FALTERING ’98 SHOWS 'GROWTH' MUST BE ’99 WORD TO THRIVE BY

PaineWebber media sessions notable for their lack of exuberance

The Artist Formerly Known as Prince had a song out in the early 1980s that postulated the end of the world in the Year 2000, long before general knowledge of the Y2K computer problem. It had a lyric that went, "Tonight I'm gonna party like it's 1999."

I kept thinking of that lyric as I read Correspondent Jon Fine's review of the happenings at last month's annual PaineWebber Media Conference in New York, which is inside.

Though they were in generally good spirits (there was, after all, free candy and ice cream), the newspaper industry's publicly traded companies came across as dour at best, pessimistic at worst. The message seemed to be that 1998 was better than had been forecast, but don't expect much more out of 1999.

Of course, it's the province of publicly traded companies to be pessimistic – hell, it's legislated by the Securities and Exchange Commission. If you don't warn investors of potential problems with your company or with your industry, you can get more than a wrist-slap from the SEC.

So maybe it wasn't out of character to get the sense that this will again be a year that newspapers will have only adequate growth. Nonetheless, it's ironic that this space – dire predictions are our specialty – would be grousing that the publicly traded newspaper companies weren't more optimistic at PaineWebber.

Though there's no question that there are pockets of unprofitability among U.S. newspapers, there are plenty where profit margins are running in the mid-20s or low 30s. This is nothing to sneeze at (winter colds notwithstanding).

Last year in this space, we predicted a stronger movement toward the clustering concept, where a group of dailies and weeklies share many technology and back office resources, thereby cutting expenses. Interestingly, no major clusters were built in 1998; so much for our prediction.

But it's time to move beyond cost-cutting and toward growth.

There is a sense that 1999 will be a good year – if not a great year – for the newspaper industry. It seems that the message that Times Mirror CEO Mark Willes put forth when he took over the company 42 months ago – newspapers should be managed as a growth industry – is finally being considered by his peers.

For 1999 to be a good year for newspapers, there has to be growth across the board: in retail, classified, national and circulation. With radio and direct mail attacking retail, the World-Wide Web attacking classifieds and reader ennui attacking circulation, the only optimistic growth area is in national.

Toward that end, we have two stories in this issue outlining how the newspaper industry is trying to get more national advertising. Senior Editor Pete Wetmore takes a look at the newspaper advertising information clearinghouse being developed by the Newspaper Association of America and the consulting firm KPMG Peat Marwick, and he looks at the shift by the Newspaper National Network to a new billing supplier.

The clearinghouse sounds a little amorphous to us at this point. We would expect that once the newspapers now in the process of agreeing to become beta testers of the service have the opportunity to give developers their ideas, the new system will begin to take a more concrete form.

The shift in NNN billing providers shouldn't be a big deal; Switzerland's PubliGroupe won the bidding for the contract almost six years ago and has now found it can't make money at the price point it bid. The California Newspaper Network – an offshoot of the California Newspaper Publishers Association (see NewsInc. March 2, 1998) – seems to be well qualified to pick up the process from PubliGroupe.

But will these initiatives give the industry enough growth to make 1999 sterling? Probably not. There is no question that newspapers need to work harder toward thinking innovatively and in a growth mode.

If they do, maybe 11 months from now we'll feel like partying like it's 1999.

– David M. Cole

Inside ...

• Industry senses the fast track is slowing
• NAA nears the point of some returns on its ad information project
• NNN pact bolsters prospects for a California ad processor
• Now, here's news: Postal rates fall
• You've tried hard, but your Internet model just won't fly
• Persons

From NEWSINC., Jan. 4, 1999, Copyright © 1999, The Cole Group. All Rights Reserved.