Company updates employees on State of the News

In a New Year’s message to readers, Buffalo News President and Publisher Warren T. Colville boasted about the newspaper’s strength and dedication to maintaining high editorial standards.

“It is no secret that the newspaper industry has seen many challenges in recent years,” Colville wrote in the full-page ad that ran on Jan. 1. “I am proud to tell you The Buffalo News remains one of the strongest papers in the country.”

The picture News executives painted during the company’s annual State of the News address on Jan. 19 was somewhat less rosy. Even so, the session made clear that the newspaper continues to reap significant profits that put it far ahead of other American newspapers and maintains a profit margin that is the envy of a battered industry.

The steady decline in The Buffalo News’ sales and profits continued in 2016, even as the company took significant steps to bolster its website and build its digital business.

First, the numbers:

  • The News’ operating profits dropped by 33 percent last year to $7.3 million from $10.9 million in 2015 as advertising and circulation revenue kept dropping and revenue from the newspaper’s expanded digital efforts shrank.
  • The News’ more than decade-long decline in revenues continued last year, with sales sliding by a little less than 6 percent to $84.4 million, down from $89.8 million in 2015. It was the biggest drop in revenues during any single year since 2009, and the 5.9 percent decline was more than double the drop in 2015. Over the last 10 years, the News’ revenues have plummeted by 40 percent.

However, The News’ profit margin remains healthier than that of many regional newspapers, at 8.6 percent, down from about 12 percent in 2015.

“It was a very challenging year,” said Warren T. Colville, the News’ publisher and president.

The decline, Colville said, underscores the need for the News to move quickly to revamp its business in an increasingly digital age that is changing the way consumers get their news, eroding circulation and upending longstanding advertising relationships.

“Evolving is slow. We need to be quick and nimble now,” he said. “Everyone has to be part of what we’re doing.”

The News has collected 55,000 emails from readers who used the website during the free period and plans to contact them with an offer to become digital subscribers for just 99 cents a month for three months, said Carol Horton, the News’ vice president of marketing and public relations.

Colville said he was hopeful that the News will generate a growing amount of revenue from the five Pennysaver products that it launched in September, following the bankruptcy of Community Newspapers. The News has launched Pennysavers in Arcade, Gowanda, Springville, Ellicottville and Cuba/Franklinville, with revenues doubling since September, he said.

The News also plans to revive the Hamburg Sun weekly newspaper on Feb. 17.

The News also continues to hold the line on expenses. Total operating expenses inched lower to $77.1 million from $78.9 million, down 2.1 percent. While payroll costs fell by 3.6 percent, newsprint expenses dropped by 5 percent.

Employee benefit costs, which include health insurance expenses, fell by just under 1 percent to $11.3 million at a time when health benefit premiums nationwide have been steadily rising. The News is proposing in the current contract talks to establish a system where Guild members would pay as much as 30 percent of their annual premiums – a proposal that the Guild is staunchly resisting. Because an alternative arrangement wasn’t reached by the end of last year, Guild members now are paying 5 percent of the premium of the Guild base health plan, which will further ease the company’s health insurance cost burden in 2017.

The News has slashed its expenses by more than $15 million since 2011.

But News executives also said there were some hopeful signs.

The News’ revamped website has attracted more than 800,000 visitors during each of the past three months. The newsroom’s goal is to maintain the print newspaper, while also launching new initiatives that will attract new readers, especially millennials, who have never used newspapers as a prime source for their news and information, said Michael Connelly, the News’ vice president and editor.

While the News’ traditional newspaper business continues to decline, Colville noted that the company has steadily developed new products to bring in new sources of revenue, from printing other newspapers, such as the New York Times, to new advertising products that target non-subscribers.

Those new products include $400,000 in new revenue from the sale of more than 26,000 copies of three books published by the News, Wall of Snow and Buffalo Memories I and II. The News is planning a book on the 40th anniversary of the Blizzard of 1977 in time for the Mother’s Day and Father’s Day holidays, as well as a Buffalo Memories III book that will be available for Christmas, Horton said.

The News also is getting ready to launch a new mobile phone app for iPhone users next month.