Downgrade for Tribune Co..

A decline in revenue from political advertisements has cut into earnings of Tribune Co., publisher of the Los Angeles Times, prompting Merrill Lynch to lower its 2005 earnings and price target on the Chicago media company.

In an analyst note, Merrill said Tribune is "currently fighting some headwinds (circulation misstatements, lower-than-projected TV political spending)," and cut its price target on the stock to $50 a share, down from $56 a share. As of Aug. 19, Tribune shares were trading at $41.75, down 18.7 percent since the beginning of the year adjusted for dividends.

"There should be no long-term detriments to its franchise value, although we admit our patience is running a little thin," the analyst note stated.

Newspapers' share of political advertising revenue is expected to drop this year for the first time in a presidential election year, even though total political spending will set a record $2.68 billion, up 123 percent from the $1.2 billion spent in the 2000 presidential election, according to PQ Media LLC, a media research firm.

Though TV and radio stations will get the bulk of election dollars, cable and satellite companies have overtaken newspapers for additional political ad dollars. Cable and satellite firms will collect 2.9 percent of all election-related media spending this year while newspapers' share will be flat at 2.1 percent, PQ Media projects.

"This is a record year for political spending and political candidates have spread out their spending with cable and the Internet picking up a lot of that new money," said Patrick Quinn, president of PQ Media in Stamford, Conn. He also sees a shift to more direct mail and promotional spending as candidates try to reach target niche audiences.