News' Profits Remain Among Best in Business

NEWSPAPER MONEY MAKER

By David Robinson

Neither falling circulation nor flat advertising sales can keep the Buffalo News from raking in some of the meatiest profits in the newspaper industry.

But that doesn't mean the newspaper's top executives are happy.

"Buffalo is a declining market. We have to face up to that," Publisher Stanford Lipsey told News employees during the company's annual State of the News meetings last month.

So how did the News manage to increase its profits by 6.5 percent last year, despite revenues that actually dropped by $235,000?

For one, the company saved more than $3.6 million as newsprint costs fell to levels not seen since 1992-94, said Rod Layton, the News' controller. But those savings may be short-lived. Layton said newsprint prices were set to go up $50 per ton in early April.

Another savings came from the News' pension plan. While Layton said the company always contributes the most it can under law to the program, the rising stock market meant that the News's maximum contribution was $1 million less last year than it was the year before.

Those savings helped offset weakness in other key areas.

Advertising sales slipped by a little more than $300,000, or less than 1 percent, to $114.4 million as ROP advertising declined while pre-print ad revenues inched up.

ROP advertising at the News has essentially been flat since 1994 and the number of display ads that have run in the paper has dropped by a third over the last decade. "This is probably the most troubling trend," Layton said.

The News lost more than $1 million in ad sales when the Hills Department Store chain was acquired by Ames. Although Ames subsequently increased its own spending by nearly $640,000, the result was a net loss of more than $350,000.

Other gainers on the ad front included Brand Names Sales, which spent $390,000 more last year and the West-Herr Automotive Group, which spent an extra $350,000. Overall, Warren T. Colville, the News' executive vice president, said the auto group had the biggest growth in ad spending last year as car sales soared to an all-time high.

But those gains were offset by losses in other accounts, including Jubilee, which spent nearly $560,000 less last year, and Rite Aid, as the struggling drug store chain reduced its ad spending at the News by $550,000, Colville said.

The brightest spot in advertising was pre-print sales, which remained strong. The News had 550 million pre-prints last year, up from 400 million in 1990. "We're still losing the ROP advertising, but we're not seeing the migration into the pre-prints as we've seen in the past," Layton said.

Colville said the opening this month of Galyan's sporting goods store in the Walden Galleria should be good for ad spending, forcing the Dick's chain to take out more ads to beat back a challenge from a major new competitor. In addition, the Best Buy chain of catalog showrooms is expected to open stores in Western New York during the final months of this year.

But Colville also warned that the competitive environment could heat up as new owners take over the Metro Community News. As a result, the News has been working to sign up major advertisers to long-term contracts "to keep them out of the game, so to speak," Colville said.

On the circulation front, the news is mostly glum. Daily circulation slid to 233,767 last year, down 50,000 from 1995 levels, while Sunday circulation dropped to 327,211, a decline of nearly 38,000 from 1995, said Paul Glaeser, the News' circulation director.

Glaeser blamed the region's loss of population and its tepid economy, along with the decision several years ago to eliminate discount programs, for the drop in circulation. He said the News is interested in buying used presses to improve the paper's reproduction.

To combat the declining sales, the News has streamlined its subscription packages, offering just one weekend package, for instance, instead of the three options that were available previously, he said. The paper also has revamped its telemarketing operations and has added hawkers to boost single-copy sales.

"Sunday continues to be a problem ... but the product continues to be strong," with penetration rates remaining among the highest in the country, Glaeser said.

The News, which launched its buffalo.com web portal last year, lost about $1 million on the effort in 1999, Lipsey said. "I call it fear.com," he said. "You don't go in there because you're going to make money. You go in there because you have to be there."

Still, the site has been averaging about 4 million page views per month and new features, including a new events listing section, have been added.

Editor Margaret Sullivan said a lot of progress has been made to revamp the newsroom, which includes putting a greater emphasis on enterprise reporting. "We've done a lot of enterprise reporting that I'm proud of," she said.

Still to come, Sullivan said, is more work redefining beats and an increased emphasis on investigative projects. The News also plans to convert its photo staff to digital photography, along with reorganizing the national and international news section and redesigning the business section.