Magazine article Editor & Publisher

Less Profitable, but Still above Average

Magazine article Editor & Publisher

Less Profitable, but Still above Average

Article excerpt

NEWSPAPERS OWNED BY publicly traded companies were less profitable last year--the fifth consecutive decline--as profit margins fell to about one-third below a peak of five years ago, according to a report on the communications industry.

Newspaper profit margins, revenues and operating profits all declined last year, compared with 1990, according to the annual report by the New York investment banker Veronis Suhler & Associates.

The report on the financial performance of nine media segments--newspapers, television-radio, books, cable tv, business information, recorded music, magazines, movies, advertising agencies--is based on annual Securities and Exchange Commission filings in which public corporations break out the earnings of the companies they own. It includes about half of U.S. newspapers, approximately $40 billion in revenues.

The report shows in stark terms how the economic slowdown begun in 1990 has depressed profits in communications businesses, especially newspapers and broadcasting.

While every medium but cable television posted declining profit margins over five years ending last year, newspapers showed the fastest decline except for television-radio broadcasting.

Newspaper profit margins--or operating profits as a percentage of revenues--dipped to 12.2% last year, compared with 13.9% the year before and a peak of 18.5% in 1987.

Newspaper operating profits--defined as revenues minus expenses and depreciation--declined an average of 996 a year over five year% again the fastest decline after radio-tv, where earnings declines averaged 13%.

From a 6.1% gain in 1989, newspaper operating profits plunged 19.8% when the recession hit newspapers in 1990, and 169%) last year.

A telling statistic on the decline in newspaper advertising is that, for the first time in at least 15 years of data surveyed in the reports, newspaper revenues actually declined last year, compared with 1990, when revenues were flat.

The 4.7% drop was the worst revenue performance of any medium last year; radio-tv was the only other decliner, down 2.4%. For newspapers revenue growth has waned steadily since it hit 9.6% in 1986 and eventually flattened out in 1990.

Lower 1991 revenues left newspapers with average revenue growth of just 1.1% over five years, the slowest of any medium, compared with an average of 2% for the communications industry as a whole.

Recorded music posted the fastest revenue gains, 22.2% a year over five years, followed by cable television at 20.4% a year.

Newspaper circulation price increases helped soften the effects of declining ad revenues, and low newsprint prices helped keep profits from sliding further.

The good news is that, while several measures of newspaper profitability have dropped steadily and substantially over five years, newspapers remain among the most profitable of media.

Even after profit margins declined by about one-third over five years to 12. …

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