MID-YEAR AD FORECAST: STILL SEARCHING FOR RECOVERY

By: Lucia Moses Newspaper Company Executives Report on Advertising


Publishers, while believing the worst of the ad-revenue
comparisons may be behind them, told investors and analysts last
week they still see little sign of an economic turnaround.

"For the rest of 2001, we're still very, very cautious," Gannett
Co. Inc. Chairman, CEO, and President Douglas H. McCorkindale
said at the Mid-Year Media Review in New York. "There simply is
no sign of recovery."

The market-sensitive recruitment classified category continues to
be the weakest spot, with metro papers hit hardest because of
falloffs in high-tech employment. One uncertainty in developing a
recovery timetable is how much of the decline is Net-related.

At The Washington Post, where the help-wanted category
contributes 23% of ad revenue, job ad revenue fell 31.5% in the
first five months of the year. "It has been worse every month,
and I know no reason to think we've hit bottom," Washington Post
Co. Chairman and CEO Donald E. Graham said. Asked about the Web's
impact, Graham said, "You have to be losing share of something
you used to have 100% of."

In the second half, improvement in dot-com ad comparisons and
newsprint price rollbacks should improve newspapers' financial
results, which are the worst they've been since the 1991
recession.

Citing low demand, Abitibi-Consolidated said it would roll back
its price hike of $25 per metric ton, effective Sunday. The
rollback, along with another one by producers in recent months,
effectively eliminates the $50-per-ton increase announced late
last year, and newspaper executives anticipated further declines.
Said John O'Brien, chief financial officer for the New York Times
Co., "The bias is now clearly in favor of newsprint prices going
lower than that."

Still, it was the gloomy ad outlook that dominated talk last
week.

Demonstrating their leanness in the downturn, publishers detailed
job cuts they have made this year, often using a combination of
buyouts, layoffs, and job eliminations. Knight Ridder said it
would employ about 10% fewer people when its previously announced
cuts are completed. The New York Times Co. said full-time
equivalents (FTEs) would be down 8% to 9% this year. Belo said it
cut about 5% of its FTEs from December to April, with more trims
to come before the year's end. Media General Inc. said it was
operating with about 5% less staff compared with a year ago. Lee
Enterprises Inc. eliminated 2.6% of nonsales positions. And the
McClatchy Co. said it has cut about 2% of its FTEs.

Still, a few spoke about the importance of balancing quality with
profit. Dow Jones & Co. Inc. said that, while it is looking hard
at costs, it won't sacrifice its long-term objectives to meet
short-term margin goals. "We remain very much aware that the
essentiality, authority, and integrity of our products and
services are the engine of our economic success," Chairman and
CEO Peter Kann said. Three days later, he told staff in a memo
that a second round of cost cuts, including more layoffs, was
coming.

The Internet, which helped fill newspaper coffers with dot-com ad
revenue last year, is now proving to be a curse in more ways than
one. Belo, McClatchy, and Pulitzer Inc. said they will take
second-quarter earnings hits to reflect declines in the value of
their investments in the Net.

Belo's charge, its second one related to its Internet stakes,
partly reflects its roughly 6.92% stake in Digital:Convergence
Corp., maker of the :CueCat computer scanner, which recently
fired most of its staff as part of a restructuring. Pulitzer's 6-
cent charge to estimated earnings of 26 cents to 29 cents relates
to its stake in financially troubled community-publishing
software company KOZ.com, which is undergoing a sale and
reorganization.



Lucia Moses (lmoses@editorandpublisher.com) is an associate editor covering business for E&P.



Copyright 2001, Editor & Publisher.