The party's over

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Optimists in the publishing and advertising industries suggest the drumbeat of down-trending economic news is as much a function of pessimism as reality. But Jack Berkowitz, VP-strategic planning for American Lawyer Media, isn't one of them.

"It's not an issue of whether there's going to be a downturn," Mr. Berkowitz said. "The issue is how severe the downturn will be. There's every indication it's already happening."

For print ad sellers, early signs suggest 2001 will be anything but a space odyssey.

Mark Edmiston, managing director of AdMedia Partners, put it more bluntly. "[This year] will be a much slower year than we've experienced in, probably, five to six years," he said. "The economy is slowing down very abruptly-though a lot depends on when the Fed takes action."

The Federal Reserve's Open Market Committee in November elected to leave interest rates unchanged. It could cut rates this month to prime the slowing economy.

Mr. Edmiston also said publishers face reduced spending in key ad categories, including domestic autos, tobacco and dot-coms.

Magazine ad pages measured by Publishers Information Bureau remain on track for double-digit year-over-year gains, but November's results support the view of Messrs. Edmiston and Berkowitz. The month's ad page growth slowed to 3.2%. Last month, The Wall Street Journal announced significant fourth-quarter linage drops from last winter's dot-com and IPO frenzy, and Dow Jones Chairman-CEO Peter Kann admitted the Journal's linage would be flat for 2001.

"What I'm seeing is contingency plans," said Valerie Muller, VP-director of print services for Grey Global Group's MediaCom, New York. "Meaning, those who are maintaining their budgets are saying, `Let's move forward, but let's have a fallback plan.' "

"I'm more concerned than some companies," said Ed Atorino, who tracks publishing stocks for investment banker Wasserstein Perella. He characterized the economy as being "in a slide-harder than a soft landing."

Still, publishing executives spoke in terms of slower rates of growth rather than year-to-year declines-meaning execs are predicting a record year for 2001. But there's no mistaking how expectations have been tamped down.

Conde Nast Publications titles look "even to up" for the first quarter, said CEO Steve Florio, a showing he characterized as "very solid."

"We are coming off the best year in our history," Mr. Florio added, "and if we can just equal it in terms of paging, I will be very happy."

"It'll be a little bit slower," said Nick Matarazzo, senior VP-sales and marketing for Hachette Filipacchi Magazines, who predicted ad revenue growth for 2001 "in the 4% to 5% range," vs. 8% growth in 2000.

McGraw-Hill Cos.' Business Week, like many other business titles, recorded a whirlwind 2000. Ad pages through November rose 20.3%. Bill Kupper, president and publisher, said the title netted $98 million in new ad business in 2000-nearly doubling 1999's figure-but he characterized 25% and 30% of that business as now "at-risk and vulnerable" because it is dot-com related.

Mr. Kupper said Business Week's ad pages would be down in 2001, though he was optimistic a rate base increase would help.

But analysts and execs alike caution against placing too much stock in rate increases. "The big concern is rates-everyone is trying to hold on to rates as best they can," said Ken Wallace, senior VP-corporate sales and marketing at Gruner & Jahr USA Publishing. "People are after bigger discounts."

Troubled DaimlerChrysler, for example, pressed publications to hold 2001 prices at 2000 rates-without any media buying commitment from the automaker.

Media giant Time Warner, on the eve of its takeover by America Online, late last month said it "continues to experience healthy double-digit" earnings growth in publishing as well as cable TV systems, though it said fourth-quarter results would be hurt by slow movie ticket and music sales and "recent softness" in cable network ad revenues.

For magazines, the start to 2001 is complicated by advertisers waiting until the last possible minute to determine ad budgets, leading to unusually light spending in January and February issues.

Some execs said the unresolved presidential election also took a toll on the decision-making process.

Some analysts are counting on the latter half of '01, with easier year-to-year comparisons, to make up for a slow start. "It's going to be a second-half-of-the-year story," said Rudy Hokanson, an analyst with CIBC World Markets.

Other execs agreed, if only because they foresee a weak first half.

"I don't see a hard landing," said Shaun Higgins, director of sales and marketing at the Spokane Spokesman Review. "I do see a soft landing with bouts of severe turbulence. ... It's going to be a pretty tough year, particularly the first six months."

Lauren Rich Fine, an analyst with Merrill Lynch, said she expected newspapers to post overall ad revenue gains of around 3.5% for 2001, below the 4% to 5% figures bounced around by the publicly traded newspaper companies at year-end conferences. In 2000, according to Robert Coen, senior VP-director of forecasting for Universal McCann, newspapers recorded a 4.4% ad revenue gain.

The print ad landscape as 2001 dawns is clearly very different from last year. "The dot-coms went to the newspapers with no organized effort-the phone rang and we took the orders," said David Cole, editor and publisher of newspaper trade NewsInc. "Now we're back to making money the hard way."

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