What's Black And White, And Not In The Red: Newspaper's Ad Outlook

Some of the nation's largest newspaper-holding companies released financial results and issued forecasts for the coming year, with the overall picture one of guarded optimism. Across the board, newspaper executives are downplaying print and pointing to the Internet as the key driver for the future of their businesses.

The McClatchy Co., which acquired and dismantled Knight Ridder in 2006, revealed that ad revenue fell 4.7% to $202.6 in November, compared to the same month last year. Print circulation revenue fell 3%, reflecting the structural decline affecting the newspaper industry as a whole.

Although CEO Gary Pruitt said the Knight Ridder acquisition went well, he forecast a continuing slump in ad demand in December, and McClatchy executives were tight-lipped about the prospects of print properties in 2007.

However, McClatchy's vice president for interactive media, Christian Hendricks, trumpeted 25% growth in online revenue in November, noting that online revenue also constitutes 8% of total revenues--a higher percentage than the newspaper industry as a whole, which is hovering around 5%. Still, he warned that one of the biggest online revenue producers--classified ads--is likely to slow in 2007 as a result of weakness in the job recruiting and real-estate markets.

advertisement

advertisement

On Wednesday, the Gannett Co. released a cautiously optimistic forecast for fourth-quarter financial results, saying it expects to post profits at the high end of its previously released guidance of about $1.49 per share. Gannett expects ad pages to dip slightly at USA Today, but said rates will rise slightly.

On the online side, Gannett has enjoyed strong growth at its newspaper Web sites over the last few years, but quarterly growth rates in 2006 have declined on a year-over-year basis. The rate of online growth at its domestic community newspapers, in particular, has slowed dramatically--with first-quarter revenue up 35% over the same period in 2005, the second quarter up 27%, and the third quarter up 21%.

Meanwhile, Janet Robinson, New York Times Co.'s CEO, issued a frank prediction of continuing difficulties in the print advertising market in 2007, while disclosing a 3.8% decline in print advertising in November compared to last year.

The company has struggled in 2006, with third-quarter profit dropping 39% compared to the same period in 2005, as revenue fell 4.2%. Some groups are having an even harder time: the Times Co.'s New England Group, with the Boston Globe in the lead, sustained substantial ad revenue losses on a year-to-year basis in the first three quarters of 2006. It lost 7% in the first quarter, 10% in the second quarter, and 12% in the third quarter.

Like other big newspaper companies, the Times Co. continues to tout online growth as a bright spot on the ledger sheet. In 2007, Robinson said she expects that online revenue could grow 30% over 2006, for a total of $270 million. Nonetheless, the rate of increase in online quarterly revenues may have peaked on a year-over-year basis, with 23% growth in the first quarter, 35% in the second quarter, and 24% growth in the third quarter.

Next story loading loading..