|Fewer Ads Subtract From Newspaper Profit|
|Subject||Changes in fixed and variable costs|
|Topic||Production and Costs|
|Key Words||Advertising, Ads, Cost, Expenses, Prices, Cash flow margins|
Newspaper publishers are often one of the first groups to feel changes in the economy. Last year, the major papers benefited from rapidly increasing advertising by Internet companies; now, ad sales are down steeply due to less technology and finance advertising and fewer classified ads, especially help-wanted ads. At the Wall Street Journal, ad sales in February 2001 were 32 percent lower than a year earlier.
At the same time, the cost of newsprint has been rising. It went up by about $50 a ton to $610 a ton in September 2000, and is expected to increase further in 2001 and 2002.
Newspapers have responded in various ways. Expenses have been trimmed by cutting news coverage, reducing staff, and restricting travel. Both subscription and newsstand prices have been raised by The New York Times and the Los Angeles Times, while the Washington Post has only increased its subscription rate, and The Wall Street Journal has raised the price of single copies. However, there is a reluctance to increase prices because it can upset customers in a market that is slowly declining anyway, and it can make the newspaper's circulation look less attractive to advertisers. Besides, newspapers are generally profitable, with cash flow margins averaging about 28 percent.
(Updated May 1, 2001)
|Source||David Lieberman, "Newspapers struggle as ad sales have 'fallen of a cliff,'" USA Today, March 13, 2001.|
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