SLOWING ECONOMY IS TAKING ITS GRIM TOLL ON PUBLISHERS

Sharp decline in help wanteds hits Mercury News; layoffs promised

The phone rang a little after five o'clock – a wrong number, I suspected.

It was a reporter calling to query me about a just-announced workforce reduction at the San Jose Mercury News.

"As the economy goes, so goes the daily newspaper business," I was quoted as saying in the March 6 San Francisco Chronicle. "Last time I checked, the economy was cooling down, and specifically in Silicon Valley, it was cooling down rather dramatically."

That observation was made without seeing the real numbers. In a memo distributed to the paper's staff (and later confirmed by Knight Ridder corporate), Mercury News Publisher Jay Harris said classified revenues for January were down $100,000, year-over-year. But the surprise was in the February numbers: classified revenue was down $2.5 million.

And while San Jose-based Knight Ridder's spokesman felt compelled to say that this shortfall came almost exclusively from help-wanted – and that other categories of classified, as well as retail, were in fact up – he did say that the company's "total advertising revenue for February will likely be down in the low single digits."

The news from San Jose was buttressed Wednesday with a warning from Dow Jones & Co. that "softer than expected advertising revenues," specifically at the Wall Street Journal, would produce earnings of 16 cents to 20 cents per share for the first quarter, as compared to earlier predictions of 55 cents to 61 cents. All were below last year's 88 cents.

The market promptly rewarded Dow Jones for its honesty with a seven percent drop in its overall value.

Earlier last week, the New York Times Co. warned shareholders that earnings for the first quarter would be down, too. It said to expect 35 cents to 38 cents per share, as opposed to 47 cents last year (and analysts' expectations of 45 cents per share). And at the beginning of the month, Tribune Co. said that its January revenues were flat.

Even a newsletter editor can see the trend here: Buckle up, it's going to be a bumpy ride. Some publishers, including Tribune and the Times Co., are using circulation price increases to attempt to weather the rough road ahead. Others are using cost-cutting measures to circumnavigate the economic potholes. Dow Jones has said it would reduce its workforce through attrition.

Knight Ridder has had recent workforce reductions at its papers in Wichita, Kan.; Grand Forks, N.D.; Akron, Ohio, and Philadelphia. The Mercury News layoffs story didn't include specific numbers because Harris says the paper is going to "conduct a careful examination of every department and every position."

In addition to revenue problems, it's pretty clear that energy costs are going to go up, even in places other than electricity-impaired California, and that newsprint prices probably won't hold at the $660 mark (though decreased newsprint consumption in January may give the paper-makers pause).

Unless the economy turns – or at least the advertising market heats up – it's going to take us back to the last big newspaper recession 11 years ago.

I remember 1990. I didn't like 1990.

The problem then was that not only was the economy off, but circulation also was off, a problem that continues today. That means that while Tribune and NYTCo. have some elbow room with the pricing of their brand-name products, others will have to look to cost-cutting.

Workforce reduction always seems Draconian – whether from layoffs, where people are actually put out on the street, or from attrition, where those left behind get to do more work for the same or less pay – but right now, it may be the only way to keep profits up.

Because, as a San Jose union leader told the Chronicle, the issue isn't that the paper isn't making money; the issue is that it isn't turning the kinds of numbers that make Wall Street happy.

Much like most of my five o'clock phone calls, the numbers are just wrong – or maybe it's Wall Street that's wrong.

Inside ...

• Companies offer reality check on business prospects for 2001
• Seattle quake sends wake-up call on disaster preparedness
• Marketing pros set up a marketing alliance to market them
• Next fall, the New York Times will offer a totally new reading choice
• TV stations' web sites ranked high, but did papers help out?
• Mardi Gras trip exposes cross-media flaws
• Persons

From NEWSINC., March 12, 2001, Copyright © 2001, The Cole Group. All Rights Reserved.