Paper’s finances deteriorate as Internet sales fail to increase
THE PROVIDENCE JOURNAL saw the decline in its advertising revenue accelerate during the first three months of this year as ad sales plunged 30.5 percent.
PBN FILE PHOTO / BRIAN MCDONALD
By Ted Nesi PBN Web Editor
PROVIDENCE – Advertising revenue at The Providence Journal plunged 30.5 percent in the first three months of 2009 compared with the same period last year, the newspaper’s parent company said in a regulatory filing on Thursday.
The decline in first-quarter ad sales at The Journal was larger than at A. H. Belo Corp.’s other two major newspapers, but the filing showed that all three publications felt the impact of the recession. Ad revenue fell 28.4 percent at The Dallas Morning News and 24.5 percent at The Press-Enterprise of Riverside, Calif.
A. H. Belo said total advertising revenue – which includes both print and Internet sales – dropped 28.2 percent in the first quarter to $89.3 million from $124.4 million a year ago.
The company did not break out specific dollar figures for its individual papers, but said all three papers “experienced declines in substantially all advertising categories that are included in retail, general and classified.” Classified ad sales slid 45 percent in the first quarter, retail ad sales were down 23.2 percent, and general ad sales declined 21 percent, compared with the same period last year.
The decline in A. H. Belo’s overall quarterly operating revenue was somewhat smaller thanks to an increase in circulation revenue from higher single-copy and delivery prices, as well as new printing and distribution contracts the company signed last year.
A. H. Belo’s total operating revenue fell 19.8 percent to $128.45 million in the first quarter, from $160.19 million a year earlier. The share of the company’s total revenue that came from advertising sales fell to 69.5 percent in the first quarter, down from 77.7 percent a year ago. Revenue from circulation increased from 18.2 percent to 24.7 percent year-over-year.
As is the case for other newspaper companies, digital advertising is not making up for the decline in print advertising at this point for A. H. Belo, even as more of its readers move online.
Internet revenue totaled $9.28 million and made up 7.2 percent of total sales in the first quarter, down from 7.5 percent in the same period last year.
The company said its Internet advertising revenue dropped 23.9 percent year-over-year due to a sharp drop in classified ads for jobs and real estate. Excluding classifieds, the company’s online ad revenue was down 9.9 percent compared with the first quarter of 2008.
In the filing, A. H. Belo blamed the poor results on “economic and operating pressures.”
“Advertising expense budgets tend to be reduced more than other expenses in times of economic uncertainty or a recession,” the company said. “The continued economic slowdown adversely affected advertising demand and the Company’s business, financial condition and results of operations.”
In 2008, The Journal’s revenue fell 13.3 percent to $131.47 million, down from $151.58 million in 2007 and $162.66 million in 2006.
In order to staunch the flow of red ink, A. H. Belo cut expenses during the quarter by 12.5 percent. The company said it spent 15.3 percent less on employee salaries, wages and benefits in the first quarter compared with last year, following multiple rounds of layoffs, including 500 late last winter.
A. H. Belo also shed more light on its decision at the end of the first quarter to write off The Providence Journal’s entire goodwill value – meaning the additional value Belo Corp. gave to The Journal in excess of its assets’ value when it bought the paper for $1.5 billion in 1997.
The company said it had looked at the goodwill value of both The Journal and The Dallas Morning News just a few months earlier, at the end of 2008, as part of an annual accounting procedure. But the slide in advertising revenue during the first quarter was so sharp, and the outlook for the rest of the year so poor, that A. H. Belo’s financial officers decided they needed to take another look.
In the end, A. H. Belo decided that The Dallas Morning News still retained the same value beyond the value of its assets that it was given at the end of 2008, which was $24.6 million. But the company determined that “no goodwill remained related to The Providence Journal,” and wrote off its entire $80.9 million estimate.
A. H. Belo lost $103.07 million, or $5.03 per share, in the first quarter. Excluding the goodwill charge for The Journal and the cost of layoffs, the company said it lost $18.1 million, or 91 cents per share.
A. H. Belo Corp. (NYSE: AHC) owns and operates The Providence Journal, The Dallas Morning News, and The Press-Enterprise of Riverside, Calif., with a combined total audience estimated at 3.7 million readers. The company also produces a variety of specialty print and online publications and offers direct-mail and commercial printing services. For more information, visit AHBelo.com.