At The UBS Media Conference Newspapers Were Yesterday’s News

Philip M. Stone December 9, 2010 Follow on Twitter

It used to be that at the annual UBS Media Conference held every December in New York that the major US newspaper companies would assemble their major executives in the prime conference rooms making 90-minute presentations on how well they were doing and why the financial people attending should invest in their companies. How things have changed.

This year the newspaper presentations were cut to one hour and banished mostly to smaller conference rooms. TV and Web presentations and debates drew the crowds. Newspapers were yesterday’s news. 

Donald Graham of the Washington Post started off the newspaper presentations by doing what has done for the past few years – not really talking about his newspaper but rather the Kaplan education side of the business which is where the really big bucks are. To encourage investors to his company he was putting his best educational foot forward; he knows full well investors are far more interested in Kaplan than they are in the newspaper. 

The newspaper, actually, has started producing better numbers recently – online revenues up 14% through September and print revenue up 3% in Q3 -- but as far as Graham is concerned better newspaper financial performance is mostly about cost cutting which is really not what investors want to hear. One way, of course, for the newspaper to do better is from a better financial performance on its digital platforms, but as far as the Web was concerned Graham said the advertising-only model continues while he sees how various pay wall experiments elsewhere work out.

“We will watch what The New York Times does, what the Times of London does; there are experiments galore going on in pay models in newspapers all around the country. We’re not going to be pioneers in those experiments but we’ll be watching every one and if somebody knows a better way to operate a newspaper business, we’ll be interested. We’re quite willing to be followers on this front,” he explained.

Well, the New York Times won’t have its semi-pay wall model up and running until Q1 and it will take a while to see how that succeeds, so don’t look for the Washington Post behind a pay wall any time soon. And no one except for News Corp. execs seem to have a kind word for the Times of London pay wall that cuts out all non-payers after the home page – the latest research shows that among non-readers of the print newspaper who said that they used Times Online occasionally, 99% have stopped using the site -- so doubtful that will be the Post’s way forward!

Janet Robinson of the New York Times did create a bit of a positive stir for her company’s shares when she said Q4 print advertising revenue would be up from Q3, although the full effect of December isn’t yet known. Actually, those comments caused a stir before her talk since the Times released beforehand a news release on her comments and the shares opened on the New York Stock Exchange up some 5% and on an overall down day ended up 4%.

But If you read her comments you really must wonder what all the fuss is about. She said Q4 print revenues will still be down 4% over a year earlier and while that compared favorably with Q3’s revenue that was down 5.8% from a year earlier. Overall The Times is merely continuing the news that has been out there for a while – in percentage terms the amount of the quarterly revenue loss reduction is tapering off but print revenues continue to decline. The bottom isn’t yet there.

Robinson said digital advertising is expected to be up 10% in the quarter, which is good until you compare that with the Q3 14.6%, and even Q4 last year that was up 11%. Circulation revenue will be down 4-5% which is in the same area as Q3’s 4.8% drop, so those substantial newsstand and subscription price hikes are having a negative effect. Not helping on the cost side the Company expects year-over-year newsprint prices in Q4 to cost an additional $13 million although lower consumption may reduce that figure a bit.

And then Wednesday it was the turn of Gannett and McClatchy. On Tuesday Gannett’s shares rose 2.74% on the hope there would be good news and was up more than 4% on Wednesday as company executives predicted Q4 earnings would be at the high end of analyst expectations. But that probably will be due to broadcasting and digital success plus rigid cost-cutting, rather than publishing revenue improvement.

Unlike the other presenters the company didn’t give any specific percentage breakdown for newspaper Q4 performance, saying only it expected a better 2011. In Q3 publishing revenue was down 4.8% over a year ago – that figure dragged Gannett’s shares down hard back in October even though TV and digital did well --and there was nothing in the presentation to indicate the Q4 publishing numbers will sparkle.

It was a similar message from McClatchy. Yes, advertising revenues were down 5.8% in October and November but that was better than the 6.4% decline for Q3 – but it’s still down whereas other media industries have arrows pointing up. Bottom line 2011 message that was really the message for all the presenting companies: “We expect advertising revenues to continue to improve, and we will remain vigilant in controlling expenses.” In McClatchy’s case it still has the $1.775 billion of outstanding debt to service which means cost controls will remain severe for some time.

McClatchy crows that its digital revenues are now 18.2% of its total revenues – higher than other major groups and certainly a positive figure unless one questions whether that is really an indication of how well digital is doing, or an indication of how poorly print is doing, or some combination?

So look at all the presentations and the message is clear: newspapers still haven’t hit bottom in their revenue declines; yes, the quarterly low single digit percentage drops are far better than the 20% plus declines from last year, but with TV, the Web and other such media already experiencing growth it’s little wonder that newspapers got consigned to the backrooms at this year’s meeting.