Economy Watch: For newspapers, no change is good news

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Here's what passes for good news in the newspaper business these days: a slowdown in revenue declines. At least that was the most optimism that could be mustered by industry CEOs who attended Gannett Co.'s Midyear Media Review last week in New York.

Analysts now seem convinced newspaper companies have reacted aggressively to a weak economic climate by paring expenses-a tactic they doubted newspaper companies were capable of based on previous downturns. Of course that's not good news for the 6% of the total work force whose jobs have been or will be eliminated among the public newspaper companies tracked by Morgan Stanley Dean Witter.

Knight Ridder CEO Tony Ridder said after his company's presentation that the revenue trough had "touched bottom." But his view was not widely shared.

"We are not getting any positive comments from properties" about a turnaround, said Gannett CEO Douglas McCorkindale. Gan-nett, the nation's largest newspaper company, had a truckload of bad economic news: One of the most telling, said newspaper division President Gary Watson, was the 16% decline in classified revenues among its Midwestern properties, courtesy of a stalled manufacturing sector.

The rapidity and severity of revenue declines the industry experienced this year are "unprecedented," said Miles Groves, a former Newspaper Association of America economist and current chief operating officer of Bethesda, Md.-based consulting firm the Barry Group.

The traditional leading economic indicator for newspapers-classified ad revenues-was down 8.6% in the first quarter of the year, according to the Newspaper Association of America. That included double-digit growth in the third-largest category of real estate-which swooned early (and often) in the last newspaper downturn, 1990-1992. Some observers said that seeming bright spot could be deceptive since that segment is also vulnerable to a drop.

"You could look at areas still holding up-retail, real estate, automotive to a certain extent-and say, `another area that will get worse,"' said Doug Arthur, a managing director at Morgan Stanley Dean Witter.

And the big picture, if anything, is darker. While consumer confidence and spending remain solid, "we are about to see a downturn in consumer spending that many don't expect right now," predicted Brian Wesbury, chief economist at Chicago-based investment bank Griffin, Kubik, Stephens & Thompson.

Perhaps that's why many companies at the review did everything short of discussing sports scores and the weather in an effort to avoid reprising grim revenue numbers or layoff announcements from the podium. Magazine publisher Meredith Corp. breathed barely a word about its beleaguered broadcast group. Janet Robinson, New York Times Co. senior VP-newspaper operations, detailed company expense initiatives so minutely that she boasted of electronic fund transfers to employees and vendors that saved the $3.5 billion company $1 per transaction.

Such tactics grated on attendees. "I think this [conference] may be renamed `Grasping at Straws,"' fumed Sandler Capital analyst John Kornreich.

The slowing-decline mantra of executives at the conference didn't necessarily win over the crowd. "There are no signs of improvement," said Mr. Arthur. "I would not disagree that we are looking at the worst of comparisons now, but we are not at bottom yet."

Moreover, even some good news on slowing declines were less positive than they appeared at first glance. "A dismal first half is ending better," said Gannett Co.'s USA Today Publisher Tom Curley, citing ad declines of 29% in April, 16% in May, and "mid-single digits" in June. But at last year's Midyear Media Review, Mr. Curley told attendees that advertisers "tapped their brakes" in June 2000 and that the national daily would show a 10% ad page drop that month.

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