What's Behind Tribune's Cuts?

By: Jennifer Saba Even though the Tribune Co. reported that overall advertising revenue for the month of May was up 3.2% from the same period as last year, and even though the newspaper industry as a whole seems to be on the rebound, the Tribune Co. plans to march forward with staff reductions.

"It's not the top line but the bottom line that drives these decisions," John Morton, president of Morton Research, told E&P on Tuesday. More to the point, Morton suspects that staff reductions are partially due to the Tribune's recent Hispanic and youth initiatives, like Hoy and Red Eye, which he said are probably unprofitable. "You expect new initiatives not to make money. And then to lay people off as a consequence doesn't seem like a good idea."

Since Tribune acquired Times Mirror, its profit margin fell by 10 points from 29% to about 20%. The Los Angeles Times, which experienced a decline in advertising volume (year to date, full run decreased 4%), is expected to bear some of the layoffs. "By Tribune Co. standards, L.A. is still fat in the payroll," Morton said, adding that former Times Mirror properties will mostly likely feel the effect of staff reductions.

Though advertising seems to be growing overall, executives revised their revenue outlook from 6% growth to 4%. Merrill Lynch released a report today, lowering its Q2 earnings per share (EPS) estimates by $.03-$.04. "Overall, we are now looking for 4.4% total revenue growth vs. 5% previously," the report said.