News earns $15 million amid warning of future losses

The Buffalo News earned $15.3 million last year, down from about $19 million the year before but more than what the company projected.

A huge, recession-fueled drop in advertising revenue – from $93 million in 2008 to $76 million last year – helped cause the decline in profits.

It also prompted News Publisher Stan Lipsey to warn that, if current trends continue, The News could lose money as early as next year.

“In 2011, if things keep going the way they’re going, we’ll no longer be profitable,” Lipsey said at one of the State of the News presentations this week.

Unlike previous years, Lipsey was the only News executive to speak as part of the formal presentation. He stressed the need to cut expenses further and said The News’ unions will be approached at some point this year about cost-savings measures.

The Guild contract extends to July 30, 2011, and negotiations are expected to start early next year.

When asked for specifics on how the company will hold down costs, Lipsey mentioned cutting staff through attrition and buyouts, and said layoffs would be an absolute last resort. He also cited the need to continue publishing a high-quality newspaper and Web site in explaining that he would be particularly hesitant to cut staff in the newsroom.

As he did last year, Lipsey emphasized the need to avoid red ink, the only thing he believes would cause owner Warren Buffett to close or sell the paper.

Despite the doom and gloom, Lipsey was upbeat about the newspaper’s long-term health.

“I do not think we will be closing in 2011,” he said of the company’s trend projections. “I didn’t come here to close this paper.”

Lipsey started the program by reading from a laundry list of newspaper bankruptcies, all of them under the heading, “A Bad Year for Newspapers.”

He was quick to note, however, that The News is far healthier than most papers.

“We have no debt and we’re still profitable,” he said. “However, our profit continues to decline and requires constant attention.”

The paper experienced small revenue gains in circulation and new media but not nearly enough to offset the decline in advertising. Lipsey said that while circulation revenue inched up thanks in part to increasing the price papers sold in stores and honor boxes, single copy sales fell by 20 percent. Overall, daily circulation was down 4 percent to 157,000, while Sunday was down 2 percent to 240,000.

Lipsey noted that most of the initiatives the News has launched in recent years have failed to produce significant revenue, including the paper’s Web site.

New media generated $4 million in revenue last year, well below the $6 million initially projected. That accounts for a little less than 4 percent of The News’ revenue. Comparatively, newspapers on average earn about 10 percent of revenue from online operations.

Lipsey said revenue projections for smaller commercial printing and direct mail also have fallen short of expectations.

While the paper has picked up several newspaper printing contracts, including The New York Times, they are projected to produce only $1 million in revenue this year.

When asked if printing The Times is contributing to late press runs and late deliveries, News executives acknowledged their use of the company’s second press for The Times can cause delays.

The loss of the second press also requires earlier deadlines and has reduced The News’ ability to offer zoned news and advertising.

One consequence is a revenue stream that fell from $125 million in 2008 to $110 million last year.

Lipsey said The News responded to its lost revenue by cutting expenses in most departments. The cuts included a 9 percent reduction in payroll last year. The cuts included 45 Guild members who were laid off or took buy outs last year.

Lipsey mentioned Warren Buffett at several points, describing him as one of the paper’s best assets. He described the billionaire owner as a newspaper lover and passionate advocate for The News.

The company’s annual presentation came just days before News executives travel to Washington D.C. to meet with International Guild President Bernie Lunzer for the second year in a row.

Lunzer is expected to meet with News President Warren Colville and Vice President for Human Resources Daniel Farberman.