Potential GM Loss to 'L.A. Times' May Be Double Inital Estimates

By: Jennifer Saba It's likely that the Los Angeles Times stands to lose twice as much in General Motors advertising than the $10 million reported, according to a note released this afternoon by Prudential Equity Group.

Yesterday, General Motors said it was pulling all of its advertising from the paper in response to a series of unfavorable articles.

Merrill Lynch also released a note on the same subject titled ?Just when you thought the coast was clear....?

Prudential pulled numbers from TNS, a media research firm that tracks ad spending, and found that in 2004, GM actually spent $21 million with the Times. ?We are estimating that GM has recently been the L.A. Times' largest advertiser, by a significant amount,? the report said.

According to Prudential, GM has been stepping up its media buy of late, outspending other companies known for putting hefty amounts into newspapers.

A combined 2005 January and February buy in the Times shows that GM increased its budget by 137%, to $6.4 million when compared to the same period last year. For the same period, in contrast, Federated Department Stores spent $5 million with the Times, while May Department Store spent $4.3 million. The report said, ?The fact that GM outspent these two department stores is noteworthy.?

Merrill Lynch, however, said ?at this point, we do not believe the GM dealer groups are participating in the pullout.? The investment firm is basing its report on the $10 million amount cited in The Wall Street Journal: ?We do not expect the impact to be material, as the Times generated $1.1 billion in revenues in 2004 out of total consolidated Tribune revenues of $5.7 billion.? Still, the firm would like to see the issue resolved.

Prudential is more alarmed about the situation, saying it should be of ?great concern for Tribune and the management at the Times, as losing this revenue, even short-term, will hurt.?

Both reports point out the Times is in a sticky position. "Giving into advertiser demands for specific editorial coverage risks severly tainting the journalistic reputation of the Times," Prudential noted.

Both Prudential and Merrill are leaving their recommendations unchanged. Prudential rated Tribune as ?neutral? while Merrill rated the company as a ?buy.?