When they traveled to Atlanta last month to cover the Democratic National Convention, reporters and editors from the Los Angeles Times flew first class. They went home in the coach section.
In between, word had come down from publisher Tom Johnson that the brakes were being applied to the Times' gravy train. First-class travel, among the perks at journalism's cushiest operation, was out unless there was a good reason for it.Not only that, but the paper was instituting a hiring freeze, shrinking the space it devotes to news, and lopping 20 percent from expense-account budgets.
While the cutbacks hardly amount to an austerity program, they do say much about the mood of the Times, and about times in the newspaper business in general.
Johnson says his paper, which carries more advertising than any in the country, has suffered a "serious decline" in profits since last year. Other newspapers aren't exactly crowing, either.
After years of reaping big gains in revenue and earnings, newspapers - historically among the nation's more profitable businesses - have hit a plateau. The amount of advertising in newspapers, their primary source of revenue, is down or flat throughout the industry. Costs, especially for newsprint, are up significantly. Hiring freezes and budget squeezes appear to be the norm.
To some observers, the industry's blahs raise larger questions about the overall health of the nation's economy.
Businesses, after all, pile on the advertising when their customers are in a mood to spend and cut back in tough times. By this reasoning, it follows that if newspapers are slowing down, a recession might not be far behind.
"Newspapers have a subpar year every year before the economy turns down," said John Morton, a Washington newspaper-industry analyst. "Everyone is telling us the economy is going along favorably, but some segments (of newspaper advertising) and consumer spending are very soft. This suggests to me the economy is not as ebullient as suggested."
Most experts had expected 1988 to be a good year for newspapers, given the economy's unrelenting expansion and the prospect of a pick-me-up from Olympics and election-year promotions.
Instead, Bob Coen, who forecasts media expenditures for the McCann Erickson ad agency in New York, said he has cut his newspaper-advertising projections from a 1 percent to 2 percent increase to a decline of 1 percent to 2 percent.
Similarly, the Newspaper Advertising Bureau last week scaled back its advertising projections. A spokesman said the general economy wasn't sufficiently strong to sustain the original prediction.
Others, however, say softness in the general economy is less to blame than a series of isolated factors.
For example, the consolidation among retailers - usually the single largest advertisers in newspapers - seems to have had a harmful impact. In the past two years May Department Stores, Campeau Corp. and Macy's have made multibillion-dollar acquisitions of other department-store chains, and two of the largest supermarket companies - Safeway Stores Inc. and Lucky Stores - were involved in buyouts.
The debt taken on by these retailers to complete the buyouts has made big advertisers more cost-conscious than ever, newspaper executives say. And in some markets, like Los Angeles, the mergers have placed former competitors under the same corporate umbrella, thus reducing their need to advertise.
In fact, department store advertising was off 13 percent in the first quarter, according to the Newspaper Advertising Bureau.
The Oct. 19 stock market crash, meanwhile, has meant a different set of worries for publishers. A pullback by mutual-fund companies and investment houses has cut into financial-services advertising, which typically accounts for about 3 percent of the advertising in a local paper.
The Wall Street slump has been most painful to the three national newspapers. Advertising is off 10.2 percent in The Wall Street Journal and down 3.6 percent at The New York Times, which reported an 11 percent decline in profit for the first half of the year. Through June, USA Today has lost 4 percent of its total ad pages, and the paper is losing money again after a brief brush with profitability in the fourth quarter of 1987.
"I don't know whether we can come back in the range we'd like in the second half," said John Curley, chief executive of Rosslyn, Va.-based Gannett Co., which publishes USA Today and 90 other newspapers around the country. "It's like betting on horses, which I don't do."
Then there is the miniskirt theory. The fashion industry bet heavily on the mini; when it proved to be a so-so seller, retailers saw no reason to continue hyping it, said James Dunaway, a vice president at the NAB.
Similarly, he said, there wasn't another hot new consumer-electronics product such as VCRs or CD players to stimulate advertising. The general-merchandise and apparel advertising categories are off 16 percent this year.
The slowdown has caused at least a little concern in newsrooms around the country. While the damage is limited now, some editors naturally worry that the next round of cuts will directly affect their ability to cover the news in a year of such major stories as the election and the Olympics.
By one measure, those fears seem unjustified so far: The press contingent at the Democratic National Convention in Atlanta last month included about 1,000 more people than were at the 1984 convention in San Francisco, even though the broadcast networks cut back substantially since then.
But cost-consciousness is evident in the news pages in more subtle ways. The Chicago Tribune had budgeted an increase in the amount of space it devotes to news and photographs at the beginning of the year. But when the industry was hit with its second newsprint price increase in a year last January, "we had to eat the page increase," said the Tribune's editor, James D. Squires.
Meanwhile, papers like the New York Daily News and others are using lighter newsprint, which allows them to conserve paper.
Newsprint is no trifling expense: at big-city dailies it can account for as much as 40 percent of all expenses. And since last year industry newsprint costs are up about 15 percent, according to Morton.
The industry's doldrums have not escaped the attention of Wall Street, where newspaper stocks have been among the best performers for years.
Almost all of the newspaper-dominated stocks crashed along with the rest of the market on Oct. 19. But recovery has been slow.
Several of the major companies - Gannett, Knight-Ridder, The Washington Post Co. and Tribune Co. - have barely kept up with the 23 percent rise in the Dow Jones industrial average since the crash.
Investors don't seem to be impressed with the companies' earnings, which in many cases have been boosted not by increases in operating profitability, but by lower corporate tax rates under the Tax Reform Act of 1986.
Even so, J. Kendrick Noble, PaineWebber's media-stock analyst, said he is bullish on the near term. He contends that another newsprint price increase this year is not likely and that ad volume should pick up slightly as personal consumption turns up.
Noble is among those who see no ominous signals about the broader economy in the newspaper industry's recent doldrums. The economy looks stronger than newspapers themselves, he said, because much of the growth in gross national product this year has been driven by a boom in American exports - a sector that is meaningless to the health of newspapers, since it doesn't boost local advertising.
Of more importance to the industry - and perhaps a gauge of the economy's immediate future - is that the amount of classified advertising remains strong, up about 4.5 percent over last year, Noble said.
In essence, rising classified-ad volumes indicate a growing economy, because they show that companies are competing for a shrinking number of workers by advertising for them in the help-wanted section. When unemployment is high, however, companies don't need to solicit workers in the classifieds.
"Historically," said Noble, "classified advertising has never gone down except when the economy is entering a recession. I think it's going to remain strong for the foreseeable future because of the declining number of young people" and the shortage of entry-level labor.
If only publishers like the Los Angeles Times' Johnson were so bullish. Johnson hedges his predictions as he looks forward to the second half of the year: "I'm hopeful things will turn around here, but I'm not confident."
For the moment at least, newspapers have become part of the bad news they report.