Newspaper Publishers Hope Ad Market Has Already Hit Bottom

Companies and analysts aren't necessarily expecting an increase in ad spending anytime soon, but the worst of the decline may be over.
By Chris Frankie ,

Advertising revenue for newspaper publishers has been falling in recent months, and both analysts and the companies are having a tough time painting a clear picture of when the ad market will start to rebound.

Most publishers express hope that ad spending, at the very least, isn't getting any worse. In the first quarter of 2001, newspapers saw advertising revenue decline 4.3% from the same period in the prior year to $10.4 billion, according to the

Newspaper Association of America

. The association said it was the first such decline since the first quarter of 1992, and the downturn has caused many of the biggest names in the industry to cut jobs, miss earnings projections and initiate cost-cutting measures.

On Tuesday, at the

Mid-Year Media Review

in New York,

USA Today

publisher

Gannett

(GCI) - Get Report

said it expects to be in the range of Wall Street's earnings projections for the second quarter, but added that "we do not have good visibility on what the second half of 2001 will bring." The company did say, however, that the advertising market appears close to a bottom. The day before, the

Washington Post

(WPO)

said advertising-based revenue fell 8.4% in the first five months of 2001 and indicated that the future ad spending outlook is weak. The company said advertising revenue at its flagship paper

The Washington Post

was down 8.9%.

James Goss, an analyst with

Barrington Research Associates

, said that, as is the case in many industries, visibility remains elusive. "

It's still hard to peg the bottom," he said. "The decline happened much more rapidly than expected."

The analyst declined to give a prediction about when the ad market for newspapers will pick up, though he did say "it would seem that things aren't significantly deteriorating any further, (but) there's nothing that leads you to believe things are turning up."

Investors haven't exactly been punishing the newspaper stocks lately, as many are trading within sight of their 52-week highs. Gannett was off 0.1%, to $63.35 in recent trading. The stock has climbed 2.2% in the last six months and 3% since March 19.

Tribune

(TRB)

,

Knight Ridder

(KRI)

,

Lee Enterprises

(LEE) - Get Report

and

E.W. Scripps

(SSP) - Get Report

have also gained modest ground in the last few months.

Shares of Washington Post rose 0.4% to $561 in recent activity, but the stock hasn't fared well of late. In the last six months, the stock has fallen 5.8%. During the last three months, Washington Post is down 2.6%. The

New York Times

(NYT) - Get Report

, which was up 1.1% to $42.27 today, has lost 5.3% over the last six months and is also down in the last three months.

Dow Jones

(DJ)

, the publisher of

The Wall Street Journal

, is down 2.8% from six months ago, but has gained 5.1% in the last three months. Shares of Dow Jones slipped 0.1% to $57.40 today.

Earlier this week, the New York Times said revenue would fall below last year's total. The company blamed the forecast on a slowdown in advertising revenue. Analysts' earnings estimates range from $1.80 to $2.20 a share for the year, with a consensus of $1.98, and the company expects to post income "in the upper quarter" of the range. But, in order to achieve those goals, the company has instituted a number of cost-cutting measures, including previously announced job cuts that could total as much as 9% of its workforce. The Times also said its pro forma newspaper ad revenue dropped 17.1% in May compared with the year-earlier period, while ad revenue at the company's namesake publication dropped 19.5% for the month. Those numbers were up against tough comparisons with May 2000, when the company recorded strong double-digit gains in advertising revenue.

Lee Enterprises' ad revenue fell 3% in May from the year-earlier period. Tribune saw a 10% decline in total ad revenue in the month. Knight Ridder, the publisher of

The Philadelphia Inquirer

,

The Miami Herald

and

The Mercury News

(San Jose, Calif.), felt the pinch as well, as ad revenue fell 8.6% in May.

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