REVIEW OF 1999 CONFIRMS JUST HOW GOOD A YEAR IT WAS

But Veronis Suhler report also shows newspapers trail 10 other media

It was, as Frank Sinatra once sang, a very good year.

For the newspaper business, 1999 turns out to have been one of the best years in recent memory. Though we instinctively knew this fact, it has been confirmed by the Veronis Suhler Communications Industry Report, released last week by the euphonious New York City merchant bank that specializes in media companies.

Probably the leading newspaper statistic in the 18th annual Communications Industry Report (CIR) was that in 1999, revenue growth of the 25 leading publicly traded newspaper companies grew 5.8 percent – to $27.5 billion. The CIR looked back five years and found that between 1995 and 1999, revenues of those companies grew at a compound rate of 7.4 percent annually.

Interestingly, the CIR says that the industry as a whole – including privately held companies that do not publicly report their numbers, so therefore Veronis Suhler is doing some estimating here – only grew six percent compounded annually. This is interesting because we would have thought that the publicly traded company revenues would have been more similar to the industry as a whole.

Nonetheless, that growth came from more advertising spending: national was up 17.7 percent at the publicly traded companies, while classified grew 4.3 percent and retail but a meager 2.8 percent. The CIR points to the strong economy, as well as an influx of technology and dot-com advertising, as the growth factor for national.

The next set of interesting numbers is the publicly traded companies' operating income margins – 21.1 percent in 1999, which is up from 12.3 percent in 1995.

How did the industry achieve those margins? Well, a big part of it was newsprint prices. In 1995, newsprint was $658 a metric ton, which had been a 41.2 percent increase over the previous year. By 1999, though, the price had dropped to $518 a metric ton.

Veronis Suhler attributes the rest of the margin gains to "the restructuring and cost containment measures that several of the leading publishers implemented from the mid-1990s through 1999."

The CIR ranked the publicly traded companies by 1999 revenues and found Gannett Co. Inc. of Arlington, Va., to be first with a gain of 8.9 percent, to $4.5 billion. Second was Knight Ridder of San Jose, with a gain of 4.4 percent, to $3.2 billion. Third was the New York Times Co., with a gain of 7.7 percent, to $2.9 billion. Fourth was Times Mirror Co. of Los Angeles (may it rest in peace), with revenues up 8.9 percent, to $2.5 billion. Rounding out the top five was Dow Jones Co. Inc. of New York City, with a revenue jump of 11.7 percent, to $1.7 billion in 1999.

Among the other top 10 publicly traded companies, only The McClatchy Co. of Sacramento saw double-digit percentage growth: 24.2 percent, which was attributed to McClatchy's acquisition of Minneapolis' Star Tribune.

And yet, despite 1999 being a good year for newspapers, if you compare newspapers with other media, ’99 wasn't anywhere near as good for publishers as it was for some others. There was a 65.2 percent compounded annual income growth rate (CAIGR) from 1995 to 1999 for the Internet (not surprising); a 37.6 percent CAIGR for radio, and a 26.8 percent CAIGR for "specialty media," which includes outdoor and direct mail.

Looking at it another way, out of the 13 media segments the CIR tracks, newspapers came in 11th in growth, trailed only by consumer magazines and consumer books.

Once again, it is clear that aggressive media – direct mail, radio and the Internet – are cleaning the newspaper industry's collective clocks. While there is plenty to be happy about in the CIR, this is no time to rest on our laurels.

With newsprint prices up and the economy cooling down, 2000 doesn't bode well to be a very good year.

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From NEWSINC., Nov. 20, 2000, Copyright © 2000, The Cole Group. All Rights Reserved.