Tuesday, April 20, 2010

Q1 earnings reports show many newspapers can return to profitability through cuts; but can they grow ad revenue?

Both the Journal Communications and Lee Enterprises reported earnings during the past two days, and along with Gannett, results show that major newspapers companies are getting back into the black, even as ad revenue continues to decline.
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"We generated a significant increase in operating earnings in the first quarter despite a decline in publishing and printing services revenue," said Steve Smith, Chairman and Chief Executive Officer of Journal Communications. For Journal Communications, print revenue declined 7.4 percent in Q1, while broadcasting revenue showed a healthy increase in revenue. Operating margins reached 10.4 percent, definitely below the industry average during the good years of newspaper publishing, but much improved over the prior year.

Lee Enterprises saw ad revenues decline 8 percent, as well. Again, though, Lee was able to increase profits through cost cutting. "We expect our revenue performance to continue improving in a still-rough economy, and we also remain focused on careful, long-term cost control," Lee CEO Mary Junck said in a statement.

Both companies are seeing declines moderate, but continuing declines over 2009 numbers are hardly encouraging news. Nonetheless, both companies are clearly in a position to survive the recession since they have made the cuts necessary to return to profitability.

The question going forward is can these companies invest in the new media ventures? or will they be short staffed and without the capital necessary to invest in new media production and development?