Newspaper Groups Have Shied Away From Giving Q1, 2008 Guidance But Now Comes A Hint From NYT Editor Bill Keller That It’s Not Looking Good -- 'We Will Be Rethinking Coverage Priorities And How We Use Our Space And Our People.'

Philip M. Stone November 30, 2007

This has been a year most US newspapers would rather forget – advertising continuing to flow to the Internet, the real estate bubble burst throughout the country affecting classifieds, their own web site growth usage slowing…the list goes on, and there are all sorts of signs out there that even in 2008 there is very little light to the end of the tunnel.

If any newspaper should be in the position to withstand all of that, one would think it is the New York Times. But Editor Bill Keller has fired his shot across the bow of his journalists this week with a dire warning.

"As we approach 2008, it is clear that the newsroom is going to have to do even more to tighten spending, and to help the publisher and the Times Company meet the difficult financial challenges facing our industry. While we are committed to retaining our competitive muscle, we will be facing some tough choices about where to save. That is why I must tell you there are going to be layoffs in the newsroom, for the first time in recent memory…

"Today we notified the Newspaper Guild that about a dozen support positions within the newspaper are being eliminated. We will, for example, be closing the Recording Room as well as trimming a number of clerical and secretarial jobs...

"As we move into 2008, we will be rethinking coverage priorities and how we use our space and our people, but always in ways that preserve what The Times does best. In the future, as in the past few months while these matters were under review, we have worked closely with our partners on the business side, with a single shared ambition: to seek cutbacks and reductions that are as strategically focused as possible, and do nothing to damage our core journalism."

Not exactly what one would call a positive 2008 outlook.

Hand in hand with that announcement came one from Banc of America newspaper analyst Joe Arns, one of only a handful of Wall Street newspaper analysts left, who downgraded NYT from neutral to sell because he believes the US economy is heading for a small recession and that will affect the luxury goods advertisers who will reduce their ad spending just like everyone else.

Couple that with the serious financial issues facing US banks and brokerage firms because of the subprime crisis, and that will likely translate into less advertising flowing from those sectors, important revenue to the NYT. The Times has made a point of turning itself into a national newspaper relying on national advertising but the downside to that is that if there is a recession on the way it gets hit hard not only on local advertising but national advertising, too.

Luxury goods advertising needs watching, not just for The Times but also for other publications that rely on that sector such as the Saturday edition of the Wall Street Journal. At The Times, for instance, luxury goods make up some 28% of their national advertising, and national advertising is around half of their total ad income. That same advertising is integral for the success of the Saturday WSJ.

The Banc of America analyst wrote that if there is a mild recession “we would expect the New York Times’ national advertisers to reduce spending in line with the industry, eliminating the advantage that the company has enjoyed in recent months in which luxury goods makers and retailers continue to grow their ad spend.”

The question is just how bad a recession might it be? Luxury goods are usually the last to be affected, but once the rich feel the pinch …

Even though NYT business suits shy away of making 2008 predictions, Keller’s note must be taken seriously as a clue that management is not seeing rosy times ahead.

And a possible recession could have a devastating effect upon a new Wall Street Journal magazine that it plans to introduce next September. It’s a glossy called Pursuits that has a planned distribution of some 800,000 copies to WSJ subscribers in the US and the company has just announced it will distribute about 80,000 copies each in Europe and in Asia,. In Europe that means bye-bye to Style Journal (we said ever since it launched that was a rotten name) and in Asia it will be goodbye to Weekend, as the Journal plans to put a global imprint on the Pursuits brand.

But magazines such as these depend a great deal upon luxury goods advertising, and if Arns is right and the recession does affect luxury goods advertising then that is not going to do the new magazine any favors. It may just be that by adding Europe and Asia is an important early marketing ploy to give luxury goods advertisers one more reason to support the venture.

There is no doubt how successful magazines directed at the rich can be, assuming good economic conditions. The UK’s Financial Times has had great success with its Saturday How To Spend It (as we have often said in the past what a great name for a magazine directed at the wealthy). During really good times, such as the upcoming Christmas season, the magazine is thought to make around £1 million ($2 million) an issue.

With that kind of success it’s no wonder that The Economist magazine (it prefers to call itself a newspaper but it’s a weekly magazine printed on glossy paper) is also trying its luck targeting the wealthy. TheEconomist, half-owned by the Financial Times, has just published its second  edition of Intelligent Life, a quarterly glossy available in Europe, Africa and the Middle East, and targeted at those who not only have it but also know how to spend it.

All media eyes, meanwhile, will be on New York next week as UBS hosts its annual media week. Advertising forecast gurus will make their pronouncements on 2007 and what they think will happen next year, and major publicly-traded newspaper groups will give presentations (but not as many before – no Knight Ridder, no Tribune).

Don’t look for much joy from those who are left.

ftm Follow Up & Comments

Post your comment here