5 hopeful takeaways from annual UBS media investment conference

The annual UBS media conference in New York City is essentially an opportunity for publicly-traded companies to pitch the value of their stock. The tough questions I alluded to in my preview a week ago hang in the air but are not always asked bluntly.

Nonetheless, I came away from the meetings with some answers and some encouragement -- indicating, I suppose, that executives of the five newspaper companies presenting did their job.

Here is the good news.

Newspaper organizations saw marked ad revenue improvements in November. McClatchy was most specific, saying revenues were down 2.4 percent year-to-year in November versus an 8.7 percent decline in October. Gannett also saw a pronounced November uptick. The New York Times Co., with strong and growing digital properties, said that advertising revenues will be positive year-to-year for the fourth quarter.

No one was asserting that this marks a turning point. It could be that the massive Black Friday and Cyber Monday ad blitzes got Christmas shoppers out early and that December results will suffer by comparison.

But the result does partly answer my question of last week -- yes, newspaper organizations, while transitioning to a more digital revenue mix, are still hyper-sensitive to trends, positive or negative, in the broader economy.

The third quarter and October marked a period of concern that recovery was stalling. Cautious companies pulled back ad schedules. If 2012, on the heels of better reports recently on employment and housing, is a year of slow but steady recovery, that will give the companies breathing room.

Digital experimentation continues and digital investment stakes are paying off. One of the more striking new ideas came from Gannett. The company has created a digital USA Today Sports Media network with a presence in a majority of major sports markets. It did so by having both its newspapers and local television stations feed sports information and video to the new platform.

Might this be a sign that after a decade of lukewarm benefits from convergence initiatives, the stage is set for companies with TV, digital and newspaper holdings to put new digital information products together?

Meanwhile, a number of companies have a nice little revenue stream flowing from their investment share in separate digital companies. McClatchy expects to receive $30 million in year-end dividends this month from minority holdings in Classified Ventures (cars and real estate), CareerBuilder (jobs) and other smaller companies.

CareerBuilder is a triple benefit for McClatchy and its two other owners, Gannett and Tribune. It gives them a leading presence to compete for recruitment advertising as that becomes mostly digital; it pays dividends; and CareerBuilder is simultaneously growing in value should the partners ever decide to sell it.

The New York Times Co.'s About.Com had an off year and is rebuilding under new management. But, CEO Janet Robinson noted, its profit margin on somewhat diminished revenues is still 42 percent.

The Washington Post has just launched a Social Reader for Facebook, allowing users to share what they read with friends and monitor their friends' reading. It is a hit already and an international one with especially good results in India, Washington Post CEO Don Graham said, and has racked up 5 million downloads in 10 weeks.

Digital transformation is a work in progress but a better revenue balance is already happening. The New York Times, with a high-demographic national audience (many not in the 1 percent but the 1/2 percent, Graham joked) is atypical. But it is far along in getting away from over-reliance on print advertising.

CEO Robinson reported that the paper's revenue split is now 37 percent print advertising, 14 percent digital advertising, 42 percent circulation (and thus 7 percent other).

McClatchy now has 20 percent of its advertising revenues from digital, CEO Gary Pruitt reported, not counting the dividends from its investment stakes.

Also, 2012, with political advertising  and the summer Olympics, will be a very good year to own local television stations as do Gannett, Media General, Washington Post Co. and a number of other companies not reporting at the meeting.

That revenue boost goes away in 2013, but it can support the expensive and slow work on new digital ventures. And in the case of Media General, hard-pressed to refinance its debt early in the New Year, the short-term revenue infusion could be life-saving.

Touring other presentations at the conference, I gleaned two other upbeat thoughts.

Targeted advertising may not be the be-all, end-all it is frequently assumed to be. David Poltrack, chief research officer at CBS, made the case with an array of commissioned studies that broadcast buys often are more productive than a targeted digital ad. That is because the cost-per-thousand impressions (CPM) is so much higher for targeted digital that the advantage of more precision in audience reach is negated by higher costs.

Newspaper print ads do not have a low CPM, so Poltrack's argument does not necessarily apply to them. But I continue to wonder whether newspapers can hold out the hope that print ad losses will eventually bottom out and revenues stabilize.

Some of that seems to be happening with top retailers like Best Buy and Target, who do prodigious marketing on all media platforms, including their branded digital sites. But the retail chains still turn up weekly in the thick packet of Sunday inserts.

It is not all roses for free-standing digital competitors. A year ago, there was a good deal of industry hand-wringing about Demand Media and other so-called "content farms." They have not disappeared, but Demand and the rest took a major traffic hit when Google changed its Panda search algorithm early this year.

After an Initial Public Offering in January at $17 a share and a period trading in the mid $20s, Demand Media stock has fallen to $7.70 as of Friday.

CEO Richard Rosenblatt made the case that the company has eHow and other strong sites of its own, along with relationships with major companies like L'Oreal and their branded sites. Plus it has dropped lower quality contributors and weeded out duplicative content, Rosenblatt said, in response to Google's "Panda penalty." Still, 2011 has been a step back for the fledgling venture.

In couponing, Groupon's sales trajectory and accounting have come under fire as its IPO fizzled; meanwhile newspaper deal-of-the-day clones like Gannett's Deal Chicken are growing nicely.

None of this is to say that 2012 will see a surge of revenue growth or a return to robust health for the newspaper companies. New waves of deep operating cost cuts are in the offing, several of the presenting companies indicated.

But the picture for the reeling industry has brightened in recent months. Paywalls, smart phone advertising and tablet apps are all showing good early results. So the requisite optimism in the investor-oriented presentations last week sounded substantially more persuasive to me than in 2010 or the three years previous.


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