Newspaper Digital Units in the Black

By: Carl Sullivan The halcyon days of stupendous newspaper Web site investments (read: losses) are for the most part gone. During the last two years, publishers have reduced staff, cut costs, and increased revenue streams, resulting in a new period of digital prosperity, albeit of the modest variety.

As promised, Knight Ridder Digital of San Jose, Calif., went into the black for the first time in the fourth quarter, according to the company's financial results released last week. Knight Ridder Chairman and CEO Tony Ridder announced that the new-media unit's revenue was up 31.6% to $55.3 million for 2002. The group's operating income was $456,000 for the fourth quarter. It still lost money ($8.9 million) for the whole year, but that was way down from $31.5 million in losses for 2001.

Chris Jennewein, director of Internet operations for The Union-Tribune Publishing Co. in San Diego, said the paper's new-media group had its first positive year in 2002, although he declined to release revenue numbers. The Union-Tribune is the flagship of privately held Copley Press Inc. of La Jolla, Calif. The paper's SignOnSanDiego.com expects "improved performance and significant revenue growth in 2003," Jennewein said. He said the site has been helped by using Web analysis tools from hometown WebSideStory Inc., which helps provide more accurate audience numbers and identify new advertising opportunities.

Across the country, New York Times Digital has recorded five consecutive quarters of operating profit and has been cash-flow positive for six consecutive quarters (as of the third quarter 2002). Fourth quarter figures weren't available at press time, but advertising at the unit's NYTimes.com grew 33% in the period.

Dow Jones & Co. Inc.'s Consumer Electronic Publishing unit also reported profitability on an EBITDA basis late last year. The new-media group's fourth-quarter revenues were $77.9 million, down slightly from the year-ago period. Operating income before special items was $16.9 million, up 59.8% from last year. Paid subscribers to The Wall Street Journal Online reached 679,000 as of Dec. 31, up 8.5% from 2001.

The newspaper Web sites owned by Cincinnati's E.W. Scripps Co. were profitable in 2002, said Bob Benz, general manager of interactive media. "We went back to basics and had a good year," he said.

Privately held Morris Communications Co. LLC of Augusta, Ga., began "consistently operating in the black on the Internet in the second quarter of 2002," said Morris Digital Works Strategy and Content Vice President Steve Yelvington.

Lee Enterprises of Davenport, Iowa, has registered several years of profitability at its Web sites, according to a spokesman. In the most recent quarter, online revenue jumped 42.7% to $2.3 million from the year-ago period.

Of course, some newspaper Web sites are still producing red ink. Dallas-based Belo Interactive had "a very strong 2002," but still lost money, said Eric Christensen, vice president/general manager. The unit expects to be profitable by 2004.