Shareholders Day September 11, 2009
1 What We’ll Cover Today
• Financial Recap • The Perfect Storm • Steps We Have Taken • New Products • Our Mission and Strategy • Summary
2 Financial Recap
3 Operating Income for the Newspaper Publishing Division has been steadily declining 143 ($ millions) 127 125 112 111
85 66
2001 2002* 2003* 2004 2005 2006* 2007 2008*
* Non-GAAP Measure - results exclude charges in 2002, 2003, 2006 and 2008 associated with early retirement plan buyouts at The Washington Post primarily funded by assets of the pension plans, a gain in 2003 on the sale of land at The Washington Post, accelerated depreciation at The Washington Post in 2008, and intangibles impairment charges at other newspaper properties in 2008. (25) 4 From the chairman:
“The newspaper will lose substantial money in 2009. Some will be non-cash accelerated depreciation because we will be closing a printing plant. Most will be real losses. Post management knows that losses must diminish in 2010.”
Don Graham 2008 Annual Report
5 2009 has been awful for the Newspaper Publishing Division ($ millions) Q1 '09 Q2 '09 YTD Operating revenues 161 169 330 Operating expenses* (201) (187) (388) Adjusted operating loss* (40) (18) (59)
Early retirement program expense 0 (57) (57) Accelerated depreciation (13) (14) (28) Total operating loss (54) (89) (143)
* Non-GAAP measure; excludes special charges
6 • These losses are material and unacceptable.
• We are doing everything in our power to reverse them as quickly as possible without damaging our future prospects.
7 Katharine Graham said:
“In order to do good, we must do well.”
8 Looking ahead
• We are taking steps today to cut these losses dramatically in 2010 and beyond.
• But, these steps are focused on our long-term viability and future growth with an emphasis on digital products and digital revenues.
9 The Perfect Storm
10 11 Print advertising dollars drove WPM profits until 2007
700 ($77M) 600 (13%) ($86M) 500 (17%)
400
$ millions 300
200
100
0 2001 2002 2003 2004 2005 2006 2007 2008
12 Print circulation is declining albeit slowly Circulation: 2001 – 2009 (in 000s) 1100 1067 1054 1035 1011 1000 969 938 873 903 835 (3.3%) 900 (4.3%)
773 800 760 745 726 694 633 700 674 650 (2.6%) 596 (5.9%) 600
500 2001 2002 2003 2004 2005 2006 2007 2008 2009F Daily Sunday
13 Online we have a bigger audience than ever
washingtonpost.com Unique Visitors January 2002 – June 2009
1414 1212 10 10Millions Millions 88 66 44 22 00
2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 20 02 20 2 30 03 30 3 40 04 40 4 50 05 50 5 60 06 60 6 70 07 70 7 80 08 80 8 90 09 0‐ 0‐2 0‐ ‐20 0‐ 0‐3 0‐ ‐30 0‐ 0‐4 0‐ ‐40 0‐ 0r‐5 0l‐ ‐50 0‐ 0‐6 0‐ t‐60 0‐ 0‐7 0l‐ ‐70 0‐ 0‐8 0‐ ‐80 0‐ 0‐9 ‐ ‐ ‐ul ‐ct0 ‐ ‐pr l‐ ‐0 ‐ ‐ ‐ t‐ct0 ‐ ‐p ‐ ‐0 ‐n ‐ ‐ ‐c0 ‐ ‐ ‐ ‐0 an‐ ‐ ‐ ‐0 ‐ ‐ Jan Apr J O Jan A Jul ctOct Jann Apr Jul O Jan A ulJu ctOct anJa Apr Jul ctO Jan Apr Ju ctOct J Apr Jul ctOct Jann Apr Jan Apr Jul Oct Jan Apr Ju O Ja Apr Jul Oc Jan Apr J O J Apr Jul O Jan Apr Jul O Jan Apr Jul O Ja Apr
1214 Ad revenue is in the tank from a major recession TWP* wp.com* Real Estate (61%) (58%) Jobs (65%) (39%) Cars (54%) (5%) National (15%) 2% Retail (14%) Total (27%) (12%)
* Six months ended June 2009 and June 2008.
15 Industry newsprint prices are going our way, but are still high $800
$700
$600
$500
$400
6 99 99 0 1 1997 1 1998 19 00 4 2 200 5 2002 2003 200 00 2 2006 Source: Resource Information2007 Systems2008 Inc. [1] Average metric ton price through July2009 2009 [1] 16 We have always been a cyclical business
10% 5% 0% -5% '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 -10% -15% -20%
Real GDP TWP Print Ad Rev
17 So what is different?
• Classifieds, which for so long contributed healthy margins to support our business, will not come back in any meaningful way. • The fundamentals of our business have changed.
18 2009 Print advertising dollars are forecast to decline 46% from 2001 – particularly in classifieds
2001 2009 Forecast Down 69% since 2001
Retail General Classified Preprint/Mail
19 Online ad revenue has grown, but not enough
wp.com: 270% or $58M*
Print: 46% or $262M*
* 2001 actual vs. 2009F
20 Steps We Have Taken
21 We have moved aggressively to cut costs • Gone from two printing plants to one • Large reduction in payroll-related expenses since 2006 (3 VRIPs; 2006, 2008, 2009) • Cut pages in the newspaper • Significantly reduced our costs of distribution by consolidating the number of agents delivering the paper • Outsourced our call center for classifieds • Consolidating operations into one building • Non-newsprint expenses significantly reduced since 2006
22 WPM newsprint and outside printing expenses 150are projected down $39M or 36% from 2006
100 (19%) (3%) (19%)
$ millions $ 50
0 2006 2007 2008 2009F
23 WPM payroll-related expense is projected down $51M or 13%* from 2006
400 (5%) (3%) (6%)
300
200 $ millions $
100
0 2006* 2007* 2008* 2009F *
Payroll Fringe Benefits Agency Fees
* Non-GAAP measure; excludes pension expense in all years and early retirement plan buyouts in 2006, 2008 and 2009.
24 But our journalism is as strong as ever Pulitzer Prize for Commentary Goldsmith Award Aldo Beckman Award 2 Loeb Award Society of American Business Editors and Writers American Association of Sunday and Feature Editors 0 White House News Photographers Association Robert F. Kennedy Award 0 Pictures of the Year International Competition Univ of MO National Press Photographers Association Northern Short Course Newspaper of the Year 8 Overseas Press Club DaysJapan National Headliner Awards American Society of Newspaper Editors Council of Foreign Relations Arthur Ross Book Award Concentra Award for Outstanding Video Journalism Virginia Press Association Awards
25 We have raised circulation prices
26 Our circulation declines have been relatively small Selected Top 25 U.S. Daily Newspapers % Daily Circulation Change: March 2008-2009
-1.2 Washington Post -3.5 New York Times -5.7 Arizona Republic -6.6 Los Angeles Times -7.5 Chicago Tribune -9.9 Dallas Morning News -13.7 Boston Globe -13.7 Philadelphia Inquirer -14.0 Houston Chronicle -15.7 San Francisco Chron. -19.9 Atlanta Journal Const. -20.5 New York Post
-25 -20 -15 -10 -5 0
SOURCE: ABC FAS-FAX, six months ending March 31, 2008-2009
27 We still have unmatched readership 33% W a shington Post 44% 27% Houston Chronicle 39% 21% Atlanta JC 35% 20% Chicago Tribune 33% 18% Dallas MN 27% 16% Boston Globe 29% 16% SF Chronicle 22% 15% Los Angeles Times 23% 14% Phil Inquirer 25% 10% New York Times 15%
0% 10% 20% 30% 40% 50%
Sunday Reach* Daily Reach*
* Average daily and Sunday readership among DMA adults 18+ Source: Scarborough 2009 Release 1
28 The Post dominates other local media The Washington Post continues to deliver unparalleled reach within the metro market.
To match the reach of a single daily issue of The Post: Prime time* NETWORK TV spots on the 6 major stations. 41% of metro market adults 25 *Network Prime is 8-11P Mon-Sat, 7-11P Sun
Prime time CABLE TV spots on the top 10 cable networks watched past (7) days (non-premium) 1 = 470 41% of metro market adults *Cable Prime is 6P-12M Mon-Sun
RADIO spots during both AM and PM Drive on the top 5 stations. 41% of metro market adults *AM Drive is 6A-10A Mon-Fri, and 41% of metro market adults 170 PM Drive is 3P-7P Mon-Fri
Source: Scarborough 2009, Release 1 29 New Products Have Increased Our Value
30 Nearly Four out of Five… …adults use Washington Post Media each week.
Source: Scarborough 2009, Release 1 31 And we are well positioned in Washington #1#1 The Washington Post is #1 in readership among the ten largest U.S. markets. The Washington Post is the #1 media source used regularly by Washington #1#1 “Inside the Beltway” opinion leaders. washingtonpost.com has the highest, weekly and past 30 day, percent reach #1#1 among the 10 largest DMA newspaper websites
The Washington Post is #1 in share of readers in $100,000+ income households, #1#1 compared to the 25 largest U.S. daily newspapers. #1#1 The Washington Post has the highest website usage among Inside‐the‐Beltway leaders The Washington Post is the #1 website used for public affairs news and information by #1#1 Executive and Legislative branch leaders.
The Washington Post is the #1 media source used regularly by Congressional opinion #1#1 leaders.
Source: Scarborough 2008, R1, QSA Leadership Study 2007, Erdos and Morgan 2008 32 So where does that leave us?
33 We have a lot more work to do
• Doing business as we do it today is not sustainable
• We must reduce our costs further
• We must reduce our costs fast
• We must invest and build for the future
34 Our Mission & Strategy
35 Washington Post Media: Our Mission
• Return Washington Post Media to profitability
• Align costs and revenues to ensure our agility, dominance and sustainability
• Create a robust economic base for future growth
• Maintain our position as a leading and high quality major metro disseminator of news
36 And . . .
In order to do that, we have a framework for making choices about what to cut . . . a strategy of who we are
37 What is the opportunity?
• Washington matters to the world
• No one is better positioned to cover Washington and provide tools to help our audience navigate Washington
38 What are our assets? • Strong brand • Some of the best journalists and editors in the world • Mass penetration locally • Large and loyal audience • Outstanding delivery system and knowledge of subscribers • Strong sales team and deep relationships with advertisers • Healthy display advertising business • Seat in the nation’s and the world’s capital
39 Strategy
The Washington Post is the indispensable guide to Washington.
40 Our strategy in a nutshell
• Serve local and national audiences, with a tight focus on Washington • Engage our audience with tools, access, and commerce • Optimize existing platforms and explore new platforms where our comparative advantage would serve us well
41 Summary
• We are aggressively cutting costs to get costs in line with revenues • While maintaining the quality of our journalism and focusing on being competitive on multiple platforms • And experimenting with new revenue streams online and in print • We will return to sustained profitability
42