Gray Lady Slips, Times Ad Revenue Tumbles In August

The New York Times Co. Tuesday reported a drop in ad spending for August, marking the second consecutive month of a softening ad marketplace for the paper, which only recently was been reporting an upswing in advertising demand. The news was surprising because other major newspaper publishers have been reporting mostly positive ad scenarios for August.

Advertising revenue at The New York Times dropped 3.7% to $63.7 million in August compared to the same period a year ago. Losing ground were financial services, fashion and corporate advertising, along with department store and the perennial problems with help-wanted.

Overall linage dropped 8.7% to 138,300 inches, with a 22% fall in retail to 21,500 inches. National and classified linage were down mid single digits. The Times revised downward its expectations for advertising revenue companywide, from an earlier prediction of up 3% to 5% to the current up 2% to 4%.

Ad revenues at the rest of the company's newspapers - which include the Boston Globe, the Sarasota (Fla.) Herald-Tribune and other papers throughout the southeast and California - were more in line with the rest of the industry reported so far. The New England newspaper group's ad revenues rose 1.6% and its other regional newspapers rose 0.9%, although the poor showing at The New York Times dragged overall ad revenues down 1.4% in August.

The Times wasn't the only newspaper publisher to report disappointing August revenues. Knight Ridder - which owns a raft of newspapers including the Miami Herald, Philadelphia Inquirer and the Fort Worth Star Telegram - saw total advertising revenues for the period drop 1.6% to $161.6 million. Retail and classified fell by low- to mid-single digits, although Knight Ridder reported a strong 16.6% jump in general advertising revenues. Both companies suffered slightly Wednesday on Wall Street, with the New York Times Co. closing down 1.72 to $42.80 a share and Knight Ridder falling 0.58 at $68.48 a share at the New York Stock Exchange.

In adjusting its third-quarter outlook, the Times said September was trending better.

"September should be better but it doesn't sound like by much. The issue is why are they underperforming their peers," said Lauren Rich Fine, first vice president and managing director of corporate strategy and research at Merrill Lynch in New York.

The McClatchy Co., which publishes the Sacramento (Calif.) Bee and the Star Tribune in Minneapolis, among others, said ad revenues rose 2.8% to $70.1 million in August compared to the same period a year ago. Year-to-date, ad revenues companywide were up 3.3%. Pulitzer Inc., which owns several dailies including the St. Louis Post-Dispatch, said advertising rose 3% on the strength of retail and national categories.

Fine said it wasn't clear why The New York Times was underperforming, although it could be a repercussion to prior ad rate increases stemming from circulation volume gains that halted in the last audit. Fine said The New York Times was still committed to a circulation volume gain in September but have lowered their guidance for circulation revenues, which she said suggested increased promotional activities. Fine said she wasn't sure advertisers wanted to pay for that.

Or advertisers are cutting to fund buys made during the television upfront, she said.

Edward Atorino, an analyst at Blaylock & Partners in New York, said he expected newspaper advertising would improve in the fourth quarter along with the economy and consumer spending.

"National seems to be gaining some momentum in many areas," Atorino said. "Retail is still soft but I would think the seasonally important fourth quarter would see a pick up in retail advertising. Preprints continue to show good growth, helping total retail ad revenues."

Miles Groves, a media economist who is president of MG Strategic Research Ltd., said August is generally not a great month in the newspaper industry. It's interesting that last August and September, it seemed things were beginning to turn around, he said. But he echoed Fine and Atorino, saying that it was too early to say that The Times' downturn was anything more than a blip.

"I wouldn't start painting the rest of the year off of what happened in August and September," Groves said.

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