Newspaper Outlook 2003

By: Mark Fitzgerald In the Chinese lunar calendar, 2002 was the Year of the Horse. The U.S. Environmental Protection Agency declared it the Year of Clean Water. If the newspaper industry -- reeling from the collapse of advertising that came early in 2001 and the late-year horrors of 9/11 and its consequences -- had taken a shot at naming 2002, it would no doubt have named it something hopeful: The Year of Convergence, perhaps. In retrospect, though, 2002 was the Year of Unanswered Questions. With perhaps one exception, all those Big Issues that newspapers faced in 2001 -- from the advertising recession to declining circulation, from real-world models for convergence to newsroom diversity -- persisted through 2002 with barely any movement toward resolution. Worse, the year left no clear signs that progress is right around the corner in 2003.

Last year, industry executives and observers lost their confidence that, in the short run at least, time heals all wounds. Washington Post Co. Chairman and CEO Donald E. Graham may have said it best at the Credit Suisse First Boston conference: "If you want my outlook for next year, I basically don't have one. There is no reason for me to share my nonwisdom with you -- it would only be confusing."

Well, it's the new year now, so let the confusing begin. What follows is a look at some of the biggest industry questions, left unsettled by the old year.

Cross ownership: The 27-year-old Federal Communications Commission (FCC) ban on same-market ownership of newspapers and broadcast properties has to be the mother of all the industry's unsettled questions. Coming into last year, the ban looked dead, dead, dead. Not only were heavyweights such as Gannett Co. Inc. and the Tribune Co. lobbying for its elimination -- so was the FCC's own chairman.

Yet, the ban remains in effect today -- and as the FCC prepares for a decision this spring, some serious opposition to repeal is building for the first time. Labor unions and consumer groups have begun beating the drums against repeal. The public is already dimly aware -- and a little resentful -- that its radio listening choices are pretty much controlled by Clear Channel Communications and Emmis Communications. At the traveling road show that anti-repeal FCC Commissioner Michael J. Copps has planned, the public will hear accusations that newspapers aspire to that kind of control. But it seems impossible the cross-ownership ban will remain in place after its most prominent critic, Sen. Ernest F. Hollings, D-S.C., has lost the key Senate committee chairmanship.

Advertising revenue: Since advertising dropped off a cliff two winters ago, guessing the timing of its turnaround has morphed from a popular parlor game to a maddening exercise in futility. Miles Groves, chief economist of The Barry Group, for instance, thought ad revenue would grow 2% or so in 2002. Instead, he now says it looks to be headed to a decline of about 0.5% from the depressed figures of 2001.

Still, more chains are again willing to risk predictions -- and relatively optimistic ones at that. Among the companies that expect positive growth for themselves are Gannett (ad revenue up "mid-single digits"); Knight Ridder (4%); the New York Times Co. (3% to 5%); and the Journal Register Co. (3% to 4%).

Chains have been emboldened by results from the late summer and fall that generally show strengthening revenue month after month. Groves, who now predicts industrywide growth of 5% to 5.7% this year, says some positive movement is inevitable: "The comparables [with 2002 results] alone should be worth 2%." And he notes that smaller papers, which never had a huge ad run-up in the high-technology and financial categories, will look even better.

Classified advertising: While there may be reason for cautious optimism about advertising overall, plain old caution seems to be the watchword in classified advertising. This fall, while other ad categories were growing, classified -- especially help-wanted -- stayed depressed. Consider one paper's experience: At the St. Louis Post-Dispatch in November, preprint revenue was up 6.1% over the same month a year earlier and national advertising soared 25.5% -- but classified revenue overall was down 3.3% and recruitment was down 9.7%. For all the talk about Monster.com and online recruitment, the biggest reason for help-wanted collapse has been the amazing productivity of the American economy, which has kept chugging along even as it sheds workers.

Convergence: The good news last year was that newspaper Internet sites began banking some serious money. The bad news was that this revenue was not necessarily the result of the cross-platform synergies that is the whole point of convergence. The disconnect was most apparent at The Wall Street Journal, where Web advertising was up 20% over 2001, while print advertising, reeling from the collapse of whole sectors of advertisers, suffered through 24 straight months of year-over-year declines until a marginal improvement was booked in November.

Building a business model of the cross-promotion possibilities of convergence ignores one fundamental flaw, argues Lewis D. Friedland, professor of journalism at the University of Wisconsin: People consume different media for different reasons. "There's no intrinsic reason that if I subscribe to Time Warner Cable, I'm going to want to read Time magazine," he says.

Diversity: The shrinking of the newspaper work force essentially stopped even the incremental progress newspapers had been making toward diversifying their newsrooms. "There was no substantive progress at all in the past year," says Juan Gonzalez, the New York Daily News columnist who heads the National Association of Hispanic Journalists (NAHJ). For the first time since the American Society of Newspaper Editors (ASNE) began tracking minority newsroom employment in 1978, the percentage of journalists of color working on daily newspapers declined from the year before.

NAHJ, for one, has determined to shake things up. At next week's ASNE Diversity Summit in Nashville, Tenn., the association will propose concentrating efforts to raise the number of Hispanic journalists on newspapers that publish not in big cities but in small and midsize cities such as Dalton, Ga., or Dodge City, Kan., where Hispanic populations have soared in recent years.

Readership: Maybe readership shouldn't be considered among the unsettled questions of 2002. True enough, the Newspaper Association of America's semiannual Competitive Media Index analysis showed that readership remains essentially flat.

But flip through just about any metro these days, and you'll see newspapers are adopting strategies right out of the Readership Institute's "Impact" study of what works to boost readership: "refers" galore, house ads for the next day's content, and hard news told through the stories of ordinary people.

The drive to capture a younger audience that generally shuns newspapers is something like an underground drag race in Chicago, where the Chicago Tribune and Chicago Sun-Times last year both launched youth-oriented tabloids named some variation of "Red."

The experimentation everywhere cheers Mary Nesbitt, the Readership Institute's managing director, who says: "This readership decline has been a long time in the making -- and to try and halt it, let alone improve the situation, isn't something that's necessarily going to happen over the course of a year."