Force a smile: Ad declines are slowing

Newspaper Earnings Preview: Cost-Cutting, Slowing Ad Declines Provide A Bit Of Breathing Room
Over the past six months, newspaper earnings results have been relatively positive as Gannett, the NYTCo and McClatchy  have returned to profitability and ad declines
have abated. When Gannett kicks off the Q1 newspaper earnings season on Friday morning, analysts expect additional signs of stability, thanks to year of cost-cutting and a slight uptick in marketers' ad spending.
But those reasons for optimism in the short term don't change the bigger picture: newspapers are coming off the worst year in the modern history, and the long term still looks uncertain to say the least. Two big questions loom: Can newspaper companies maintain their lower cost models? And will they be able to grow revenues amid a tentative economic recovery?

Company: Gannett
When report: Friday
What to expect: In an analyst presentation last month Gannett execs indicated that though ad spending is still down from last year, the rate of decline has moderated to the single digits. In a research note issued this week, JP Morgan said Gannett's newspaper ad revenues should decline 7.2 percent in Q1, with total newspaper revenues down 6.4 percent.
High Olympics and Super Bowl ratings and rising local ad spending, particularly by automakers, have already helped boost broadcast revenues by over 20 percent. But that won't be enough to offset continued—if slowing—ad declines at the newspapers, which have fallen 7.5 percent in the first two months of the year; also digital is being pulled down 5 percent by Careerbuilder.
—- Company: NYTCo. 
What to expect: : JP Morgan says newspaper-ad revenues will decline roughly 8 percent in Q1, slightly better than the 10 percent previously anticipated. Cost-cutting will continue to prop up profits, but by the end of the year, unless the economy and attendant revenues show better-than-expected improvement, the company will have difficulty maintaining margins.
—- Company: McClatchy
What to expect: JP Morgan forecasts that ads will be off by 8.4 percent as circulation continues to grow. While the circulation gains might not offset negativity on the ad front, cost-cuts should help margins jump to 25 percent from Q109's 12 percent.
—- Company: EW Scripps
What to expect: : Like Gannett, it has benefitted from cost-cuts and broadcast revenue gains. And just like most other newspapers, it is still trying to slow ad declines. JP Morgan projects a 12.5 percent decline in Scripps' newspaper revenue, an improvement over Q4's 15 percent drop.
A note about the industry: Digital ad revenues are still largely tied to print upsells, a practice that tends to depress online sales dollars. Gannett, McClatchy and EW Scripps have been trying to increase digital's independence, but that will take time. Meanwhile, the gains from last year's cost-cuts will evaporate later this year unless publishers find new areas to cut and/or find new ways of driving revenues. 

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