Industry Looks for New Niche in 2004

By: Lucia Moses As 2004 approaches, it looks to be another Year of the Niche, as publishers pledge to build on their products geared toward young adults and other demographic groups.

Targeted products are transforming the newspaper business. Lee Enterprises Inc. said at least 30% of its revenue this year would come from niche and targeted advertising products and that more are on the way next year, while Knight Ridder said that half of its 2004 revenue growth would come from new initiatives, online and off.

"We're trying different things in different markets, trying to find out what's best," said Richard A. Boehne, executive vice president at the E.W. Scripps Co. But executives say they're still far from figuring out what methods are building loyalty from readers, particularly young adults.

"We're learning," said Gannett Co. Inc. Chairman, President, and CEO Douglas H. McCorkindale after a speech at one of two competing investor conferences in New York City last week, where niche products were a theme of most presentations by the public companies. Given the diversity of lifestyles and interests within the young adult population, it may be that one type of product may not fit all people in that age group, he said.

Donald Graham, chairman and CEO of The Washington Post Co., said of Express, his company's 4-month-old quick-read paper, "It is much too soon to talk about success and failure here. We knew the audience would be good. Advertising in the first couple months has slightly exceeded our expectations. We're off to a good start. In two or three years, we'll spell out whether we think it worked or not."

Such free, quick-read dailies launched in Washington, New York, and Dallas during the past year have won much industry attention, but not all are copying that approach. Knight Ridder, for example, is looking at starting a Web product in some of its markets, in the style of the Chicago Tribune's Metromix, an online entertainment site, said Newspaper Division President Steven B. Rossi. "We decided, rather than jump to market with a print product, it would make sense to create content that's adaptable to the Web," he said. And while a print version could come later, "I don't think print should be the primary vehicle." And Scripps, which plans to start three or four products next year, is looking at a direct-mail publication, aimed in some markets to college kids, President and CEO Kenneth Lowe said.

Publishers look to these products to grow the top line in a year in which revenue growth is expected to rise 4% to 6%, the industry's best revenue performance in four years. The greatest unknown continues to be the outlook for help-wanted advertising, with CEOs generally predicting moderate growth in that category.

"We are optimistic about next year, which is reflected in our projections for mid-single digit revenue growth," McClatchy Co. Chairman and CEO Gary Pruitt said after a presentation to investors and analysts. Of year-over-year comparisons in help-wanted, he said, "We're hopeful they'll turn positive by the second quarter, but we said that last year, too."

And publishers still face structural problems in the retail category, as stores have been cutting back newspaper spending and/or shifting their newspaper ROP to preprint. "It's a very confused marketplace for newspapers in retail," McCorkindale said during a Q-and-A session. "We're getting very mixed messages from larger retailers. Small- and medium-sized retailers are continuing to get better."

Despite plans for new product launches, companies emphasized they wouldn't retreat on profit and margin goals for the coming year, and stressed continued attention to costs. Knight Ridder task forces, challenged to find $100 million in cost cuts, have identified $60 million to $70 million, "and we're not done," Rossi said. "I still think we'll find $100 million by the end of '04." Lee Enterprises said even as it planned to add to its sales staff and increase sales training next year, it was still looking for ways to manage costs aggressively.

And in a sign analysts haven't lost interest in circulation growth, some questioned Knight Ridder about the success of its plan to grow circulation by selective price discounting, given that recent financial reports showed revenue from that category is still down. CEO Tony Ridder said, "I think it's important to grow circulation. That's what our advertisers say they want."