With Tribune on Block, L.A. Times Circulation Down 8%
Tuesday, October 31, 2006
The Los Angeles Times lost 8 percent of its daily circulation -- the most of any of the nation's largest newspapers -- over the past six months, potentially lowering its value even as suitors line up to bid on its parent company.
Nationally, newspaper circulation has been sliding since 1987 and the past six months were no exception. Overall circulation was down 2.8 percent from the comparable period last year. But the pain was felt worse in some cities than in others. The smaller-circulation Miami Herald, for example, was down 9 percent for daily and Sunday, while the New York tabloids -- the Post and Daily News -- gained.
The L.A. Times is owned by Chicago-based Tribune Co., which has put itself up for sale as the result of a boardroom war. A minority of board members are unhappy with the company's performance over the past year and think the company would be worth more split up or sold off.
On Friday, two private-equity groups -- Bain Capital of Boston and Thomas H. Lee Partners of Boston combined with Texas Pacific Group of Fort Worth -- met Tribune's deadline for expressing interest in buying the company, said sources with knowledge of the submissions who spoke on the condition of anonymity because the bidding is private. Tribune's market capitalization is $8 billion.
Tribune's sentimental flagship is the Chicago Tribune, but the L.A. Times is its largest newspaper and accounts for about one-quarter of Tribune revenue. The Times has been at the heart of Tribune's cost-cutting efforts in recent months; Chicago executives fired Times publisher Jeffrey M. Johnson this month for refusing to cut more jobs.
The 8 percent drop in circulation was recorded in April through September and left the Times with a daily circulation of 775,766, according to the Audit Bureau of Circulations, which monitors newspaper sales. The Times's Sunday circulation for the period was down 6 percent, to 1.2 million. The Times publisher said the big drop was attributable to low-value circulation -- such as giveaways -- that the paper cut to save money.
Other Tribune papers fared slightly better. Daily circulation at the Chicago Tribune was down 1.7 percent; the Hartford Courant was down 3.9 percent; the Baltimore Sun was down 4.4 percent; and Newsday was down 4.9 percent.
Tribune shares fell 50 cents in morning trading in reaction to the circulation news but mostly recovered during the day, closing down 2 cents at $33.45.
If the Times's circulation slide is the result of readers actively fleeing the paper, the company's value could be reduced as the sale process goes forward, said James C. Goss, an analyst with Barrington Research Associates Inc. of Chicago. That could lead bidders such as Bain and Lee to lowball Tribune, offering less per share to buy the company.
Analysts place Tribune's value at about $35 per share.
But if the 8 percent loss is the result of what Goss called "corporate choice" -- meaning that Tribune allowed low-value circulation to seep away -- that would be seen as smart corporate policy and could raise the value of the company.
However, allowing overall circulation to drop too far can result in lowered ad rates.
In a written statement, Times publisher David D. Hiller said his paper was focusing on "individually paid circulation," or full-price circulation. In that respect, the Times's circulation was up one-third of 1 percent over the past six months, yesterday's data showed.
Newspapers receive credit for other forms of circulation, such as "third-party sales," when a retailer agrees to buy a large number of newspapers at a reduced rate then give them away as a promotional tool. That kind of Times circulation was down 67 percent, the paper said.
The Washington Post lost 3.3 percent of its daily and 2.6 percent of its Sunday circulation in the same period. The New York Times was down 3.5 percent daily and Sunday. USA Today, the nation's largest newspaper, lost 1.3 percent.
In New York, the tabloid wars have been good for the industry: The New York Post's circulation was up 5 percent, while the Daily News's rose 1 percent.