The purse strings controlling ad budgets have loosened, and for 2010, overall ad budgets in the United States are expected to grow 1.2% over the year to $368 billion. The country’s newspaper giants are already seeing numbers improve. Additionally, analysts expect that during this year, digital advertisement spending will contribute 32.5% of the total ad spending, compared to 30.3% for print. This will be the first time ever that digital ads account for more ad spending than print ads.
Q1 revenues for The New York Times Company (NYSE:NYT) registered their slowest decline in two and a half years. Revenues fell 3.2% over the year to $588 million. EPS of $0.11 managed to exceed the market’s expected $0.05.
By segment, ad revenues fell 6% over the year, the smallest decline since Q307. Digital advertising revenues grew 18%, helping to offset the 12% decline in print advertising revenues. Circulation revenues grew 4% over the year and other revenues dropped 16%. The company’s strategy of driving online revenues is showing good results. Digital revenues grew 15.5% over the year to $90.4 million. For the quarter, digital revenues contributed 15.4% of revenues compared with a 12.9% contribution a year ago.
The New York Times continued to work on its digital initiatives and recently launched a new section front for Times Digital Business coverage. The section more closely resembles a home page providing readers with news, analysis, commentary, and business tools in one place and offering advertisers an innovative environment with a focused viewership.
The company is also expanding its reach on mobile, e-readers, social media and other products. In March of this year, its flagship newspaper, the New York Times, had approximately 78 million page views from mobile sites and applications. The New York Times iPhone app has already reached 4 million downloads since its launch in July 2008. For the iPad, the company released a free advertising-supported New York Times Editor’s Choice App, which offers a selection of the latest news, opinion, and features chosen by Times editors. The application delivers two pages of content including articles, videos, and photo slideshows while ensuring simple navigation and offline reading and sharing options. The Times magazine is selling its iPad application for $4.99 a week, the same price it charges for the print version. The iPad edition offers extra photos and video clips to the reader. Additionally, the Times is launching on Sony’s and Barnes & Noble’s e-reader devices.
To increase its print revenues, The New York Times Company is working to launch regional editions in five other markets in the United States. The company plans to launch its newspapers in a total of 15 local markets in the coming quarters. Meanwhile, within New York, competition is heating up as the Wall Street Journal launches a New York section to vie for ad dollars away.
The stock is trading at $9.93 with a market capitalization of $1.4 billion after having reached a new 52-week high of $14.87 earlier this year.
McClatchy (NYSE:MNI) also saw ad revenue declines slow down. Total revenues fell 8.2% to $335.6 million from $365.6 million a year ago. Advertising revenues fell 11.2% to $253 million compared with declines of 20.5% a quarter ago and 28.1% a year ago.
Earlier this year, the company was working to restructure its debt. It has successfully extended $1 billion in maturities from 2011 to 2013 and beyond. Its leverage ratio was 4.65 times cash flow at the end of the quarter, down from 5.26 times cash flow at the end of 2009, and its interest coverage ratio was 3.21 times cash flow. Both measures are well within the amounts required by McClatchy’s credit agreement.
McClatchy is aggressively chasing online advertising dollars. It recently tied up with WebVisible, a leading provider of local online marketing tools. McClatchy plans to roll out WebVisible’s online marketing platform to cover all McClatchy U.S. markets by the end of the year. WebVisible’s platform will give McClatchy’s local advertisers a better way to be noticed in newspaper listings, websites, search engines, mobile phones, and navigation devices. McClatchy has been testing the platform with local businesses in several markets and has seen advertising sales improve in test markets.
The stock is trading at $5.05 with a market capitalization of $427 million. It touched a new 52-week high of $7.16 earlier last month.
Gannett (NYSE:GCI) also saw its slowest decline in ad revenues in over a year. Overall revenues for the company fell 4% over the year to $1.32 billion, matching analysts’ expectations. Publishing advertising revenues fell 8%, publishing revenues declined 6%, digital segment revenues were down 2%, and broadcasting revenues grew 17% over the year. EPS for the quarter was $0.50 compared with the market’s expected $0.41.
Gannett is also increasing its print sales and recently announced a tie-up with Starbucks for USA Today to be distributed in 6,500 corporate-owned Starbucks locations in the country. Within digital, USA Today’s iPad application will soon migrate to a subscription model. The application has already seen over 175,000 downloads since its launch earlier this quarter.
Gannett is merging its offerings to a unified digital portal. The company is working toward the launch of a new job and economy portal that will feature job advice columns gathered by ContentOne, USA Today graphics, a job advice video from Gannett Broadcasting, and the CareerBuilder job search module. Additionally, the company tied up with 11 other major media companies to form a joint venture to develop a new, national mobile content and distribution service to make mobile digital television universally available to consumers.
The stock is trading at $17.07, taking its market capitalization to $4.07 billion. It reached a new 52-week high of $19.69 earlier last month.
Nearly 4 million iPads are expected to be available in the market within the year. Additional tablet devices being launched by HP, Dell, and others will also begin to enter the market. These devices will change the way people read newspapers. As of now, all major players have their iPad applications up and running. As these applications migrate to a subscription-based model, it will be interesting to watch the numbers unfold, especially in terms of competition with the Wall Street Journal, which has been using this model successfully for several years.