Washington Post's Profit, No Thanks to Newspapers


The Washington Post Company reported that its quarterly earnings swung to a profit from a loss a year ago, but don't take that as an indication that newspapers are rebounding. The print journalism business is still suffering from the industry-wide downturn in advertising. It's also falling prey to a shift of newspaper readers from the paper to online, where they yield much less advertising revenue and for the most part, no subscription revenue.

But thanks to the Washington Post Company's Kaplan education division and cable TV operations, net income came in at $11.4 million on 2 percent higher revenue of $1.13 billion. A tiny profit, yes, but better than the loss in the same quarter last year, which is why the company's stock traded higher Friday.

The Washington Post is increasingly an education company. People seem to be investing in their (and their children's') education even more during the economic downturn. Kaplan Higher Education benefited from higher enrollment, showing a 36 percent increase in revenue and 74 percent increase in operating income.

In sharp contrast print advertising revenue at the newspaper division plummeted 20 percent in the quarter. The division posted an $89 million loss on a 14 percent decline in revenue. This division was also responsible for some charges the company posted, relating to an early retirement program at The Post. Classified ads, which used to be the newspaper business' bread and butter, just aren't working online. Digital classified ad sales dropped 29 percent in the quarter, dragging online ad sales down 9%. And the newsweekly is dramatically shrinking. Newsweek magazine, which recently underwent a major redesign, suffered a 40 percent drop in ad revenue.

The Post. didn't hold an earnings call with analysts or give any indication of its outlook. Based on the numbers it looks like the decline in print ads appears to be slowing slightly; this quarter they dropped 20 percent while in the previous quarter, the first quarter they dropped 33 percent. It's notable that while The New York Times Co., Gannett and McClatchy all struggle with similar declines in newspaper revenues, the Post has managed to generate profits and it has nothing to do with newspapers. The Post Company's strong position in the education business was its saving grace this quarter, and will continue to be as newspaper trends are unlikely to reverse anytime soon.

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