Newspapers Tumble On Weak Q3 Results

Newspaper companies continue to take hits on the stock market following a spate of disappointing third-quarter earnings results. This week, The New York Times Company reported a 52 percent plunge in third-quarter revenue, followed by Wall Street Journal publisher Dow Jones and Company, which reported a 16 percent decline. While both companies cited one-time restructuring costs as a reason for the declines, ad revenues were visibly soft. Tribune Company, Gannett Company, Inc., and Knight Ridder, Inc. also posted near-flat third-quarter ad revenues, causing stocks to fall.

Five major newspaper publishers have seen their year-over-year stock prices plunge, as analysts urge investors to stay away from ailing newspaper stocks. Of the five, The New York Times Company's stock price has fallen farthest--30 percent. The Times is followed by Tribune Company, down 24 percent; Knight Ridder, down 21 percent; and Gannett and Dow Jones, both down 20 percent.

The systematic drop in stock prices has been steady throughout the year for publishing companies, as they report rising printing costs, circulation declines, and large-scale advertiser defections, particularly in the retail and automotive categories.



Despite a huge 67 percent surge in ad revenue at new holding, the New York Times Company's ad sales grew only 4 percent this quarter; sales would have been a scant 1.3 percent excluding the Web property. Third-quarter ad sales fell 2.5 percent for Dow Jones & Company, which said poor sales at Barron's and the Far Eastern Economic Review offset a 3.8 percent sales bounce from the U.S. edition of The Wall Street Journal.

The company also projected lower-than-expected fourth-quarter earnings due to costs related to the launch of a Saturday edition of the Journal.

While USA Today publisher Gannett Company posted a 7.1 percent year-over-year increase in ad revenues, this was mostly the result of a property swap with Knight Ridder. With the same properties, advertising would have risen a slight 1.1 percent. The same holds for Knight Ridder, whose revenues rose 3 percent in the third quarter on the strength of the new acquisitions from Gannett; without them, the increase falls to 1.8 percent. Tribune Company saw a 2 percent increase in third-quarter ad revenues.

Not surprisingly, substantial Internet ad revenue gains helped drive these increases. At both The New York Times Company and Dow Jones, interactive revenue grew 31 percent this quarter. Third-quarter online sales were 46 percent for Tribune Company and 52 percent for Knight Ridder. Gannett did not specify its third-quarter interactive revenues.

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