Tribune Co.'s profit declines 7.3% due to circulation, TV woes

Media giant's earnings fall to $192 million in 2Q

July 15, 2005|By James P. Miller | James P. Miller,CHICAGO TRIBUNE

CHICAGO - Tribune Co.'s earnings dropped 7.3 percent in the second quarter as cost-cutting at the Chicago media company only partially offset the one-two punch of eroding newspaper circulation and a drop in TV profits.

Earnings excluding unusual gains and charges fell to $192.6 million, or 60 cents per diluted share, from $207.7 million, or 62 cents, a year ago. Revenue fell 2.3 percent, to $1.46 billion from $1.50 billion.

The latest results, which slightly exceeded analyst forecasts, "reflect our continued focus on cost controls in the face of a weak advertising environment in the nation's largest markets," said Dennis J. FitzSimons, Tribune's chairman, president and chief executive.

Because advertisers routinely cut back when the economy turns down, newspaper and broadcast companies have historically been sensitive to the economic cycle. Although the U.S. economy is now largely recovered from the recession that began in 2001, media companies continue to struggle.

To a significant extent, that reflects a fundamental marketplace change - the splintering of the once-concentrated entertainment and information audience - that is pinching profit margins at companies like Tribune, Knight-Ridder, New York Times Co. and Gannett Inc.

Consumers continue to switch from watching broadcast TV to cable offerings. In addition, a growing number of viewers, particularly younger people, are opting to interact with their personal computers. Having fewer viewers puts pressure on the rates TV broadcasters can charge advertisers.

At Tribune's chain of 26 television stations, the effect of the soft ad market has been hard to miss: Revenue at the company's TV group fell 9.1 percent, to $334.5 million, and operating profit for the stations tumbled 22 percent, to $121 million.

Tribune and other newspaper publishers also continue to get socked financially by the steady decline in newspaper readership. That trend, in place for more than two decades, appears to have accelerated over the last year, as young consumers increasingly turn to the Internet for news.

At Tribune, the circulation slide has been most prominent at the Los Angeles Times. Over the 12-month period that ended March 31, the Times' average daily circulation dropped an unsettling 6.5 percent, to 908,000.

For Tribune - which owns 11 daily newspapers, including the Chicago Tribune and The Sun - publishing revenue fell less than 1 percent, to $1.04 billion in the latest quarter, and the publishing group's operating profit - excluding certain one-time charges in second quarter a year-ago - declined 2.4 percent, to $217.7 million.

On a net basis, income more than doubled, to $233.4 million, or 73 cents a share, from last year's $96.4 million, or 29 cents a share.

Tribune's shares rose 35 cents, or 1 percent, to close at $35.75 yesterday on the New York Stock Exchange.

The Chicago Tribune is a Tribune Publishing newspaper.

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