Web Profits Are Talk of NAA Meeting

By: Carl Sullivan

It was uncharacteristically chilly here last week but the forecast was fine inside the hotel where the Newspaper Association of America was holding its annual Connections new-media conference, where officials said attendance was up about 40% from last year’s meeting. Newspaper Web executives attending the event were largely optimistic about 2003.

“Being cash-flow positive is a lot better than being cash-flow negative,” said David Hiller, president of Chicago’s Tribune Interactive, which posted $8.7 million in earnings before interest, taxes, depreciation, and amortization last year, compared with a loss of $20 million in 2001. Hiller said this milestone proves to the larger Tribune Co. and outsiders that new media is a “real business.”

Knight Ridder Digital President and CEO Hilary Schneider also got the chance to crow about black ink. Her division had announced its first profitable quarter a week earlier. Sharing the dais Wednesday with Hiller and other executives, Schneider reported that San Jose, Calif.-based KRD is seeing year-over-year growth in banner advertising and sponsorship sales, including what she called “impressive growth” in sales to national advertisers on the Real Cities network, which expanded last week with the addition of the McClatchy Co.’s Web sites.

Pitching newspaper Web sites to advertisers has gotten easier in the last 18 months, said Washingtonpost.Newsweek Interactive CEO and Publisher Christopher Schroeder. He said many advertisers have finally been persuaded that the Internet is a powerful ad medium. Local and national advertising revenues at The Washington Post Co.’s Web sites (primarily washingtonpost.com) jumped 60% in 2002.

Advertising was also on the rise at New York Times Digital, which reported an operating profit of $3.3 million in the fourth quarter and $8.3 million for the full year. And integrated print and online ad packages totaled $29.8 million in sales in 2002, up 22% from the previous year.

But NYTD CEO Martin Nisenholtz reminded his colleagues that the journalistic impact and reach of newspaper Web sites still far exceeds their financial results. He said newspaper Web managers risk losing “the future” if they only pay attention to the short term. Nisenholtz said he strives for a balancing act between short-term performance and long-term goals.

While the profitability pressure can be intense, Schneider said it does help new-media divisions set priorities. Immersed in constantly evolving technology, Internet employees can come up with a gazillion good ideas, but managers have to focus on what’s most important, she said.

The focus for 2003 at Dallas-based Belo Interactive will be registration, said Vice President/General Manager Eric Christensen. He expects advertising revenues to rise as Belo’s sites fully exploit the registration data they’ve been collecting from users.

Without providing details, Nisenholtz said NYTimes.com will likely launch some sort of new premium-content tier in the next three months. Tribune Interactive will spend the next year studying the paid-content issue, added Hiller, who said that history will show that the all-free access model was a mistake. That doesn’t mean Tribune sites will no longer offer any free content. Rather, it likely means that Tribune will restrict some content to print subscribers and/or those who purchase an online-only membership.

Several of the executives suggested that online news might develop into a model similar to cable television, where users pay for premium content. Schroeder said the problem with this theory is that many consumers feel that they’re already paying for Web content through their monthly Internet Service Provider (ISP) fees, even though content providers don’t see any of that money. Schroeder said advertising, not paid content, will drive at least 80% of newspaper Web site revenues for the next few years. But he also expressed worries about the possible impact of new ad-blocking software that many consumers are downloading. Online publishers will be forced to find counter-measures, Schroeder said.

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