“There are fewer public companies, with Tribune going private and Dow Jones absorbed by News Corp. Big private companies like Hearst, Advance and MediaNews do not report their results. Also, analysts who had estimated an industry-wide figure have stopped doing so,” Edmonds said.
“A further complication is that there are four distinct measures of margin: cash-flow, EBITDA, operating margin and net margin,” he said.
That said, Edmonds found a sampling of public companies reporting full-year results for 2012 shows operating margins for their newspapers down slightly from a year before:
- Gannett’s operating margin was 9.9%;
- New York Times Co., 5.4%;
- McClatchy, 15.1%;
- E.W. Scripps, 6.9%; and
- A.H. Belo, 8.1%.
- The Washington Post operated at a 9.2% loss.
Assorted special charges and markdowns of assets often made net earnings margins significantly lower. McClatchy operated at break-even, the New York Times Co at a 1.3% loss.
Newspapers still profitable
Edmonds added a few comments on the situation:
- Generally newspapers remain at least slightly profitable, though nothing like the old days when 20-25% operating margins were common.
- A few companies (typically ones that are debt-free or part of a company that has strong earnings in other businesses – like the Washington Post) choose to operate their newspapers at break-even or at a loss. This has some merit as a strategy, allowing for investments in developing new revenue streams and keeping the news report strong. (The Washington Post is taking several actions to make 2013 results better).
- Companies with local television operations (Gannett, Washington Post, Scripps) did comparatively well in 2012. Election-year political advertising was a huge boost, especially in hotly contested states.
- A point made by a New York Times executive in a conference call with analysts last fall: The Times and others are beginning to make good progress in replacing lost print revenues with paid digital subscriptions, other circulation-revenue increases and new digital ventures. However, the profits (especially if you look at return at the margin vs.overall) are not nearly as good as profits from selling more print advertising.
- Some of those companies have not paid a dividend for several years, notably McClatchy and New York Times. The Washington Post and Gannett still do, but that reflects their local television businesses’ health.
“So my sense is that U.S. newspapers are beginning to do better on replacement revenues, but there will be increasing scrutiny in 2013 and following years of how profitable these new activities are,” concluded Edmonds.
Here are highlights from 2012 full-year earnings reports from a few major U.S. newspaper groups:
Operating revenues were $5.4 billion in 2012, an increase of 2% from $5.2 billion in 2011.
Publishing revenues were $3.7 billion, 3% below 2011 levels. Digital-segment revenues totaled $719 million for 2012, an increase of 5%. Advertising revenues for 2012 declined $155 million or 6%, reflecting the impact of the soft economy on advertising demand.
Circulation revenues increased by $53 million or 5% over 2011, reflecting the first company-wide circulation revenue increase since 2006. Commercial printing and other publishing revenues were flat in 2012 at $255 million.
Newsprint expense for publishing was 6% lower than in 2011 due to a decline in consumption.
Washington Post Co. (Newspaper Publishing Div.)
Revenue in 2012 dropped 7% to $581.7 million, from $622.5 million in 2011. Print advertising revenue at The Washington Post fell 14% to $228.2 million, from $264.5 million in 2011, largely due to reductions in general and retail advertising.
Revenue generated by the company’s online publishing activities, primarily washingtonpost.com and Slate, increased 5% to $110.6 million, from $105.8 million in 2011. Display online advertising revenue increased 6%, and online classified advertising revenue dropped 1%.
In 2012, daily circulation at The Washington Post fell by 8.6%, and Sunday circulation dropped by 6.2%; average daily circulation at The Washington Post totaled 471,800 and average Sunday circulation totaled 687,200.
The newspaper publishing division reported an operating loss of $53.7 million in 2012, compared to an operating loss of $21.2 million in 2011, after including pension expense of $42.4 million and $25.3 million respectively.
Lee Enterprises (Arizona Daily Star, 51 other dailies)
For the fiscal year ended 30 September 2012, operating revenue totaled $710.5 million, a decrease of 2.3% compared with the fiscal year.
Combined print and digital advertising revenue dropped 4.2% to $495.9 million, with retail advertising down 2.9%, classified down 5.6% and national down 7.8%. Combined print and digital classified employment revenue dropped 0.6%, while automotive fell 2.8%, real estate dropped 12.0% and other classified fell 8.2%.
Digital advertising revenue increased 9.7% to $63.4 million, while print advertising revenue dropped 5.9%. Circulation revenue increased 1.5%. Excluding the additional week of operations in 2012, total revenue decreased approximately 4.0%.
Newsprint and ink expense decreased 7.5%, a result of a reduction in newsprint volume of 6.3%.
A.H. Belo (Flagship: Dallas Morning News)
Total revenue was $440.0 million in 2012, a decrease of 5 percent compared to the prior year. Advertising revenue, including print and digital revenues, dropped 9 percent compared to the prior year. Revenue from preprints dropped 3 percent to $84.8 million, classified revenue fell 11 percent to $54.1 million, and digital revenue dropped 1 percent to $34.7 million.
Circulation revenue was $136.5 million in 2012, a decrease of 2 percent compared to 2011. Printing and distribution revenue was $45.3 million in 2012, an increase of 16 percent compared to the prior year due primarily to expansion of commercial printing and distribution contracts.
In 2012, the company’s newsprint expense was $40.4 million, a decrease of 5 percent for the full year. Newsprint consumption dropped 4 percent to approximately 64,300 metric tons.