New York Times Q1 earnings revealed

The New York Times Company is circling the outer rim of its death spiral. Not unexpectedly, first quarter results were disappointing, even considering the difficult business environment.

Management was ready with spin to explain away the problems as not its fault. CEO Janet Robinson ascribed the weak advertising revenues to the economic downturn magnified by the effects of "secular change in our business." Robinson added that they are "diligently managing their business for the long term and transitioning into the digital era."

Ad revenue fell nearly 10%.

Circulation income showed a modest uptick. Undoubtedly, this came from the increase in the newsstand price to $1.50 and the cover price to $1.25 in the early third quarter of 2007. But squeezing revenue from circulation is always a fool's errand in the news game. Raising prices decreases circulation and eventually pressures ad rates. In the jargon of strategic consulting, this is called "harvesting" a business. Of course, after the harvest a field tends to be pretty empty.

I cancelled my home subscription to the Washington Post almost four months ago and they're still dropping it on my driveway. Presumably, they are trying to meet minimum circulation guarantees to advertisers.

Even worse for the Times, it is failing to make good on its announced strategy to cope with the secular industry decline it acknowledges. With revenue fading fast, structural changes urgently have to be made to the expenses. In 2007 Robinson announced a planned reduction in their annual cost base of $230 million in 2008 and 2009, excluding the effects of inflation and one-time costs.

This equals $28.8 million per quarter. Cost reduction for this quarter totaled only $5.7 million, $21.1 million less than promised. That is a whopping 80% less than promised.

This harsh realization must explain the motivations for the layoff accelerations reported yesterday.

Sam Zell has been in the driver's seat at the Tribune Company for just a few months and already word on the street has it that he will need the lenders' cooperation to survive. Tribune bonds have plunged from 60 to 30 over the last four months:

Q1 Tribune bond prices

The alarm bells are deafening. 
The New York Times Company is circling the outer rim of its death spiral. Not unexpectedly, first quarter results were disappointing, even considering the difficult business environment.

Management was ready with spin to explain away the problems as not its fault. CEO Janet Robinson ascribed the weak advertising revenues to the economic downturn magnified by the effects of "secular change in our business." Robinson added that they are "diligently managing their business for the long term and transitioning into the digital era."

Ad revenue fell nearly 10%.

Circulation income showed a modest uptick. Undoubtedly, this came from the increase in the newsstand price to $1.50 and the cover price to $1.25 in the early third quarter of 2007. But squeezing revenue from circulation is always a fool's errand in the news game. Raising prices decreases circulation and eventually pressures ad rates. In the jargon of strategic consulting, this is called "harvesting" a business. Of course, after the harvest a field tends to be pretty empty.

I cancelled my home subscription to the Washington Post almost four months ago and they're still dropping it on my driveway. Presumably, they are trying to meet minimum circulation guarantees to advertisers.

Even worse for the Times, it is failing to make good on its announced strategy to cope with the secular industry decline it acknowledges. With revenue fading fast, structural changes urgently have to be made to the expenses. In 2007 Robinson announced a planned reduction in their annual cost base of $230 million in 2008 and 2009, excluding the effects of inflation and one-time costs.

This equals $28.8 million per quarter. Cost reduction for this quarter totaled only $5.7 million, $21.1 million less than promised. That is a whopping 80% less than promised.

This harsh realization must explain the motivations for the layoff accelerations reported yesterday.

Sam Zell has been in the driver's seat at the Tribune Company for just a few months and already word on the street has it that he will need the lenders' cooperation to survive. Tribune bonds have plunged from 60 to 30 over the last four months:

Q1 Tribune bond prices

The alarm bells are deafening.