'USA Today' faces travel troubles

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Gannett Co.'s USA Today finds itself facing a uniquely challenging landscape following the Sept. 11 terror attacks.

Given its reputation as the newspaper for the corporate road warrior, the sharp drop in business-travel in the last three weeks raises questions about both its circulation and advertising volume for the rest of the year.

The daily's already taking a substantial hit on travel advertising, its largest category. According to Bill Bird, an analyst with Salomon Smith Barney, travel accounts for 20% of its ad revenues.

At least initially, any falloff in circulation related to business-travel declines has been offset by a strong demand for news that led to a spike in single-copy sales for the national daily. Print runs and daily sales have skyrocketed. A spokesman said the Sept. 12 issue hit an all-time circulation high, selling over 3.6 million copies, and that newsstand sales are still up.

USA Today derives a much greater portion of its circulation from non-subscription sources than its national competitors, The New York Times and The Wall Street Journal, with 79% of its circulation for the six months ending March 31-the most recent figures available from the Audit Bureau of Circulations-coming from single-copy sales.

Some hotel chains have not cut back on USA Today orders, despite gut-wrenching drops in occupancy rates industrywide. Bulk sales to hotels and airlines add almost another 400,000 to USA Today's total circulation, 368,000 of which is hotel distribution. Bulk sales, which do not count toward standard "individually paid" circulation figures, are copies sold between 25% and 50% of USA Today's basic single-copy price of 50 cents.

"Right now, we don't have any plans" to cut back on USA Today, said a Marriott spokesman. A Holiday Inn spokeswoman could not confirm or deny by press time that chain's response, and a Hilton spokeswoman declined to comment.


Without elaborating, the USA Today spokesman confirmed it's seen declines in hotel-ordered copies since Sept. 11. Publisher Tom Curley was unavailable for comment.

Circulation reporting rules for the most recent period make it difficult to ascertain USA Today's hotel circulation. Should hotels disclose they charge guests for room delivery of USA Today-at 50% or more of its basic price-and offer the option of opting out, that circulation counts as "individually paid" circulation. Reflecting the secrecy with which USA Today guards these figures, a spokesman refused to estimate what percentage of the paper's "individually paid" circulation came from such means-though he said hotel sales including bulk sales accounted for about one-fifth of its total circulation. Total paid circulation was 1.8 million in March.

The crucial question-thus far unanswerable-is if events will sustain newsstand sales long enough to outlast the hotel drought, which veteran circulation observers see as an obvious way for hotels to shave costs in times of vacant rooms and thinned ranks of travelers. "Right now, it's impossible to tell," said the USA Today spokesman.

Gannett does not break out USA Today's results from those of its other 96 newspapers, and thus far has not communicated specifics about USA Today's situation to analysts, but Ed Atorino, an analyst with Dresdner Kleinwort Wasserstein, estimated the ad revenue hit on USA Today was less than The Wall Street Journal, but greater than the hit to The New York Times.

USA Today's spokesman declined to comment on financial projections.

For Dow Jones & Co.'s Journal and Barron's, Mr. Atorino's estimates have ad dollars dropping 39% in the third quarter and 25% in the fourth quarter. On Sept. 17, Dow Jones announced the Journal's third-quarter ad linage would exceed the 25% to 30% decline it initially forecast. At the Times, Mr. Atorino estimated third- and fourth-quarter ad revenues would be off between 15% and 20%. Before Sept. 11, he said, he thought the Times would be off mid-single-digits in the fourth quarter.

A report issued late last week by Deutsche Bank Alex. Brown analyst Peter Appert said "the third quarter is shaping up to be the industry's worst in 30 years in terms of ad revenue growth," and projected an industrywide ad revenue drop of 11.5%.

Slight slips

Gannett's stock closed Sept. 28 at $58.36, off its 52-week high of $70.02, and down from its Sept. 10 price of $63.72. The New York Times Co. closed at $38.45, off its 52-week high of $47.98 and down from Sept 10's $42.15. Dow Jones ended Sept. 28 at $44.76, near its 52-week low of $42.19. On Sept. 10, its stock was $52.75.

USA Today's circulation situation doesn't concern Mike McHale, group media director for Publicis Group's Optimedia International, New York, who cited recent circulation gains: "Right now, they're not charging me for over-delivery."

Yet on the ad side, Mr. McHale, who buys media for British Airways, said the carrier had not yet gone back into USA Today and it remained uncertain when it would.

Contributing: Ira Teinowitz

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