Stations Report Mixed Results, Print Operations Continue Decline

Broadcast station groups displayed mixed third-quarter results Thursday--highlighted by the Tribune Co. reporting a slight revenue drop, even in a year with significant political spending. But their parent companies with print operations saw those segments suffer.

Tribune--which operates 25 local stations including those in top three markets--reported a 3% revenue drop to $278 million for its television group. With a governor's race in California, the company said revenues at its LA station increased, but stations in the other leading markets, New York and Chicago, dropped. Slow categories included retail--perhaps hurt by Federated's decision to consolidate stores under the Macy's brand and move into national advertising--as well as auto and health care. The company did not specify whether the slowdowns were in national or local spot.

Among the Tribune stations are 16 affiliates of the new CW network, which so far this season has posted ratings at about the same level as the defunct WB (which stations were previously affiliated with). Even though there was some hope that the CW would outperform the WB since its combination with UPN was supposed to add some programming firepower, Tribune Chairman-CEO Dennis FitzSimons said the network would ultimately buoy the stations and "drive improved prime-time ratings and revenues."



Tribune's woes contrasted with growth at Belo Corp., which runs 19 stations, including 13 affiliated with the higher-rated ABC, CBS and NBC. Revenue for the station group jumped 6.9% to $179 million, although political revenues accounted for 64% of the increase. Belo said it posted an 8.4% jump in spot dollars. In keeping with trends, local revenues increased slightly by 2.7%, while national jumped 7.7%. Ad dollars for station Web sites--a major focus for station groups as spot dollar growth slows--increased 45% to $4.8 million.

McGraw-Hill, which operates four ABC stations, joined Tribune in posting a revenue decline for its station group. The company reported a 5.9% drop for the segment to $26 million. Political revenues could not overcome declines in national and local sales. McGraw-Hill has two stations in politically hot California, including one in large market San Diego. Its decline was somewhat surprising, considering ABC's ratings success.

The New York Times Co.--which plans to sell its nine stations--posted a 27.8% increase in the segment to $4.3 million, but offered no other details.

In print, the Times Co., Tribune, and Belo all struggled.

Print advertising took a hit in the third quarter at the Times Co.'s major properties, including the New York flagship and the Boston Globe--with a 4.2% decline in ad revenue contributing to a 2.4% decline in total revenues versus the same period in 2005, ending at $739.6 million. As in previous months, the New England Group turned in the worst performance, with a 10% drop in ad revenue. Squeezed by falling revenues and costs associated with layoffs and its sale of the Discovery Times Channel, profits fell 39% from $23.1 million in the third quarter of 2005 to $14 million in 2006.

According to Janet L. Robinson, President-CEO of the Times Co., the weak performance is due in part to softening demand for print classifieds: "Print advertising remains challenging, especially in categories such as studio entertainment, help wanted and automotive where we are experiencing declines."

In September's monthly returns, the Internet was a bright spot, with online ad revenue jumping 18.9% across the Times' three media groups compared to September 2005. That number is up slightly from 17.3% in August--but both August and September figures were relatively low compared to results from earlier this year, suggesting a possible slowdown in online advertising. By comparison, July revenues were up 27.5% compared to last year, June was up 23%, and May was up 27%.

Although the Tribune Co.'s third-quarter earnings showed a big increase over the same period of 2005, without the one-time increase resulting from its acquisition of the Times Mirror, revenues would have fallen 3% compared to the third quarter in 2005.

Print ad revenues at the company's various newspapers, including the Chicago Tribune and Los Angeles Times, fell 2% to about $1.35 billion, missing analysts' expectations by $200 million. As a result, the Tribune's publishing division saw profits fall 17% to $141 million. Like the Times, Tribune executives blamed weakening demand for national and classified advertising, with the former falling 8% and the latter 1%.

Recently the Tribune Co.'s board of directors has been battling with dissident shareholders from the Chandler family, a wealthy group of private investors who have urged the company to sell key properties and break itself up. The company formed a special committee to consider this and other options intended to improve its various properties' financial performance on September 21, and on Wednesday it announced it has hired Morgan Stanley as financial advisor to this committee.

The Belo Corp. also posted weak third-quarter results at its newspaper properties, including The Dallas Morning News, with overall print revenue falling 4.2%. In addition to a weakening ad market, Belo blamed its shrinking profit margin on severance costs associated with layoffs at The Dallas Morning News, as well a $10 million technology initiative.

According to Ken Doctor, an analyst with Outsell, Inc., the latest round of newspaper results have surprised even observers who anticipated bad news from newspapers: "Top side, the revenues are decelerating faster than people had expected. We do seem to have a softening of the economy, but the main thing is the advertising dollars are moving to other media even faster than predicted." In part, Doctor explained, that's because "we're starting to see a Craigslist effect: advertising is no longer even keeping pace with inflation, because advertisers are finding more efficient ways to reach those customers, including of course the Internet."

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