Lee Enterprises still losing advertising revenue but stays profitable with cuts

Lee Enterprises had an advertising revenue loss of 9 percent in the last quarter of 2017, the company reported Thursday, but was able to increase profits with cuts in people and paper and a favorable income tax adjustment.

Lee, which publishes the St. Louis Post-Dispatch and 50 mid-size papers and sites in the Midwest and West, is first of the publicly traded newspaper companies to release earnings for the quarter and may do better financially than larger companies with more metros.

But its report suggests a likely operating pattern for the industry: Print advertising still down sharply, digital advertising and subscription revenue holding roughly even and expenses pared to stay profitable. In Lee's case, compensation was down 7.5 percent compared to the same period a year ago and newsprint down 15.3 percent.

Digital advertising now accounts for 27.9 percent of all advertising revenue, the company said.

Its profit margin on revenues of $143.8 million for the quarter was 10.8 percent before considering the favorable tax adjustment, 24.5 percent after.

Larger public newspaper companies — Gannett, New York Times, McClatchy, Tronc and New Media Investment/Gatehouse — will all be reporting results for the quarter later in the month. 

As Poynter and others have reported, there is a new round of newsroom cuts in progress already in 2018 with editorial writers along with business and education reporters among the categories hardest hit.

The Lee report comes at the end of a week when platform giants Facebook, Alphabet/Google and Amazon are also reporting results for the quarter.

Facebook said Wednesday evening that its advertising revenue was up 48 percent year-to-year compared to the same quarter in 2016. Its income rose 61 percent year-to-year with an operating margin of 57 percent.

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