SYNDICATES FACE WEAKER ECONOMY

By: Dave Astor There are two schools of thought about the effect of a weaker economy on syndicates and supplemental news services.

One school says they benefit, because savings-conscious clients may purchase content rather than pay local staffers to create it. "A paper can buy a syndicated cartoon for $5 a week rather than pay a staff cartoonist $1,000 a week," said Creators Syndicate President and CEO Rick Newcombe.

"Newspapers are cutting back. They have fewer reporters on the street and smaller budgets for syndicated features," added Scripps Howard News Service Editor and General Manager Peter Copeland. So, he said, SHNS clients are using more stories and replacing some individually bought columns with SHNS ones.

The other school says a weaker economy is, on balance, negative for syndicates and supplementals. That's the school in which most executives, including Copeland and Newcombe, are enrolled.

"A downturn squeezes everybody," said Alan Shearer, editorial director and general manager of the Washington Post Writers Group (WPWG). "A downturn reduces space." A number of clients have cut back on feature sections and shrunk news holes, which doesn't help content distributors.

"There's less real estate," said Copeland, who noted that one way SHNS is trying to adapt is by introducing 200-word features on kids, food, car care, and home/garden.

Although numbers were hard to come by, most firms said they aren't hurting too badly.

"We've seen an increased number of cancellations this year," said Jay Kennedy, editor in chief of King Features Syndicate. "It's been relatively minor so far, but, like everyone else, we're watching to see how it will play out the rest of the year." He added that King, with the aid of some popular comics, has more 2001 sales than drops.

It's More Difficult To Close a Sale

Shearer -- who said about a dozen papers have "obliterated" their feature budgets -- noted that WPWG is making new sales to blunt the impact of increased cancellations, "but it takes more effort" to close these sales. He said it's especially tough in a weaker economy to sell new features.
Does that mean fewer feature launches? Several executives said the number of intros each year is based more on the quality of submissions than the economic climate.

Newcombe said another reason for many sales and drops in a tough economy is that more papers experiment by pulling certain features and buying others.

Shearer feels that, overall, text features have been canceled more than comics.

Some newspapers ask for temporary rate reductions on features, which has a negative impact on a syndicate's bottom line.

Los Angeles Times-Washington Post News Service President Al Leeds, whose firm has two sales for every drop in 2001, said one- year contracts have protected news services from some cancellations. Leeds said "the good times had gone on for so long" that clients last fall might not have realized an economic downturn was coming before new contracts kicked in starting Jan. 1. For syndicated features, papers can cancel on 30 days' notice.

Also, if a paper wants to drop a syndicated feature, there might be only one editor trying to retain it. "But a news service [because of its variety of content] has a constituency at a paper of more than one editor fighting to keep it," said Leeds.

Knight Ridder/Tribune Information Services Editor Jane Scholz said some papers save money by replacing a syndicated feature with a similar feature from the KRT package they're already buying. She added that KRT's 2001 sales, though up from last year, aren't growing quite as fast as expected because of the economy.

Says Web Sales Are 'Evaporating'

What about sales to newspaper and non-newspaper Web sites since the dot-com category took a dive? "They're evaporating like the morning mist," said WPWG's Shearer. "It's amazing how much has disappeared. It wasn't much to begin with, but it was growing."

"We haven't seen much in cancellations, but new sales to online newspapers have dropped off dramatically," added King's Kennedy.

What about Web aggregators/distributors? ScreamingMedia has fared better than many -- for reasons such as having $94 million on its balance sheet since going public last year, drawing 62% of first- quarter revenue from large and midsize clients, and licensing technology as well as content.

"It's difficult not to be affected at all by the current economic downturn, but ScreamingMedia has successfully insulated itself against the worst of it," said CEO and Chairman Kevin Clark.

But another Web firm, iSyndicate, recently jettisoned much of its staff.

No other executives interviewed reported major layoffs. "We're at full staff," said Copley News Service Editorial Director Glenda Winders, by way of example. Some staffs were already lean because of past layoffs.

Despite the downturn, Shearer is basically optimistic. "The economy still seems fairly strong," he said. "I think the second half [of 2001] will be better."