Publishing Industry Sees Recovery on the Horizon

THE United States publishing industry is cautiously optimistic about increased sales, higher profits, and - in the case of daily newspapers - stepped-up advertising for the remainder of 1993.

Looking ahead to the late 1990s, multimedia companies within the industry stand to benefit from technological advances in the interactive television/communications sector, as cable systems give TV watchers 500 or more channels to choose from.

Few people in publishing are yet willing to say that the impact of the recent economic downturn is over. The publishing industry was especially hard hit by the recession due to lost advertising revenues. But there is a growing perception that the bottom has been hit. Advertising revenue is up about 7 percent this year.

Yet publications continue to go out of business. The 92-year old HG (formerly House & Garden) will cease publication in July. This week, two trade journals catering to the advertising industry, Magazine Week and News Inc., announced they are shutting down. Variety, a venerable weekly covering the entertainment industry, announced that, to cut costs, it will begin publishing biweekly during the summer. The number of editorial pages in each issue also will be cut.

Wall Street analysts say that for all the "sturm und drang" of the past two years - reduced advertising lineage, widespread mergers and consolidations, extensive layoffs, and the folding of a number of publications - the industry has stabilized and is poised for modest gains.

For example, the newspaper industry's earnings gains for the first quarter of 1993 were a clear improvement over 1992 fourth-quarter results, say Susan Decker and Bret Rekas, newspaper analysts for Donaldson, Lufkin & Jenrette Inc., an investment house.

But overall, newspapers continue to show a slow and rocky recovery - a situation that could continue into 1994, says Gerald Holtzman, an analyst for Value Line Institutional Services, prviding investment analytical services. If the current recovery falters, advertisers might make new cutbacks in ad campaigns.

THE US publishing industry is divided into two sectors: publishing companies that print books and information materials, and newspapers. Analysts often include magazines in either of these two categories.

The publishing industry, including books, journals, and some magazines, posts better overall financial returns than newspapers. Value Line, in its current June 4 rating of probable stock market performance, lists the publishing industry as No. 44, and the newspaper industry No. 76. (Manufactured housing and recreational vehicles are No. 1; the metals and mining industry is last.)

The publishing industry should post at least average financial performance in the next 12 months, says George I. H. Rho, an analyst for Value Line. But he remains wary of advertising-related ventures, such as magazine publishing, given the current saturation of magazines in the US.

In the past five years, the publishing industry's sales have shot from around $17 billion to about $24 billion. Sales are expected to reach more than $30 billion by the mid-to-late 1990s. Net profit margins are 7 to 8 percent and should be close to 10 percent toward the end of the decade.

The newspaper industry is expected to post total sales above $35 billion this year and more than $40 billion by the mid-1990s. Last year sales were slightly under $35 billion. Net profit was about 5 percent in 1992, up from 3 percent in 1991; net profit is expected to reach more than 5 percent this year and about 8 percent by the end of the 1990s, according to Value Line.

Multimedia companies, involved in "interactive" communication technologies, are the prospective stars of the publishing industry. One such company is News Corporation Ltd., which owns newspapers, magazines, television ventures, and a 20th Century Fox film studio. Mike Mangan, an analyst for Prudential Securities, says the developing entertainment-communications industry will be one of the "growth" sectors of the 1990s.

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