MEDIA EXECUTIVES PUT SOME SPIN ON GRIM YEAR Wall Street hears of cost-cutting, redoubled...

NEW YORK CITY -- With a flash of ankle and a come-hither look, newspaper executives sidled into Damon Runyon territory in early December, hitting hotels just off Broadway for a pair of investor conferences and allowing characters from both sides of the street to follow his advice.

"Rub up against money long enough, and some of it may rub off against you," one of Runyon's characters said. His descendants were in town to follow up on that advice. Though Runyon wasn't talking Wall Street when he said, "All of life is six-to-five against," the money gang from downtown uses these conferences to lessen the odds somewhat.

Six-to-five against may be understating the case. With revenue down and expenses up, many newspaper stocks look like Apple Annie instead of Mrs. E. Worthington Manville. Newspapers may not be able to pull off a transformation like Dave the Dude, but slight little things like Internet bubbles, recessions, advertising declines and rising expenses can surely be given some makeup and blush.

David McMurry, advertising and marketing services analyst for the investment company Credit Suisse First Boston, opened the CSFB conference by quoting some gloomy forecasts from several advertising prognosticators. Consumer media advertising for 2001 would be down 8.1 percent. Local advertising, where most newspapers play, would be down 8.9 percent. Another report had a decline of six percent for 2001.

The forecast for 2002? Flat, to up two percent, depending on whose numbers you use.

But don't grab your markers yet. The CSFB panelists pointed out that long-term buys and campaigns have been given the old heave-ho. Short-term, spot buys are in, and that's not an area where newspapers, with long lead times, can play well. The panelists also said that newspaper sales reps were just that, sales reps. Their clients needed marketing campaigns, not the sales campaigns newspapers were ready to trot out.

Enter, stage left, a parade of execs, ready to show that there's some life in the old lady yet.

BELO CORP.

From Dallas, Chief Financial Officer Dunia Shive provided the dark downside of the current economy with revenue down across Belo's newspaper group, continued weakness in the ever-critical classified advertising market and no end in sight. "We expect the advertising environment to improve," she said, "but the timing and rate of improvement is unknown. It is very difficult to predict advertising revenues in 2002."

Belo Chairman Robert Decherd alluded to the problems in the economy in his remarks, but still had a decidedly upbeat spin. "Like all media companies," he said, "Belo has experienced great challenges during 2001. ... We have taken the steps necessary to accelerate the crucial process of aligning Belo's expenses with expected revenue generation."

These steps, Decherd said, would leave the company well positioned. "With our expenses properly aligned, we know that Belo will benefit when the inevitable recovery in U.S. advertising commences."

DOW JONES & CO. INC.

Peter Kann, chief executive of New York City-based Dow Jones, began by talking about how bad things were. "Despite our recent efforts to control costs, profits are down even more," he said. "I wish we could stand here today and say that there would be some resurgence, but I just don't see it."

With the bad news out of the way, Kann turned upbeat. Dow Jones, he said, was aggressively pursuing growth opportunities, leveraging existing brands, pursuing strategic alliances and partners and working for shareholder growth, all music to Wall Street's ears.

The company, he said, had completed a $226 million, four-year project to add pages and color to its flagship property, the Wall Street Journal. Beginning Jan. 2, he said, the paper will be able to run 96 pages, up from the current 80. Color capacity will increase to 24 pages, up from the current eight pages, boosting the opportunity to upsell advertisers and experiment with (premium price) positioning.

Also on the way at the Journal is a new section called Personal Journal, covering personal finance issues, travel and family life. Not coincidentally, it will also offer more opportunities to sell ads.

Also coming is a new design for the front page.

The Journal's on-line counterpart, WSJ.com, was up to 609,000 paid subscribers, he said, and competitors who formerly pooh-poohed the subscription model were "now trying to convince all you that they are not tied to on-line advertising."

KNIGHT RIDDER

P. Anthony Ridder, chairman and chief executive of San Jose's Knight Ridder, isn't playing Nicely Nicely, nor is he waiting for an inevitable recovery.

Ridder said the company had instituted the strongest cash controls in its history, reducing the work force by 2200 full-time equivalents (FTEs). A hiring freeze is in place, he said; no bonuses would be given to corporate executives, and there would be a salary freeze for people earning more than $200,000.

Knight Ridder Digital's losses would decline by about $20 million in 2002, he said. Though the shift of classified ads from newspapers to the Web has been a problem for some companies, Knight Ridder is well positioned to take advantage of that shift with its CareerBuilder/HeadHunter network, tying newspaper advertising to CareerBuilder.

LEE ENTERPRISES INC.

Mary Junck, president and chief executive of the Davenport, Iowa-based Lee, came in with a list of successes, ranging from circulation to ad sales to web sites to regional clusters.

The company has increased the number of sales representatives it has across the board, set up blitz teams and started selling across papers. The blitz teams, she said, set out to create $5.3 million of new revenue and ended up with $6.9 million. Cross-selling allows local reps to sell 16 papers instead of one or two, creating $200,000 of new revenue a month.

And the declining readership bugaboo? Not at Lee. Reversing a nine-year downward trend, daily circulation is up and Sunday is flat. And, of course, there's the cost thing. The workforce is 2.6 percent smaller, executive pay was frozen and benefits have been trimmed.

THE McCLATCHY CO.

McClatchy, too, was in a corset-tightening mode for the investors. Gary Pruitt, chairman and chief executive, said that the Sacramento-based company "continued to weather this economic downturn with a focused strategy that employs disciplined management and efficient operations."

The company, Pruitt said, was focused on quality daily newspapers, backed up by targeted direct mail and direct marketing as well as the leading local information web sites in those markets. That focus was helping the company outdo its peers, and had led to faint praise (McClatchy: Relatively Less Bad) from a Wall Street analyst.

MEDIA GENERAL INC.

J. Stewart Bryan III, chairman and chief executive, said his Richmond, Va., company, too, was above average (doesn't that screw up the curve?).

"We have approximately 350 fewer employees than at the end of 2000, or about five percent, and we will continue to reduce head count through attrition as long as this downturn lasts," Bryan said. "We eliminated a holiday bonus for employees, and it does not look like we will pay management bonuses this year."

Newsprint web-width reductions are expected to save $3.7 million next year, and pay increases will be limited to 3 percent or less, he said.

On the plus side, the company's experiment with a combined TV/print/Web operation in Tampa generated $13.4 million in multimedia sales through the end of the third quarter, exceeding the year's goal of $12 million ($4 million of it new revenue).

E.W. SCRIPPS CO.

In a room full of rosy outlooks and sure bets, Daniel Catellini, chief financial officer for Cincinnati-based Scripps, had a refreshingly murky crystal ball.

"We are beginning to get a feel for what the year might look like," he said, "but bear in mind there's still plenty of uncertainty. What we're saying today is based on our best thinking and doesn't include any more unexpected jolts to the economy."

What that crystal ball showed was flat revenue for Scripps' newspaper group. Employee costs would be higher, driven by increases in health care and pension expenses. Newsprint costs would be lower. Everything else will be flat.

TRIBUNE CO.

The keys to success lie in cost containment, on-line strategies and your people, according to Tribune's chief executive, John Madigan.

With the advertising environment in a downturn, as Madigan politely put it, keeping costs down is important. The Chicago-based company implemented a five percent salary cut and eliminated most cash bonuses for more than 140 managers. It also put a salary freeze on nonunion employees and an almost total freeze on hiring. Cutting expenses in the unionized areas is a goal, as is an overall staff reduction.

Cutting costs isn't enough, though. Revenues must grow, and that's where on-line comes in. Tribune and Knight Ridder operate CareerBuilder, the No. Two on-line recruitment firm, and bought HeadHunter, the No. Three. Then they started cross-promoting them on-line and in print, creating what Madigan says is a set of sites with more local job postings and recruitment advertising than the leading national brand.

WASHINGTON POST CO.

Make no bones about it, Chairman Donald Graham said: It's grim out there. But, hey, the future's so bright I've got to wear shades. Advertising revenue is down 13 percent in '01. At the Post, recruitment advertising -- at 25 percent, the largest single category -- is off by 37 percent. The Mega Employment section was 43 percent smaller than the previous year. Similar downturns are hitting the company's other print properties.

The company also plans to lower its assumed rate of return on pension funds to reflect the real world, a move that will further depress earnings numbers.

Things are brighter in the on-line world, where page views and advertising revenues are up, and investments outside print have been performing quite well.

-- Steven E. Brier; e-mail: seb@newsinc.net