OK, BASK IN THE GLOW OF THOSE FINANCIALS (THEN FACE REALITY)

Third-quarter results are happy and healthy, but problems persist

Champagne corks popped, I suspect. There must have been some general merriment at the publicly traded U.S. newspaper companies during the last month as the third-quarter earnings reports started coming in.

The news, as you'll read inside, was good.

For those of us who have weathered more than a couple of general economic recessions, the last one – which seemed to last pretty much straight from 1991 to 1995 – hit the newspaper industry the hardest of any recession ever. That punch was then followed by a right hook from newsprint suppliers: for some unknown reason, newspapers didn't anticipate the 1996 newsprint price increase.

So to have a couple of really good back-to-back quarters – especially with one of them being the traditionally sluggish third quarter – must have been like symphonies to the battle-scarred ears of the executives running the public newspaper companies.

Though not a classic symphony, the strains of "Happy Days Are Here Again" must have been the notes that were heard.

Senior Editor Pete Wetmore chats up the analysts at stock brokerages and investment banking firms and finds them to be a happy lot as well, primarily because not only has there been lots of record profits and growth, but because the stock prices have remained fairly stable (Correspondent Marion J. Love takes a look at how the publicly traded stocks did on the big crash of "Bloody Monday" – darn well, it turns out).

No, the songs and the wine were probably nice touches for the beleaguered front offices, but I don't think too much time should be spent celebrating. After a quick drink and a lifting of voices, newspaper business executives should stare reality in the face.

When they do, they'll find that the next recession is around the corner, the next newsprint price increase is coming, the Internet is eating away at advertising dollars, readership continues to plunge and circulation is down (we'll be looking at the FAS-FAX numbers next time).

No, these may be happy days, but that doesn't mean that there will be happy days into the future. The newspaper industry must take current profits and reinvest them in programs designed to counter lower readership and circulations, and feed the popular press' ever-burgeoning love affair with new media.

Most publishers I know pat themselves on the back when they reflect on their minuscule investments in on-line. But show me a newspaper web site that handles classifieds as well as Microsoft's CarPoint.

Does anybody in the business seem to care that while magazine readership is up, while weekly newspaper readership is up, daily newspaper readership is down? Is anybody doing any research on this phenomenon?

One solution to the problem – at least in many markets, anyway – seems to be publishing in non-English languages. We commissioned an old friend and longtime marketer, Roger S. Peterson, to take a look at non-English publishing around the United States. He comes back with some startling numbers regarding the successes of products like El Nuevo Herald and ¡Exito! While we acknowledge that there are plenty of markets in the country that couldn't support any type of non-English publishing, there are hundreds that can – but don't.

I certainly understand the fear – in 1987, as a mid-level editor at a metro daily, I proposed publishing articles in Spanish, Vietnamese and Cambodian. Though there was a certain amount of interest at the top, most of the news and business executives who saw the proposal were aghast. Their problem: How could we tell what those people were saying?

The reason that little champagne should flow now in newspaper corporate offices is that until we have eradicated the fear of helping newspapers evolve into organizations that can counter declining readership and circulation – businesses that can meet and beat the best of the Internet – there is nothing to celebrate.

– David M. Cole

Inside ...