US: economy clouds outlook for publishers

Posted by Val�rie Gazzano on December 13, 2004 at 12:57 PM

"Since so much of their business depends on advertising spending, newspaper publishers and the people who invest in them have long been resigned to the fact that publishers' fortunes tend to rise and fall with the economic cycle," reports Seth Sutel of the Los Angeles Times. "But in presentations to investors this week, many publishers were highly cautious in their outlooks for next year, reflecting another hard fact: even though the economy may be recovering, it's not growing nearly fast enough to create a predictable, robust upward trend in advertising. Newspaper publishers from all over the country descended on New York this week to make presentations to the investment community at two conferences put on by competing investment banks, UBS and Credit Suisse First Boston."

"By their nature, newspapers are sensitive to changes in the economic climate. When jobs grow, employers tend to buy help-wanted ads to attract applicants. When housing is booming, so do real-estate ads, and when retailers or auto companies are competing with each other for the attention of free-spending consumers, they also take out ads.
But when the economy is merely sputtering along, companies are far less likely to significantly increase their spending on advertising, especially if they're fearful that their other expenses may also rise, such as insurance, interest costs, energy, commodities and health care -- all of which have been heading higher. Going forward, newspaper companies also know that they could be especially affected by some of the emerging dangers for the overall economy, namely rising interest rates, higher costs for health insurance, and even rising prices for commodities -- in the case of newspapers companies, paper."

Source: Los Angeles Times

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