Dailies let down by national ads

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The advertising market continued its tumble last week, and the fallout was keenly felt in the newspaper business. Both The New York Times Co. and Dow Jones & Co. told analysts they would miss their first-quarter earnings estimates, and both cited soft ad spending as the culprit.

While the national scope of the New York Times and Dow Jones' The Wall Street Journal make them oddities in a predominantly local medium, shudders were still felt throughout the publishing industry.

"The whole industry was counting on national [advertising] to bail them out," said Michael Beebe, a publishing analyst with Goldman Sachs, New York. "But if you look at where the weakness is coming from, it's in the national category."

"It's not just tough [in terms of year-to-year comparisons]-you're seeing cut budgets," said Lauren Fine, an analyst with Merrill Lynch, New York. Ms. Fine added that she actually felt better about January's results than December's, but also admitted, "There's no question we're in negative territory. We haven't seen that since 1991."

Meanwhile, some print media executives were suddenly talking worst-case scenarios. "It's much worse than anyone thought," said one. "From an advertising standpoint, it feels like 1990"-the year the worst media recession in generations began.

That executive's gloomy assessment is not widely shared, but there's no question the climate's changed. The conventional wisdom says the fat ad volumes of 2000 were an anomaly, but the Journal's linage results thus far this year put it below 1999's.

"Obviously the valley is a lot deeper than anyone expected, be they investors or executives," said Kevin Gruneich, an analyst with Bear Stearns, New York.

David Briggs, Journal director of ad sales, was optimistic second-quarter results would roughly match `99's-which, he said, was the second-best year in the Journal's history. All the same, the mood inside the Journal last week darkened as a memo from CEO Peter Kann said layoffs were necessary.

Ms. Fine said the ad results at the Journal were in a "free fall."

Tom Curley, president and publisher of Gannett's USA Today, said his paper was holding tight to its previously stated expectations-for now. "We had said we'd be up in the mid-single digits" for 2001, he said. "That will be a battle to maintain, but I am not giving up."

Mr. Curley, however, did not back media executives' party line that the second half of the year will be an improvement over the first half: "I'm not willing to go that far." He also dismissed notions another early-90's-like recession was brewing. "In '90 and '91, we had cancellations," he said, which have not hit his paper this year.

Executives at The New York Times-which rode waves of new national advertising to record results, and now may suffer from that new focus-did not return calls seeking comment. National advertising has been the industry's fastest growing ad segment, but this year's results, particularly among technology and financial services advertisers, have simply slowed.

Meanwhile, analysts wait, with varying degrees of gloom and optimism, for the next round of monthly earnings reports. And Mr. Curley is keeping his eye trained on one macroeconomic indicator-whether or not unemployment stays under 5%. "If it starts to go up," he said, "the fear factor kicks in."

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