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The Washington Post Returns to Profitability

The Washington Post
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The Washington Post

The decline in newspaper advertising has been precipitous: free services like Craigslist have poached classified ad dollars and marketers have shifted their spending to targeted, measurable Internet ads. Publishers have been struggling to cut costs and grow their own online ads.

Finally, after almost two years in the red, the Washington Post Company's papers returned to profitability in the fourth quarter of 2009. The Washington Post Company reported earnings of $8.71 per share, more than four times the net income in the year-ago quarter, on $1.2 billion in revenue.

This is a cost-cutting story; unfortunately the division's turnaround has nothing to do with advertising. Hundreds of buyouts and cost cutting across the board swung operating income to a profit. But ad revenue in the quarter was down 9 percent in 2009 from 2008. Sad as it sounds, that's still the best quarterly performance of the year. Online ad revenue grew one percent, which may sound like no great shakes, but it's great improvement from the double-digit drops that online ads suffered during the heart of the financial crisis. Subscriptions continued to bleed as well: circulation dropped 5.9 percent last year. Despite a re-design and re-launch of Newsweek last year (going after the audience of "The Economist) the magazine division fell 30 percent.

The company may be named after its flagship paper, but there's no debating that it's the educational division — Kaplan Inc — that yields all its growth. Sixteen percent revenue growth at Kaplan for the quarter was responsible for listing revenue for the whole company 6 percent for the year. Despite high unemployment people are still eager to get into good schools, perhaps more than ever seeing it as a way to snag that elusive job. It's interesting to note that Kaplan's international revenue grew 13 percent in the fourth quarter, thanks to some acquisitions.

This is one business that has plenty of growth potential, especially abroad.

  • On The Call: New York Times Co. CEO Janet Robinson

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.