Veronis, Suhler Report Highlights Newspapers' Healthy Revenue Gains

Article excerpt

Newspaper revenue has risen substantially in recent years, higher than most other media, according to the Veronis, Suhler & Associates Communications Industry Report.

Newspaper revenue grew steadily from 1993 to 1997, says the report, which is based on revenue figures from publicly traded companies. There are 29 publicly traded newspaper companies charted m the report.

Revenue growth in 1997, the banner year, represented a five-year high, and the accompanying earnings increases also were at five-year highs.

The newspaper companies' revenue reached $24.2 billion in 1997 from $17.8 billion in 1993. Compound annual growth was 8%, with the highest swing in 1997 when revenue grew 9.3%.

Operating income margins also climbed, from 14.7% in 1993 to 19.5% in 1997. Operating cash flow grew from 20.2% in 1993 to 25.6% in 1997. Newspaper assets rose by 20.1% in 1997, the largest increase in five years.

In 1997, newspapers ranked fourth m operating income margins among all media, trailing television stations, out-of-home media and cable and pay-per-view networks. For 1993-1997, newspapers ranked seventh.

Radio broadcasting, recorded music, consumer book publishing, business information services, consumer online and other media were included in the report. (See new media analysis on Page 26).

Five newspaper companies made the top 50 list of companies ranked by revenue. Times Mirror Co, Knight Ridder, New York Times Co, Tribune Co, and the Washington Post Co. Time Warner and Walt Disney held the one and two positions.

The biggest contributor to newspaper profits was lower newsprint costs. In 1995, the price shot up to $658 per metric ton but dropped to $546 m 1997. The difference in price is reflected in margins, with operating income margin 5.7% higher than 1995 and average operating cash flow margin up 6.6%.

Newspapers also profited from increased classified advertising, particularly in the help wanted sector. Retail advertising also grew, especially in the department store category, which overcame a period of low spending because of consolidation. There was also a growth in national advertising, thanks in part to the National Newspaper Network, which facilitates national buys.

The strong economy spurred acquisition activity in advertising, according to the report.

"The revitalization in the newspaper market fueled acquisitions," the report notes, which led to further growth A H Belo acquired the Providence Journal and several smaller papers, for example, and its newspaper revenue rose 42.4%.

Knight Ridder purchased four papers from the Walt Disney Co for $1.7 billion, boosting its newspaper revenue by 21.3%. Sun Media's newspaper revenue rose 19.1%, largely the result of five acquisitions with a total value of $223 million.

"Newspapers did quite well," says Kevin M Lavalla, a managing director at Veronis, Suhler who contributed to the report.

When comparing newspapers with other media, Lavalla says they're the most mature industry and the oldest by far. "They used to be the only game in town, but then the others came in and took a big chunk away. But they're still doing extremely well".

He says the newspaper companies were still highly profitable, despite spending millions of dollars recently to develop their Web sites.

                                  Annual Growth          Compound
Industry        Revenue ($ Mil.) of Revenue (%) Annual Growth (%)
Segments                    1997           1997         1993-1997
Television
Broadcasting          $ 30,083.3            13%             10.4%
Radio
Broadcasting             3,392.1           33.4              23.8
Subscription
Video Services          34,358.3           17.7              16.5
Entertainment           48,396.1           10.9              13.8
Flimed Ent.             33,225.1           10.9              24. …