Cloudy ’93 for Newspaper Business : There’s Widespread Hope for Gains, but Not in Southland
This was supposed to be the year in which the nation’s newspaper industry emerged from its multi-year slump.
But now, with 1992 fading into memory and no industrywide recovery apparent, newspaper publishers are once again looking toward a new year with a combination of hope and trepidation.
The hope is at papers in New England, the South and the Midwest, which are showing signs of life and are expected to rebound.
The trepidation is in New York, where the outlook is for a flat economy, and in recession-racked California--especially the Southland--where economic fortunes and newspaper advertising linage continue to decline.
In that respect, Knight-Ridder President P. Anthony Ridder said, 1993 will be a replay of 1992, when “what was true in some markets, some months, was almost never true for all.”
The regional differences will come against a national backdrop of rising consumer confidence and renewed hiring. That should help the news business, but the boost could prove anemic.
Papers can expect “some ad linage growth,” said Smith Barney, Harris Upham & Co. media analyst John S. Reidy, “but not the double-digit growth you often get at the start of an economic recovery.”
Added Alan Gottesman, media analyst at PaineWebber, which sponsored a conference of industry executives this month: “Like last year (1992), the newspaper industry is cautiously optimistic. But last year, the accent was on caution. This year, the accent is on optimism.”
The muddy outlook has different implications for various constituents of the news business.
- For stockholders: Newspaper companies’ operating profits got a boost over the last year from double-digit declines in newsprint prices. But with those costs widely expected to reverse course in March, publishers say controls on payroll and travel expenditures will be tight.
Belt-tightening will be made easier, though, by the absence of such expensive-to-cover events as national elections and the Olympics.
- For advertisers: Restraint in price increases seems certain in 1993, as newspapers compete for scarce advertising dollars. Most industry officials say their rates will rise less than 4%.
- For readers: The new year portends more color photographs and advertisements in newspapers, as publishers continue to upgrade their printing facilities.
The Philadelphia Inquirer just introduced color. The Seattle Times is increasing its color capacity from eight to 48 pages daily. Even the gray old lady herself, the New York Times, will begin printing some Sunday sections in color next year.
Readers can also expect continued experiments with electronic delivery of news and advertising, such as news by fax and classified ads “published” by telephone or personal computer. The Miami Herald already is logging 1,200 calls a day to its telephone automobile classifieds.
- For employees: The new year promises to be one of continued buffeting, especially at the larger papers that have been adversely affected by the decline of the traditional department store--a leading advertising category.
Alex. Brown & Co. media analyst Kenneth Berents foresees continuing layoffs and buyouts. “I would not want to be at a big-city newspaper today and be a marginal employee,” he said.
Berents attributes his bleak view to declining readership and the rise of discount chains such as Wal-Mart and Kmart, which don’t advertise much in newspapers. But other observers note that newspaper readership--after declining for many years--has stabilized at about 60% of the population. Newspaper ads, these analysts say, remain among the best vehicles for generating retail traffic.
Still, at the Los Angeles Times, management expects the number of full-time employees to shrink by another 500 next year because of employee buyouts and attrition. Together with 1,300 positions eliminated since mid-1990, the job cuts will result in a total reduction in staffing of 20% since employment at the paper peaked, said David Laventhol, publisher of The Times and president of its parent company, Times Mirror.
The Times, Laventhol said, will “continue to suffer” in 1993 because Southern California’s economy “got hit later and harder” than its counterparts across the country--and will be the last to climb back from the recession.
The paper is technologically positioned for a recovery, however. The Times has just completed a $400-million project to build a new downtown printing plant and upgrade its existing plants in Orange County and the San Fernando Valley.
With the new presses in full use, color advertising already has shown substantial increases, Times officials said. Through November, the number of color ads was up about 50% from a year earlier, and color ad revenue (excluding the Los Angeles Times Magazine) are expected to approach $11 million, up from $6.5 million two years earlier, according to Jim Tarmann, director of advertising, administration and operations.
Though California remains mired in recession, other regions of the country appear to be recovering:
- Tribune Co.--which publishes papers in Chicago, Ft. Lauderdale and Orlando--sees glimmers of a recovery. “One encouraging sign is that help-wanted advertising, traditionally a leading economic indicator, is on the rise,” said John W. Madigan, president of the Tribune newspaper group. “Total group help-wanted linage was up 5% in October.”
- In Boston, where the economy plunged into recession five years ago, “the light at the end of the tunnel seems a little brighter than before,” said William O. Taylor, president and chief executive of Affiliated Publications, publisher of the Boston Globe.
- The New York Times, though facing a sluggish local economy, will enjoy “substantially” more than $35 million in annual savings from its new $400-million plant in Edison, N.J., according to Vice Chairman Walter E. Mattson of New York Times Co.
But the company will put off another $280-million investment in a plant in the borough of Queens until the New York economy shows a sustained recovery, Mattson said.
- The Washington Post is also mulling investment in a new plant. While new technologies have made the paper’s existing printing operation more efficient, “we will print the news of the inauguration of President Clinton on presses that also printed the news of President Truman’s inauguration,” noted Donald Graham, president and chief executive of Washington Post Co.
Among national newspaper chains, “Gannett has experienced its most active recovery in the Midwest,” according to Gary L. Watson, president of the company’s newspaper division. The Washington, D.C.-based firm has also enjoyed double-digit gains in the Plains states.
In Southern California, however, “the numbers are worsening,” said Susan Clark Jackson, president of Gannett’s western newspaper group. Gannett publishes the San Bernardino County Sun and the Desert Sun in Palm Springs.
As department store accounts continue to shrink or stagnate, “we are concentrating on strengthening our position with smaller- and medium-sized advertisers,” Watson said.
The Wall Street Journal will end 1992 with ad linage increases in nine of 12 months, according to Peter Kann, chairman and chief executive of publisher Dow Jones & Co. Kann said the Journal’s profit will be at its highest level in four years.
“But we’re still not beating our chests or proclaiming an end to the advertising recession,” he added. Corporate image, mainframe computer, airline and hotel advertising all were soft this year, he said--a weakness only partially offset by personal computer and software ads.
Industry leaders at the Paine-Webber conference served notice that, from now on, newspapers will be seeking a bigger chunk of the $70-billion-a-year market for national (as opposed to local or classified) advertising.
Newspapers now get 6% of all such ads for airlines, hotel chains, big computer companies and the like. But a new initiative by the Newspaper Assn. of America and major publishers aims to make it as easy to blanket the country with newspaper ads as it is to deal with a television network.
“There is basis now for real optimism for national advertising,” said James K. Batten, chairman and chief executive of Knight-Ridder. “It has taken us a painfully long time to get our act together to accommodate the appetites of national advertisers who need newspapers as a network buy.”
