The Federal Reserve’s surprise one-half percent cut in interest rates Wednesday did wonders for the stock market, at least for one day, but it’s probably occurring much too late for the newspaper industry to withstand the effects of unexpected store closings.
On the day after Christmas, discount chain Bradlee’s Inc. announced that it will close all 105 of its stores–most of them in the Northeast–and two days later, Montgomery Ward & Co. said it will shut down, closing 250 stores. These unforeseen actions, as well as Office Depot’s closing of 70 North American outlets and other store closings sure to come, were not built into the forecasts of media economists, who projected modest growth in advertising spending in 2001.
Jim Conaghan, vice president of market and business analysis at the Newspaper Association of America, said economists probably will have to lower their numbers to account for the shakeup in the retail sector. Retail advertising makes up about 44 percent of the industry’s ad revenue, and already was showing signs of softening. At the same time, newsprint prices continue to spiral upward.
“The continuing fallout on the retail side is really hurting us, more than the job slowdowns and the real estate market,” Conaghan said.
Reaction to the softening economy represents the most serious economizing the media industry–in particular newspapers–has undertaken since the mid-1990s, when newsprint prices soared. This time, it’s a double whammy–higher newsprint prices and a slower economy–that has raised the uncertainty about the future.
Media companies, as a group, are already in a cutback mode. Knight Ridder Inc., the nation’s No. 2 newspaper company after Gannett Co., announced last month that it would trim 440 jobs from its workforce in an effort to improve profitability. Tribune Co., in the aftermath of its purchase of Times Mirror Co., eliminated 14 local news sections at the Los Angeles Times–along with 170 jobs–and cut 12 percent of the workforce at the Tribune Interactive online operation.
Time magazine, which a year ago this month launched an ambitious large-type edition of the news weekly, pulled the plug on that endeavor in late November, despite meeting advertising goals and attracting 30,000 subscribers, well short of its 150,000 goal.
Auto sales have slowed dramatically, which has contributed to an overall gloominess about the new year, at least through the first two quarters. Retail, auto sales and classified advertising form the backbone of newspaper advertising, more than $8 of every $10 in advertising revenue the average newspaper takes in.
“The people who are interested in cutbacks are the people who have to live quarter to quarter, and they are the people who are publicly traded,” said David Cole, publisher of the industry newsletter News Inc.
Taking on the champ: Perhaps no magazine is as egocentric as O, the Oprah Magazine, which in its current issue published seven pictures of the talk show host, not counting her ever-present visage on the cover. But Newsweek magazine, in its Jan. 8 edition, outdid even O. In a 10-page spread titled “The Age of Oprah,” Newsweek ran 12 pictures of Winfrey (one in which she is holding her magazine), four caricatures of her and eight photos of her magazine. Winfrey is also on the cover.