Dead trees weighed on third-quarter results at E.W. Scripps ( SSP) and Belo Corp. ( BLC), underscoring why both have announced plans to separate their beleaguered newspaper publishing operations from their healthier assets. Scripps on Thursday reported a 21% jump in earnings for the third quarter, beating expectations, thanks to growth at its cable networks. The company's newspaper unit, which includes the Rocky Mountain News, recorded a 7% drop in profits and a 6% decline in overall revenue to $158 million, despite a 19% increase in online revenue, which totaled only $10.4 million. Belo, which publishes the Dallas Morning News and Providence Journal, posted a 2% decline in earnings, due in part to weakness in ad sales. Its newspaper group logged a 7.8% drop in revenue, while its TV revenue climbed 1.8%. The results highlight an ongoing, industry-wide decline in newspaper publishing as consumers gravitate to the Internet for their information needs and ad dollars are sucked up by online news aggregators like Google ( GOOG) and Yahoo! ( YHOO). The situation has been exacerbated by an epic slump in the U.S. housing market that is wreaking havoc in the broader economy and slamming classified ad spending. Investors have pressured media companies throughout the industry to take dramatic steps to stop the bleeding, only to be met with resistance from publishers -- many of whom are tightly controlled by families steeped in a proud tradition of newspaper journalism that they view as vital to the health of American democracy.
Early this month, Belo announced it would
spin off its newspaper assets from its TV business. The move enables its controlling shareholders, the descendants of longtime Dallas Morning News publisher George Bannerman Dealey, to keep their grip on both businesses, while public shareholders gain the option of dumping the newspaper stock. The split is expected to take place in the first quarter of 2008, but Belo's third-quarter results included a $2.3 million charge related to the transaction. Scripps followed suit last week, unveiling a plan to split its local newspaper and broadcasting businesses away from its national brands, which include fast-growing cable and Internet-based businesses like HGTV and the Food Network. That restructuring is expected to take place in the second quarter of 2008. For the third quarter, Scripps reported net income of $88.4 million, or 54 cents a share, up from $73.1 million, or 44 cents a share, in the prior year. Its income from continuing operations rose to $87.9 million, or 54 cents a share, from $78.4 million, or 48 cents a share, last year. On that basis, results beat Thomson First Call's average analyst estimate of 42 cents. Scripps' operating revenue rose 2% to $596.4 million, boosted by a 16% jump in revenue at its cable networks division. Analysts had projected a top line of $587.9 million. The publisher expects fourth-quarter earnings from continuing operations between 68 cents and 72 cents, while analysts had forecast earnings per share of 68 cents. Shares of the media concern recently were up $1.98, or 4.6%, to $44.39. Belo reported net income for the period of $18.8 million, or 18 cents a share, down from $19.2 million, or 19 cents a share, in the year-ago period. Its overall revenue fell 3% to $364.3 million. Analysts expected Belo to report a profit of 20 cents a share on revenue of $367.7 million. Shares of Belo were down 23 cents, or 1.2%, to $18.30.