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In the first of what are likely to be ongoing similar announcements from newspaper publishing and media companies, The New York Times Co. (NYSE: NYT) announced this morning that it's beginning to see advertising weakness due to the war with Iraq. It's not bad enough yet to affect earnings, though. The company said its first quarter (ended this month) earnings will be in line with expectations, and gave a range of $0.42-$0.45. Analysts are looking for, on average, $0.43. Advertising revenues were on track through the first two weeks of March, and then started to weaken as the war dawned. In particular, advertising from hotels, airlines, and other travel-related businesses is slacking, though there is an overall softening. This isn't unexpected, with several large companies pulling or toning down ad messages in the last two weeks. And for the travel industry, this is another unfortunate outgrowth of the pain it's been battling since Sept. 11, 2001. It's difficult to imagine airlines and hotels shelling out the ad bucks anytime soon. There's just no incentive, with people staying at home in front of their war-splashed televisions. As a prolonged and messy war seems more and more probable, advertising weakness will likely continue and even accelerate. It makes sense for firms to pull back their ad dollars and wait for better times to convey their messages and promote their products. But for media and publishing companies such as The New York Times, Gannett (NYSE: GCI), Knight-Ridder (NYSE: KRI), and The Washington Post Co. (NYSE: WPO), to name a few, this current weakness could quickly become a drought. Earnings aren't at risk now, but it's not a stretch to imagine that they could be. Watch for these companies and more like them to keep the market updated in the coming months on the war's adverse effects on advertising.
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