the last year, some pubs have begun moving decisively to trim "junk" circulation, thus presenting a more convincing picture of ad reach. The strategy is paying off for Discover magazine, whose new management took an axe to junk circ after buying the title from Disney in fall 2005. In the first quarter of 2007, its ad pages jumped 26.8% and rate card revenue rose 14.6%, according to the latest figures from the Publisher's Information Bureau. In a symbolic measure of the turnaround, its June issue will have more ad pages than any issue since December 2004 -- a year before management attacked junk circ -I ncluding four new advertisers: Shell, Olympus Camera, POM and Celestron Telescopes. According to Henry Donahue, Discover Media's CFO, "Part of the investment thesis was that the rate base was inflated," to the tune of "100,000-150,000 copies delivered to doctors' waiting rooms each month." When added to paid subscription and newsstand sales, it totaled about 850,000, which helped Disney keep the magazine's total circulation around a million. Significantly, according to the Audit Bureau of Circulations' report from June 2005, newsstand sales and subs were both declining in that period, and Disney "was doing heavy, heavy discounting against the rate base," Donahue said. There were few display advertisers, as direct response ads proliferated. "By cutting out the junk circ entirely," Donahue said, the magazine's new owner, Bob Guccione, Jr., "calculated we would be able to save hundreds of thousands of dollars on production and distribution, with no appreciable loss on the advertising side." With a reduced rate base of 700,000, mostly subscribers paying up to $25 a year, the magazine can go to advertisers with solid claims of an engaged readership. Apparently, three makes a trend. Time and TV Guide both slashed their rate bases in 2006 in hopes of producing a more plausible and transparent ad sales pitch. Time reduced its rate base from 4 million to 3.25 million, as it also began offering media execs the option of buying a total audience basis derived from MediaMark Resarch's new "issue specific" magazine measure. TV Guide's cut was far more dramatic, from 9 million to 3.2 million, and was accompanied by a move to regular magazine format. Kena Launches for Hispanic Women A new lifestyle magazine called Kena is set to launch on April 23, targeting Hispanic women in the U.S. with bimonthly distribution, via the eight largest Hispanic newspapers: La Opinion in Los Angeles, El DiarioLa Prensa in New York, La Raza in Chicago, El Nuevo Herald in Miami, Al Dia in Dallas, La Voz in Houston, Fronteras in the San Francisco Bay Area, and La Voz in Phoenix. With content including beauty, fashion, cooking, money, décor, family and parenting, the magazine will debut with a circulation of 600,000 per issue. Kelly Appointed Editor Of U.S. News & World Report Brian Kelly was promoted from executive editor to editor of U.S. News &World Report this week, according to the magazine's management. In his previous role, Kelly supervised the magazine's Web site, and now joins a growing group of editors ascending from Web roles to overall magazine management. Before joining U.S. News in 1998, Kelly was an editor and reporter for The Washington Post, where he helped establish the newspaper's Internet presence. Playboy Hires Hagopian For Digital Playboy Enterprises, Inc., announced it has hired Tom Hagopian as a division executive vice-president and general manager for digital media. In this role, Hagopian will lead the development and management of the company's online and mobile businesses, both in the U.S. and abroad. Based in New York, he will report to executive vice-president and president of media, Bob Meyers.