The 2007 NAA Mid-Year Media Review produced mostly somber notes this year. At some point each company complained of weak trends such as auto and housing markets as well as weakness in the American retail economy as a whole. I’ll give a rough breakdown of what was said in the order which the companies presented. Links to the complete presentations (their investor pages) appear by clicking the company name where available. Enjoy!
Journal Communications
Their 2007 operating priorities for their publishing division:
1. Targeted local online initiatives
2. Non-traditional revenue growth
3. Cost control
4. Expand community newspaper footprint in target geographies
Their revised second quarter 2007 outlook was bleak:
-Publishing revenues flat to down
-Radio revenue flat to down slightly
-Television revenue down
Part of their cost control effort is web width reduction as was the case for many other newspapers which are all barreling over each other to get to 48inch webs. I asked if they expected newsprint manufacturers to cut output or raise prices to offset their losses and the response was that because of the Abitibi merger and weakness in the market that in fact prices should go down further for newsprint. Also costs associated with the cut down are expected to be recouped within one year and annualized savings from the new web width is expected to be 4%.
BELO
-joined with a consortium of other papers to pursue online initiatives with Yahoo. Many of the companies presenting are involved with Yahoo (and to a lesser extent Google, Careerbuilder, and MSN) to increase their content sharing and advertising reach.
-a headcount reduction is expected to result in $10 million annualized savings.
-a more refined distribution perimeter is expected to save an additional $10 million.
-the company pension plan has been frozen and retirement focus shifted to 401(k) plans.
Looking to the future, Belo is increasing its video presence on their news sites and also looking to outsource as much as practical.
Journal Register Company
Their large presence in Michigan hurt them as the unemployment rate in the area is number 1 and foreclosures are at number 4 in the nation. A bright spot is their online revenue growth rate of 64% however that reflects just 4% of total revenue. The company is seeking to increase online revenue to 6% of total by year end 2007. Cost cutting is another move to keep expenses inline with revenue. The company completed plant consolidations in Ohio.
-Yahoo! HotJobs partnership
-launch new multimedia content platform news sites
Media General
-realized online revenue growth of 40 to 45%
-traditional print revenue was 0 to -3%
-hiring has been frozen most areas except sales
-align expenses with revenue
This presentation really focused on innovative things the company was doing to prepare for the future. Some thoughtful ideas:
-online streaming news and weather video
-photo sharing
-hyper local coverage and products
-making the print edition quicker to read and easier to use
-aggressive use of audience research and branding campaigns
-joined Yahoo!HotJobs newspaper consortium
Meredith Corporation
This company does not print any traditional newspapers or have newspaper websites however they do own some powerful brands which they are successfully expanding online and elsewhere. Brands like Better Homes and Gardens which they still print as a magazine and publish online now has a companion video site at Better.tv featuring video only content and advertising. I really like what they’ve done with that site. It really utilizes the broadband internet connections coming into 75% of people’s homes right now and integrates advertising into their content for more effective ROI which advertisers desire.
Future Growth Strategies:
-increase online presence and develop new revenue streams
-strengthen core publishing business
-capture margin upside in broadcasting
-increase internet derived revenues of total operations from 3.5% to 10% by 2010
The McGraw-Hill Companies
Here is another large media company with no newspaper holdings and ironically enough probably the best performer in the bunch. Compounded annual growth rate between 1996 and 2006 is close to 25% and the company has returned $6.8 billion to share holders in that time.
-education segment growing strongly
-financial segment growing strongly
-information and media segment soft
Citing softness in advertising their BusinessWeek ad pages are down 12.6% for the last 24 issues. The company is looking to transition their print publications to the internet for greater margin expansion. The company’s strong results in education and finance are buoying the decline in traditional print.
DAY TWO
LEE ENTERPRISES
Yet another company with a growing audience yet declining circulation numbers, which they called “circulation erosion”. I liked that they have made it a top priority to nurture employee development and achievement by providing their employees with an online development program.
2007 initiatives:
-Yahoo!HotJobs partnership (do you see a trend here? I might be interested in yahoo stock with all these revenue streams flowing in.)
-accelerate online innovation
-emphasize strong local news
-Grow revenue creatively and rapidly (they have hired a strong sales oriented management team to drive revenues up)
-Exercise careful cost controls
They are confident that no competitor can “match us for our local content” or match them for their audience reach.
THE McCLATCHY COMPANY
If you recall McClatchy bought out Knight Ridder last year and then sold off the properties it did not want. The move was a terrible one in hind sight because the timing of their purchase was not at the market bottom. The company stock has fallen some 50% since the acquisitions till now.
The near term forecast is unfavorable. Also, they own 15% of CareerBuilder and are unhappy about their relationship with the online job posting site. Neither McClatchy nor CareerBuilder would comment as to what happened however McClatchy is partnering with Yahoo and Google.
THE NEW YORK TIMES COMPANY
They gave a thorough and boring presentation. But the numbers weren’t horrible such as:
-$30 million revenue from new products
-digital revenue is now ~10% of all revenue (was 8% last year, 6% year before)
-reduced costs in the last two years by $120 million and another $30 million coming with the completion of their Edison NJ plant closure in Q2 2008.
-Overall advertising was weak however luxury goods (something they do well) experienced solid gains.
-Partnership with Microsoft for NYT Mobil
-70% of NYT print subscribers have been so for 2 years or more
The New York Times will also be leasing at least 5 floors in their new building and moving non core tasks to less expensive real estate locations around the area.
GANNETT
Susan Clark-Johnson, president of the newspaper division was rather up beat about the future of their newspaper business. She cited a culture change concerning the evolving role of print media and its partnering with multimedia formats to maximize the total experience.
-Hyper local focus
-Bullish on digital video
-Aggressively training editors and journalists on video equipment
-Aggressively training sales to provide multimedia Ad solutions
-Partnering with MSN and CareerBuilder
The future is with Ad partnerships, hyper local content such as floridatoday.com’s little league pages, and niche markets like IndyMoms.com.
THE WASHINGTON POST COMPANY
Wow, I wish you could have been here to see CEO Donald E. Graham give this incredibly brief and candid presentation. While all the other companies ran close to or over their one hour time limits Mr. Graham was done in about twenty five minutes. The Q&A session consisted of him saying things like, “well… that’s not how we do things at the Washington Post” and “who wants to play poker?”.
Highs:
-Post Points
-Idea sharing between Slate and WashingtonPost.com
-Kaplan revenue growth 22%
-Cable One doing well
Some things to think about; WashingtonPost.com revenues were 14.5% of Post print ad revenues. Their newspaper segment expensed $47 million to buy out 193 people. Their fastest growing revenue stream is Kaplan with close to $1.7 billion in 2006. As Mr. Graham states in his letter to shareholders, “It was a poor year… for the business we are named for”.
