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INDUSTRY LOOKING MORE LIKE GENERAL ECONOMY EVERY DAY Earnings reports reflect tribulations in many sectors, hint at the future.

With most of the flotsam and jetsam of publicly traded newspaper company earnings reports having now come over the transom, it appears the industry looks pretty much like the rest of the economy: mixed.

Inside, Senior Editor Pete Wetmore takes not only the actual earnings reports of the last quarter of 2000 out for a spin, but also gives us an overview of the extra-ordinary circumstances in which many of the publicly traded companies found themselves (not the least of which being that the last quarter of 2000 had 14 weeks, rather than the normal 13).

Scanning the financial pages of the dailies, perusing the finance magazines, surfing the money web sites or watching the money-men talking heads on TV, the consensus is pretty much this: If this ain't a recession, it's awfully damn close. But, say the crystal ball-gazers, we're going to pull out in the second half of the year.

Of course, newspapers swim in a different kettle of fish. In 1998 and 1999, the relatively low price of newsprint meant bigger profits for newspaper companies, but now the pendulum has swung. Higher newsprint costs are eating into the profits of 2000 and 2001. Further, skyrocketing energy costs will be hitting publishers pretty soon as well, in the form of higher bills for electricity and heating, not to mention fuel for vehicles.

The Fed's lowering of the interest rates twice within a month has yet to have caused the stock markets to react positively, and consumer confidence is low. While nowhere near as bad as a decade ago, these are still potentially bleak times.

The warning signs of newspaper problems are on the horizon. In late 2000, Knight Ridder let go about 100 workers at its Philadelphia Newspapers Inc. Shortly thereafter, the company's Grand Forks Herald in North Dakota said that it expected to lay off about eight people from newsroom jobs. And 10 days ago, the Akron Beacon Journal -- Knight Ridder's Ohio stronghold -- said that as many as 10 newsroom employees would be let go.

In virtually all these instances, the cutbacks were attributed not to a bad economy or losses at the papers, but to the need to meet profit goals set by the San Jose-based parent corporation. Beacon Journal Publisher John Dotson was quoted in his own newspaper as saying, "This is still a very healthy business. Knight Ridder is a healthy business."

I believe saying stuff like this falls into the category of what my grandmother called "whistling past the graveyard." As much as I feel the pain of those laid off, these moves by Knight Ridder look suspiciously to me like hunkering down to weather a storm. And if the storm doesn't come? Well, then, future margins will be so much the better.

Another warning sign is the general belief among industry suppliers that purchases of certain capital equipment -- specifically computer systems -- will be flat against last year, which was down from the norm because of the massive replacements in 1999 to overcome the programming challenge brought on by the Year 2000 bug.

Large national groups that would normally be buying about 10 editorial and/or advertising systems are said to be in the market for only one or two. While publicly traded companies pretty much must make investments in capital equipment, it appears that those investments will be few and far between (and in areas other than computers).

Against this tableau is the faltering new media environment -- with dot-coms falling by the wayside on what seems to be a daily basis -- where newspapers could come up the winners, as long as they stay in the game. Today, most publishers aren't shooting for new media profits as much as new media break-even.

Nobody said that publishing a newspaper would be easy, but the challenges faced by publishers today are certainly more varied and deep than any faced by their predecessors. Mixed quarterly earnings -- mirroring a generally mixed economy -- serve to highlight this changed reality.

-- David M. Cole, e-mail: dmc@newsinc.net
COPYRIGHT 2001 The Cole Group
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Copyright 2001 Gale, Cengage Learning. All rights reserved.

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Publication:NewsInc
Date:Feb 12, 2001
Words:668
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Next Article:LOSSES MIX WITH GAINS AS EIGHT COMPANIES REPORT Dow Jones, Gray and Knight Ridder post losses as McClatchy, NYT see record growth.


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