THE COST OF WAR FOR MEDIA COMPANIES

Decreased Ad Revenues, Skyrocketing News Expenses

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NEW YORK (AdAge.com) -- News organizations are keen to cover a potential Iraq conflict with greater depth than last decade's Gulf War. But it will require reconciling
Photo: AP
President Bush last night as he issued an ultimatum to Iraqi leader Saddam Hussein.
enormous editorial expense with an expected revenue dip when hostilities begin, as key advertisers remain reluctant to appear near images of war.

Newsweek editor Mark Whitaker said his magazine would have 31 correspondents and photographers "in the region." His counterpart at Time Inc.'s Time, Jim Kelly, said his magazine was deploying "a couple dozen people," of which "at least" 15 were not previously there. Janet Robinson, president-general manager of The New York Times, plans to have 30 journalists covering the conflict from the Middle East.

Preparing for war
"We have been preparing for a while," Mr. Kelly said, to spend "tens of thousands [of dollars] a month we didn't expect to spend."

William Holiber, publisher of US News & World Report, said his magazine would have about 10 staffers in the Middle East, and that while war uncertainties precluded precise budgeting, costs would be "certainly hundreds of thousands of dollars." And many Middle East-based news staffers underwent specialized survival training, at a cost of a few thousand dollars per

Photo: AP
Members of the 15th Marine Expeditionary Unit at a forward camp in the desert of northern Kuwait this morning.
head, said an editor familiar with that cost.

Advertisers flee
The painful paradox is that while journalistic awards and additional readership sprouts in the wake of in-depth war coverage, the bottom line suffers when advertisers flee.

At least one network plans to go dark on ads. Larry Goodman, president of AOL Time Warner's CNN sales and marketing, said when a war begins CNN expects to drop advertising for three days on its main channel and for one day on Headline News. "We are planning for many scenarios," Mr. Goodman said. "If there are mass casualties, we would keep advertising out for who knows how long."

Ms. Robinson said the Times was considering creating an as-yet-unnamed separate section for war news, similar to the "A Nation Challenged" extra section it ran after Sept. 11, which would make it easier for advertisers to avoid juxtapositions with war content.

All newsweeklies have touted their abilities to work with advertisers to place ads away from their hard-news coverage, but judging from one media buyer's comments, the upside of this may prove limited.

Dead soldiers
"It's going to be really hard for clients to feel comfortable in the back half of Time, " said David Verklin, CEO of Carat North America, which buys media for Radio Shack Corp., Hyundai Motor America, Pfizer and Adidas. "I'm not sure we'd want to be in the middle of a newsweekly with a picture of a dead American soldier on the cover."

Mr. Holiber predicted that one-third of the newsweekly category's advertisers will pull out when hostilities begin. And Mr. Verklin cited a study Carat conducted that found "the best prediction" is that at the onset of war, TV ads will disappear for six days.

Balancing act
The issue of balancing cost and coverage is clearly a sensitive one for executives at outlets committed to in-depth coverage of the conflict. All tout an expected increase in single-copy sales, but a Washington Post spokesman and one executive elsewhere conceded that during comparable times, increased newsstand sales did not offset additional cost and ad losses. And Mr. Whitaker pointed out that the degree of newsstand sales increase seen by Newsweek (also owned by the Washington Post Co.) in the run-up to the Gulf War last decade was not happening now.

"I'm in the process of shaving" some earnings assumptions owing to war coverage's impact, said analyst Ed Atorino, who tracks several publicly traded newspaper companies for investment bankers Blaylock & Partners, New York. "There's a good chance that [earnings] will come in at the low end of estimates," and some companies may miss hitting estimates as well.

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Richard Linnett and Ira Teinowitz contributed to this report.

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