AS 2000 OPENS, MEDIA COMPANIES ARE RIDING VERY HIGH

Four-year trends, positive attitude on Wall Street herald happy days

During the administration of President Herbert Hoover, it is said, the theme song was, "Brother, Can You Spare a Dime?" Conversely, his successor as president, Franklin Delano Roosevelt, was quite fond of "Happy Days Are Here Again."

Though it is thoroughly inequitable to compare the moribund early part of the 1990s with the depths of the Great Depression, there is no question that the new year – and the new decade – are starting off with a song and a smile.

As Correspondent Jon Fine relates inside, attendees of the annual PaineWebber Media Conference, held in New York last month, heard nothing but good things. Though the media companies with television components were somber, they all quickly pointed to a year on the horizon that would encompass not only a Summer Olympics – always good for advertising revenue – but an election year potentially filled with advertising as well (notwithstanding the potential for Democratic presidential primary contenders agree to debate weekly and not buy advertising).

But the newspaper companies? They were singing happy songs; 1999 was great, they said. And 2000 looks to be better.

This week, the New York investment bank Veronis Suhler & Associates will release its 17th annual Communications Industry Report, covering the financial performance of 473 publicly reporting companies in 12 industry segments, including newspaper publishing.

The Veronis Suhler report outlines a four-year period for newspapers that wasn't too shabby: a revenue compound annual growth rate (CAGR) of 7.8 percent; an assets CAGR of 12.7 percent; an operating cash flow CAGR of 12.4 percent; an operating income CAGR of 13.5 percent, and a 1995 versus 1998 return on assets of 3.9 percent.

That return on assets number? No other industry segment was higher.

The most interesting number, though, is the 1998 operating cash flow return on assets: The newspaper industry showed 24.4 percent, while the communications industry average was less than half that, at 11.9 percent. Again, no other industry was higher.

Of the top 50 companies ranked by five-year revenue growth, 11 were companies with significant newspaper holdings: No. Three Hollinger (with 40.6 percent CAGR) and No. Eight Belo Corp. (with 22.1 percent CAGR) were the newspaper leaders, with Thomson Corp., E.W. Scripps Co., Knight Ridder, Gannett Co. Inc., Tribune Co., Washington Post Co., New York Times Co., Times Mirror Co. and Dow Jones & Co. Inc. all on the list.

Among the 50 top companies ranked by 1998 revenues, 10 of those 11 companies made the list (Belo missed out on this one).

Correspondent Fine says the sea change at the December conference was the attitude toward the Internet. Wall Street analysts are seeming to begin to understand that newspapers can play the Internet game as well as anyone (some, like Knight Ridder and Tribune, better than most). Instead of the Internet being a threat to newspaper companies, it is now being seen as an opportunity. Many publishers have had to spend a lot of money to learn how to compete on the Internet, but that has been well invested.

The PaineWebber Conference, in conjunction with the Veronis Suhler report, should make Wall Street stand up and take notice. After our rather grumpy statements about the Street's valuations of newspaper stocks in our last issue of 1999, many newspaper stocks were bidded up; of course, the PaineWebber conference was the same week as our issue, and that might have had some small influence.

Nonetheless, with continued newsprint costs well within control and a resurgence of national advertising – not to mention those Olympics, and political ads that will benefit television (we'll get some of that revenue, too) – 2000 looks like it will shape up as possibly better than 1999.

We mustn't forget the recession of the early ’90s and the newsprint prices of the mid-'90s, but if we're lucky, we too will be singing "Happy Days Are Here Again."

– David M. Cole

Inside ...

• Media analysts told of ad gains, successful web plans
• Editors wrestle with Peanuts' future while using recycled strips
• New revenues touted by boosting classifieds with e-tools
• Libel insurance problems arise from unlikely sources
• Latest FAS-FAX contains unhappy word of declines
• Web encounters old print bugaboo
• Persons

From NEWSINC., Jan. 3, 2000, Copyright © 2000, The Cole Group. All Rights Reserved.