Newspaper troubles are gray: readership down, profits up.

THE news isn't all grim for Los Angeles-area newspapers, which have long contended with circulation losses and increasing competition from cable and the Internet.

While circulation was down among most Southern California dailies, the overall market posted a 7.7 percent increase in revenues in 2004 from a year earlier, according to BIA Financial Network, a media consulting firm.

BIA said advertising accounted for about 76 percent of newspaper revenue, with the remainder coming from subscriptions and newsstand sales.

Not surprisingly, the Los Angeles Times topped the local market with $1.23 billion in revenue--accounting for nearly half of the total in the metropolitan area. The Times, which is owned by Chicago-based Tribune Co., was followed by the Orange County Register, the Daily News of Los Angeles and the Press-Enterprise of Riverside.

Mark Fratrik, BIA's vice president for research, said the market was buoyed in 2004 by political advertising, strong growth in the Hispanic market and a generally robust economy compared with the previous couple of years.

"You have some good growth in the economy overall," Fratrik said. "(Average) income is growing pretty well there."

The Los Angeles market, which the BIA defines as including Los Angeles, Orange, San Bernardino, Riverside and Ventura counties, is the nation's second-largest for newspaper revenue. Nationally, BIA reported that newspaper revenues increased 3.6 percent in 2004 compared to the prior year. That followed 3.1 percent growth in 2003.

Tough Times

Although local newspapers showed healthy gains in advertising, this year could be treacherous for the Los Angeles Times.

One of the paper's largest advertisers in 2004, General Motors Corp., has sold thousands of cars under an ongoing discount program without a single ad in the paper. The automaker withdrew all advertising from the Times in early April, complaining that the newspaper had run columns unfairly critical of GM.

GM launched its "Employee Discount for Everyone" promotion--in which customers pay the same for vehicles as GM employees--at the beginning of June and recently extended it through the end of July. The promotion was accompanied with a blitz of advertising in newspapers, radio and television--but not in the Times.

GM spokeswoman Nancy Libby said the promotion boosted regional market share to 33 percent from 25 percent, a larger gain than the national average. However, the success of the Times-free campaign doesn't mean GM will necessarily avoid the newspaper in the future. "We're constantly re-evaluating our advertising mix," Libby said. "You never say never."

Martha Goldstein, a Times spokeswoman, said newspaper executives continue to have discussions with GM about restoring advertising. "We've had good, productive discussions," Goldstein said.

According to a recent research note from Prudential Equity Group LLC, advertising in the Times by GM and the General Motors Corporate Dealers Association fell from to $350,000 in May from $2.8 million in March.

Goldstein said the figures are misleading because they account for advertising by the manufacturer and the dealers association--not individual dealers. She said many dealers are staying with the newspaper or returning after pulling their ads for a time.

Radio Daze

Get ready for a shakeup in the local radio market.

The possible sale or spinoff of ABC Radio--long rumored in industry circles--could trigger a chain reaction in the nation's largest radio market. The Walt Disney Co. unit owns three stations in Los Angeles: talk station KABC-AM (790), sports station KSPN-AM (710) and classic rock broadcaster KLOS-FM (95.5).

Although KLOS ranks around the middle of the pack in Arbitron Inc. ratings, it has a signal that blankets Southern California. That means another broadcaster might try to buy ABC Radio's Los Angeles assets in order to get KLOS' transmitter, even if the new owner elects to switch formats.

The two largest U.S. broadcasters, Clear Channel Communications Corp. and Viacom Inc.'s Infinity Broadcasting division, can't swallow ABC Radio's stations in Los Angeles and several other markets without exceeding federal cross-ownership limits. But Clear Channel or Infinity could buy ABC if they dispose of stations in markets where they own eight or more stations.

That means a lot of stations could change hands in a relatively short period of time--and midsized broadcasters such as Emmis Communications Corp. and Entravision Communications Corp. could become major players in the Los Angeles market.

Staff reporter James Nash can be reached at [phone], ext. 230, or at [e-mail].