State of the News meeting: Ad revenue down, but commercial print revenue up

The Buffalo News saw its operating profit decline in 2014, amid continued challenges with subscriptions and advertising revenue. But the paper continues to see opportunities to grow its commercial printing business.

“We had a good year, but it’s not coming from our traditional core business,” said Warren T. Colville, the publisher and president, during an annual State of the News meeting.

The paper recorded an operating profit of $9.77 million, down 11.7 percent from $11 million the year before, said Brian Donohue, senior vice president and chief operating officer.

The News’ 2014 operating revenue was $92.4 million, down 3.5 percent from $95.7 million the year before. Donohue described operating revenue as “the engine that drives The Buffalo News. Unfortunately, the engine is getting a little smaller.”

The average number of Sunday papers sold was 151,570, which was down from 162,011 in 2013. The daily average was 101,000.

On the digital side, ad revenue was down more than $600,000 over the past two years. “We’ve got a lot more eyeballs on the site — we just have to figure out how to get money from eyeballs looking at that site,” Donohue said.

Michael K. Connelly, editor and vice president, said The News’ digital traffic has increased for 14 consecutive months. “The digital traffic we had at end of 2014 was nearly twice what it was in January,” he said. “Now, the challenge in 2015 is, can we double it again?”

Connelly said The News would rebuild its site, noting that only 30 percent of the paper’s audience “comes to us through the home page, the front door.”

Another notable trend for 2014, he said, was the “rise in mobile.” News statistics show that on weekends, the bulk of the News’ Web traffic is from mobile devices.

News officials described the paper’s commercial printing business, as a promising category with more opportunities for growth.

Revenue on the commercial side was up 36 percent. The paper signed on four new publishers and 30 new publications, said Bryan Carr, vice president of production. Additionally, the New York Times agreed to a three-year extension, and the Batavia Daily News agreed to a five-year extension.

“We have a few good prospects for 2015 we can call upon,” he said.

Carr said revenue from the commercial sheet-fed shop was up 6.2 percent, but the segment recorded a 4 percent loss, largely due to additional staffers brought on board for a second shift five days a week. He said the paper has taken steps to “help us better match the staffing with our body of work,” and he anticipates the category returning to profitability this year.

Warren Todd Colville, vice president of sales, said the paper faced some ad revenue challenges such as Blue Cross Blue Shield stopping its digital and print advertising with the paper, and Walgreens moving a portion of its footprint to a competitor. But he said the paper has a strong Sunday automotive section, and the Sunday paper as a whole continues to attract an appealing package of advertisers.

Overall, he said, the 5.5 percent decline in ad revenue – a drop of $3.5 million — for 2014 was not far off what had been expected.

The News continued to keep expenses in check last year. The paper recorded expenses of $79 million, down from $95.1 million in 2009, Donohue said. Its spending onnewsprint dropped, the result of using less of it and combined volume discounts.

“It’s a good thing we continue to reduce those costs, because our revenues have continued to fall over the last bunch of years,” Donohue said.

During 2014, the paper spent about $1.7 million on major investments in capital. Plans for 2015 call for another $1.7 in investments, including ideas such as upgrades to the parking lot, a blue neon sign for the roof that will be visible from the I-190, and washing the building, which will cost $13,000.

The publisher was asked about staffing projections for 2015. Colville said he did not envision staffing going up, unless perhaps there was a need on the digital side to fill, or for more staffers on the commercial printing business.

“There’s not any plans for any buyouts or anything like that,” he said. “That’s not on the table right now. I’m not saying never. But we’re not even having discussions about it.”

The publisher said the paper was not considering cutting the price of the paper in order to bolster circulation numbers.

Colville was also asked about the potential of other tenants moving into One News Plaza. The business incubator Z80 Labs is set to leave this month.

Colville said the company thought it had a tenant lined up to take the fourth floor, but the News would have had to make about $2.25 million worth of renovations for that tenant. Plus, he said, the paper does not want a tenant’s lease to run longer than 10 years, given the possibility of a new Bills stadium coming to the neighborhood.

As for the first floor, the News is still trying to find a tenant. Colville mentioned Ruth’s Chris Steak House looked at the site, but that possibility did not work out.

“We could use the money,” he said. “We have good space in a great spot.”