AP On Weak 1Q For Newspaper Companies: Online Still Growing, But Not Fast Enough?

By: Media companies announced lackluster earnings during their latest quarter as declining revenue, profit and circulation figures dealt the newspaper industry its latest financial blow.

Gannett Co., Tribune Co., New York Times Co. and Media General Inc. all reported lower earnings Thursday, as classified advertising dwindled and overall online revenue growth began to slow, analysts said.

At Chicago-based Tribune, interactive revenue grew 17 percent to $60 million. That segment grew 30 percent during the first quarter in 2006.

?The big problem and the big red flag for newspaper companies is that the slowing in online revenue growth means that their ability to make up that print loss is eroding very quickly,? said Ken Doctor, a media analyst for Outsell, Inc.

Newspaper publishers have been struggling for years as readers turn to the Internet for their news and advertisers ? particularly classified advertisers ? follow them. That trend has continued. During the latest quarter, classified revenue at Tribune and Media General fell 14 percent, while dipping nearly 12 percent at New York Times and 3 percent for Gannett.

Meanwhile, profit at online search leader Google Inc. surged 69 percent to $1 billion, or $3.18 cents per share, in the first quarter. Quarterly revenue climbed 63 percent to a new company high of $3.66 billion.

The Mountain View, Calif.-based company?s financial firepower flowed from its ubiquitous search engine, which has become the hub of the Internet?s largest advertising network. Google delivered 225.9 billion advertising links during the first quarter, an 85 percent increase from 122.3 billion at the same time last year, according to data compiled by online research firm Nielsen/NetRatings Inc.

Michael Simonton, newspaper analyst at the credit ratings service Fitch Ratings Inc. said an 8 percent drop in print ad revenue at Gannett?s flagship USA Today was a cause for concern.

?It could reflect that sophisticated national advertisers are rethinking their media mix, looking to the Internet or outdoor instead of print,? he said.

Gannett, the nation?s largest newspaper publisher, is often considered an industry bellwether. Its first-quarter earnings fell 11 percent, to $210.6 million, or 90 cents per share. The result surpassed Wall Street expectations by a penny, according to Thomson Financial. Overall revenue at the McLean, Va.-based company slipped 1 percent to $1.87 billion.

Gannett owns 23 television stations and several radio stations along with its nearly 90 daily newspapers.

New York Times? first-quarter profit fell 26 percent to $23.9 million, or 17 cents per share from a year ago.

Revenue for the quarter dipped 2 percent to $786 million, beating Wall Street?s estimate of $784.9 million. Analysts predicted first-quarter net income of 18 cents per share.

The New York-based company owns its namesake newspaper and The Boston Globe as well as more than a dozen other daily newspapers.

Media General, which publishes The Tampa Tribune, Richmond Times-Dispatch, and Winston-Salem Journal, posted a quarterly loss of $6.5 million, or 27 cents per share, compared to a profit of $6.7 million, or 28 cents per share, a year ago.

Revenue rose 5.9 percent to $230.4 million. Excluding the impact of four NBC stations that Richmond, Va.-based Media General acquired last summer, total revenue decreased 3.2 percent. Analysts forecast a loss per share of 26 cents and revenue of $236.4 million.

The company had a 20 percent dip in print real estate advertisements.

?We are deeply disappointed that this year started out much weaker than we had anticipated,? said Chief Executive Marshall Morton.

Tribune, the nation?s No. 2 newspaper publisher, reported a loss of $15.6 million, or 6 cents per share, after paying preferred dividends. That?s after a profit of $100.7 million, or 33 cents per share, last year.

The company, which owns 11 daily newspapers, 23 TV stations and the Chicago Cubs baseball team, said the latest quarter?s results were hurt by a non-operating loss of 20 cents per share, related to an adjustment in the value of the company?s eight-year-old stock investment in Time Warner.

Excluding that item, profit from continuing operations would have totaled 28 cents per share in the latest period.

Quarterly revenue dropped 4.3 percent to $1.21 billion. Publishing revenue slipped 5.5 percent to $931 million and broadcasting and entertainment revenue dipped by $1 million to $283 million.

Analysts were predicting profit of 30 cents per share on higher revenue of $1.23 billion.

?These results indicated the continued struggles in the newspaper ad market and difficulty reigning in costs enough to protect profitability,? Bear Stears analyst Alexia Quadrani wrote in a research note.

Tribune shares fell 21 cents to close at $32.48 in trading Thursday on the New York Stock Exchange, while Gannett shares slid 71 cents to $57.66. New York Times shares fell 66 cents to $23.90, and Media General fell 57 cents to $38.52.