Attacks Compound Media Woes

By: Seth Sutel, AP Business Writer (AP) This year was already shaping up to be one of the worst in recent memory for the media industry. But the terrorist attacks of last week could make the outlook even worse if the economy slumps and advertisers cut spending even more than they already have.

At the same time, media outlets are facing mounting newsgathering costs from covering the devastating events, not to mention the lost advertising revenues from nearly a week of wall-to-wall news coverage. News costs could mount even higher once the U.S. military response gets under way.

"At this point, advertisers go into a trench where they wait to see what happens," Jack Myers, chief economist of the media forecasting firm Myers Reports Inc., said in an interview. "If we return to a sense of normalcy, so will advertising."

Just three weeks ago, Myers had once again lowered his forecast for overall advertising spending for this year to a decline of as much as 6.6%. In a research report to be released Wednesday, Myers says even that decline would be optimistic. "What was our worst-case scenario is now our best-case scenario," Myers said.

Other analysts are holding back before making firm predictions, saying they need to see how the political situation shapes up before determining what impact there could be on specific companies and the overall advertising picture.

Christopher Dixon, the lead media analyst at UBS Warburg, estimates that $320 million in television advertising has been lost so far, but it's uncertain how much the rest of the year will be affected.

"The good news is that the networks are limping back to normal," Dixon said. "For most analysts 2001 was a write-off anyway. Most people are now looking to 2002, and it's too early to say what that could look like."

In the meantime, investors are responding by pushing down shares in companies that rely on advertising. After taking a big fall on Monday, major entertainment companies were off again Tuesday, as Viacom Inc. lost 90 cents to $31.90, Walt Disney Co. fell 85 cents to $18.40, and News Corp. fell $1.95 to $24.45, all on the New York Stock Exchange.

Other parts of the media world are also taking a hit. Newspaper publishers, already struggling with a severe advertising downturn, are warning that the horrific events of last week are likely to further impact their profits.

Dow Jones & Co., The New York Times Co., and E.W. Scripps Co. have all warned of weaker third quarter results. The Times also indefinitely postponed events commemorating its 150th anniversary, which had been scheduled for this past weekend.

Newsmagazines have also pulled out the stops on coverage of the attacks, putting out special issues with no advertising. Meanwhile, the all-news TV coverage of the past week has put off the start of the fall TV season, originally scheduled for this week, until next week.

TV news departments, never seen as profit centers for broadcasters in the first place, are now likely to require even more resources to cover the aftermath of the attacks as well as whatever retaliation the U.S. government decides to take.

Tom Wolzien, a media industry analyst at Sanford C. Bernstein & Co., estimated that TV network news budgets, now up to $500 million a year, may have to increase by 25% to 35% over the next few years as the U.S. military response unfolds.

Wolzien, who was also a longtime news producer at NBC and an army photographer in Vietnam, said in a report to investors on Monday that "while extended periods of non-commercial programming are unlikely going forward except in the most dire of circumstances, news coverage costs will continue to be higher."

Despite the financial hit, industry analysts said the media could see increased public confidence because of their willingness to set aside profit concerns in order to serve the public good.

"Let us, at the very least, congratulate all those networks and corporations that put the public interest ahead of their shareholders' interests, and ahead of investor concerns for short-term profit," Myers, the industry forecaster, said in a report last Friday. "Let's hope that advertisers, investors, and regulators reward these companies for their extraordinary public service."