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Tough Times Ahead for Newspapers as Ad Revenues Drop

March 08, 2001|Associated Press

Downbeat pronouncements from three newspaper publishers have deepened pessimism among industry analysts, who are already predicting that the first quarter of 2001 will be one of the toughest in recent years for the newspaper business.

The latest came from Dow Jones & Co (ticker symbol: DJ), which on Wednesday warned investors for the second time that a steep decline in advertising volume at its flagship newspaper, the Wall Street Journal, would result in lower first-quarter earnings.

New York Times Co. (NYT) issued a similar warning Monday, and Knight Ridder Inc. (KRI) said two weeks ago that it expected earnings to decline modestly in the first quarter. Also, Knight Ridder's San Jose Mercury News told its staff Monday that it would lay off a yet-to-be-determined number of workers.

The warnings and layoffs are a sign that an advertising slowdown, which publishers blame on the cooling economy, is worse than previously expected, said John Morton, an independent newspaper industry analyst.

"They would have had difficulty for the first six months no matter what happened because of the tough comparisons with last year, but now there's a danger that if things don't improve the whole year will be poor," Morton said.

Dow Jones shares lost $4.38 to $56.97 on Wednesday. New York Times stock fell $1.10 to $41.78, and Knight-Ridder slipped $1.45 to $58.95.

Analysts said it's still unclear how slowly advertising will grow this year. Like many publishers, New York Times had been predicting advertising growth of about 5% this year, but on Monday the company said it now expects growth of only 1% to 3% for the entire year, with much of it coming in the second half.

Part of the problem is an embarrassment of riches from last year, when the Internet boom was still in full swing and many companies were spending freely on advertising, leading to banner profits at newspaper publishers.

In addition to cutting costs, publishers also are increasing newsstand prices to help make up for the shortfall in advertising revenues. The New York Times, the Wall Street Journal and the Los Angeles Times--owned by Tribune Co. (TRB)--have all announced price increases.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Bad News

Slowing ad sales are starting to hurt newspaper stocks, which boomed a year ago on spending by Internet firms.

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S&P newspaper stock index, monthly and latest

Wednesday: 324.75

Source: Bloomberg News

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