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Incoming Dow Jones CEO faces significant challenges

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As he prepares to take the helm of Dow Jones & Co. next month, incoming CEO Richard Zannino says he will move aggressively to integrate the publisher’s print and online sales staffs. By wedding the two sides more effectively, Zannino is betting the company will be able to stem the advertising losses that have led to a prolonged slump and caused five straight quarters of profit declines.

“We have lots of properties in print, online and radio, and need a strategy to do more selling on a combined basis,” Zannino, 47, said in an interview Tuesday after it was announced he was being promoted from COO to succeed CEO Peter Kann. “It’s a top-down emphasis. We have print reps who love to sprinkle some ad sales online and online reps who are willing to sell print. It all comes down to how we satisfy the customer, and we’ll do that through joint marketing, joint rate cards and joint training, so as to give customers the right incentives for either print or online sales.”

Zannino, who takes over as CEO on Feb. 1, will be the first nonjournalist to run Dow Jones since 1933. He joined Dow Jones in 2001 as chief financial officer after holding senior finance, strategy and operating positions at Liz Claiborne, General Signal Corp., Saks Holdings and Peter Kiewit Sons.

Kann, 63, will remain chairman of the company until 2007, when he reaches the company’s mandatory retirement age of 65. A new chairman has not been named, nor a new COO.

Dow Jones also announced that Karen Elliott House, senior VP-publisher of The Wall Street Journal, is retiring from the company. House, who is married to Kann, will stay on for several months during a transition period. It has been widely reported that Kann lobbied for his wife to succeed him as CEO.

According to a report in Wednesday’s Journal, the search for Kann’s successor came down to Zannino, House and L. Gordon Crovitz, president of Dow Jones Electronic Publishing.

Wall Street welcomed the management change. Dow Jones’ stock closed Tuesday at $39.14 a share, up $3.65.

Kann, a Pulitzer Prize-winning journalist who has been CEO of Dow Jones since 1991, has taken pains in the last few years to expand the Journal’s ad base beyond the financial and technology sectors to more lifestyle marketers. These efforts have included the launch of the “Personal Journal”’ section in 2002 and, last September, the addition of the Saturday Weekend Edition.

He also engineered the plan to save the newspaper $18 million annually by shrinking the paper’s width to 12 inches in 2007. The Journal’s Asia and European editions switched to a tabloid format in October in a move expected to save $17 million a year.

The results of the changes so far have been underwhelming. Through November, ad linage at the Journal, including Weekend Edition, was down 2.1%. In November, the Newspaper Association of America’s semi-annual circulation report said the Journal’s circulation fell 1.1% to nearly 2.1 million.

Although the print side continues to struggle, WSJ.com has been a runaway success. With about 764,000 subscribers, it is the largest paid-subscription online news site.

Crovitz, who was instrumental in Dow Jones’ purchase of MarketWatch last year, is considered the frontrunner to replace House as publisher of theJournal, according to Reed Phillips, a partner in media investment banking firm DeSilva & Phillips.

“There was complacency there under Kann and House that will be greatly diminished” with their departures, Phillips said. He predicted that within a short time the new regime will start to retool Dow Jones’ brands and make significant changes in strategy, including potential layoffs.

Robert Crosland, managing director of media investment bank AdMedia Partners, said Zannino faces significant hurdles. “It’s hard to tell what the right formula is [in today’s business climate],” Crosland said. “Dow Jones has definitely been ahead of the curve with its interactive stuff, but now the question is whether the company is going to live in the past or redefine its future, and that’s what everybody in the business media market has to contend with.”

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