Year Ends on Brighter Revenue Note

Alt-weeklies running leaner, local ad sales rise

Can recession be good for business? In the case of the alternative newspaper industry, sometimes the answer is yes.

In a year that saw many sectors of the economy taking losses, 2002 found alt publishers and sales directors getting back to basics to keep the bleeding to a minimum – a strategy that actually strengthened their positions.

“We’re pretty low to the ground, so we can all of a sudden divert our attention to follow the money,” says New Times president and COO Michele Laven. “That’s what we’ve done.”

Like many alt-weeklies, at New Times help wanted classified sales fell off a sharp 30 percent through the third quarter compared with the same period of 2001 as the economy faltered, reversing a few years of tremendous growth in that area, Laven says.

“But we regrouped, and we really focused on our rental and real estate sections, and year-to-date we’re up 67 percent in those two categories,” she says. Overall, local sales, both classified and display, are up 5.5 percent over the same period at New Times’ 11 papers, says Laven.

That local effort offset poor performance in other categories, including the biggest loser – national sales – which were off 38 percent at the chain’s national sales arm, The Ruxton Group, Laven says.

National sales in the rest of the industry followed that trend, as illustrated by figures from the Alternative Weekly Network, which represents 164 publications. AWN is anticipating a drop in gross sales for 2002, with a projected $10.5 million compared with $14 million in 2001. And that’s compared to a peak of nearly $27 million in 1999, says AWN Executive Director Mark Hanzlik.

“Things have been improving in September, and I’d say October was a very strong month for us, and November is continuing to be a healthy month,” Hanzlik says. (Following this interview, in its December newsletter, AWN reported that November ended with sales down 22 percent from the previous year.) “Then again, we’re starting to anniversary some pretty bleak numbers from 2001.”

Hanzlik says the steep dive started at the end of summer in 2001.

“We fell right off the shelf in the third and fourth quarter, particularly the fourth quarter last year,” he says. “We felt it right before Sept. 11, and then right after that it just kind of snowballed. We have to keep that in mind when we’re getting overly excited about the sales figure versus the previous year.”

However, Hanzlik says AWN has gotten stronger and more efficient during this downturn.

“It’s more of a cooperative sales effort that’s moving forward much better than it was three or four years ago when we had a lot more revenue coming into the industry,” he says. “I think everybody was just dumbstruck by the tobacco windfall. Now we actually have to get out there and work for some business. It just makes people so much more grateful for every piece of business they receive.”

Bill Risteen, sales director for the Boston Phoenix and the company’s two other papers, agrees.

“We all were riding high on tobacco business, and when that all went away — and obviously with Sept. 11 — all of us were impacted,” he says.

Phoenix sales people have gotten “back to basics” and are much more focused on local business, especially classifieds, where there are still “great growth opportunities,” Risteen says.

Now Phoenix papers’ local and classified sales “have done extremely well this year,” says Risteen, more than making up for the loss in national sales.

“So overall, it’s actually been an OK year, but like everybody else, we’re hoping that the economy does pick up and we have a better year next year,” he says.

Risteen says good old-fashioned business sense has kept the company a step ahead of the faltering economy. “At the beginning of the year … we took a real hard look at our expenses, as well. That’s what really put us up for the year, just watching where we were spending, what we were spending on, and cutting back as best we could.”

Meanwhile in the Southeast, increased spending was the successful strategy at Creative Loafing Inc.

“We’ve put a lot of effort and actually investment in sales this year, so that we’ve really worked at refocusing,” says Creative Loafing Senior Vice President Neil Skene. “We’ve initiated some zone advertising in Atlanta. So we’ve really tried to do some things that both helped the marginal advertisers – those who are looking for a little bit of a price break – and trying to be aggressive about our sales targets. It’s helped keep some more community or neighborhood advertisers in the paper when times are a little hard. … And we’ve actually seen revenue growth out of that. … We’re actually adding advertisers.”

Skene says the chain is up about six percent year to date over 2001 in overall revenue, but flat in terms of net income due to the investment in sales.

Village Voice Media CEO David Schneiderman didn’t offer specific numbers, but says, “Surprisingly, we’ve run ahead of last year. We’re probably going to beat the 2001 performance. We’re heading that direction.”

Jane Levine, publisher of the Chicago Reader and Washington City Paper, has seen similar scenarios play out at both papers, but for different reasons. At the Reader, local display sales are down just under five percent compared to 2001, although she notes that the last few months have been up, so the trend is in that direction. Meanwhile, classified sales leaped more than 25 percent over the same period.

“Washington [City Paper] is just up, up, up,” she says — display up about five percent and classified about 25 percent.

Classified gains, which have been the bright spot for many papers, are in the Chicago and Washington markets directly attributable to real estate rental ads.

“In Chicago, I think it’s because the economy is bad,” Levine says. “Landlords are having a harder time renting their units. So whereas a year ago they could run an ad for one week and [the unit] would get snatched up, or they didn’t even have to advertise because somebody would be passing the apartment on to somebody else, now people are more reluctant to move because times are uncertain, so landlords are having to advertise two or three weeks to rent the place.

“In Washington I think it’s a healthier story,” Levine continues. “The District is having a lot of development, so there are lots and lots of new units there. So that means there is a lot of supply, so you have to advertise that. It’s the same sort of thing, but a more positive story.”

Smaller and more isolated markets also have positive stories to tell, having largely escaped the economic downturn.

For example, Salt Lake City Weekly Publisher John Saltas reports a banner year, with total net revenue up 19 percent through October and a third-quarter increase of 16 percent compared to last year’s third quarter.

“We escaped most of the recession, unlike many other AAN papers, because we had the Olympics here at the beginning of the year,” Saltas says. “So, when everybody else was really getting punched around, we had a … a record first quarter.”

Even when the windfall from the Olympics is excluded, Salt Lake City Weekly had a good year, Saltas says. “Our economy just has not felt that [recession] thus far.”

The same was true in smaller markets with little or no reliance on national ad revenue.

“We haven’t lost any major advertisers so far, knock on wood,” says Sioux Watson, publisher of Independent Weekly in Durham, N.C., which recently merged with rival Creative Loafing’s weekly, the Spectator.

The paper didn’t take tobacco ads, so it didn’t feel that fallout, says Watson. Neither did the Independent have many large national advertisers, so it didn’t take a hit when the national economy tanked. Instead the Independent relies mostly on mom-and-pop businesses, such as shops and restaurants. The paper also added a couple of ad reps when it closed the Spectator and was able to stabilize ad rates with the competition out of the picture.

“We are bucking the trend a little bit. We’re still growing,” says Paula Routly, co-editor/publisher at Seven Days in Vermont. “Certainly not as the same pace as before, but our revenue is up somewhat from last year.”

Routly says Seven Days is “actually getting more national ads than we ever have right now,” coupled with strong growth in classified sales. She projects 14 to 18 percent growth in classifieds, and 5 percent growth in retail.

“It’s not great, but it’s not as bad as it could be,” she says and credits the paper’s broad and diverse client base with providing protection against economic downturns.

And whether they are running small single papers or huge national chains, leaders at alt weeklies find that an economic downturn can be a good time for self-assessment.

“We are a better run business due to the challenges we’ve faced over the last couple of years,” says New Times’ Laven. “We’ve had to become more efficient and just look at everything that we were doing. It’s no different than when a competitor comes into the marketplace and all of a sudden you really have to look at your circulation to make sure you’re … in all the right places. … It’s been a helpful year from that standpoint.”

John Ferri is a freelance writer based in Tacoma, Wash.