
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, July 30, 1995                   TAG: 9507280062
SECTION: BUSINESS                    PAGE: G-3   EDITION: METRO 
SOURCE: PAUL FARHI THE WASHINGTON POST
DATELINE: WASHINGTON                                LENGTH: Medium

GANNETT DEAL REFLECTS VALUE OF NEWSPAPERS, BROADCASTING

Since the mid-1970s, a funny thing has happened to network television audiences: They've been shrinking. A similar thing has been happening for decades in the newspaper business, as the percentage of American households subscribing to a daily paper declines.

Yet over this same period an even funnier thing has happened: Revenue for most newspapers and TV stations has been climbing to record levels.

Keep this in mind the next time you hear about the Internet or the latest on-line service. For all the glamour of the new high-tech communication tools, traditional low-tech media such as TV stations and newspapers remain the most valuable.

This week, for example, Gannett Co. agreed to pay $1.7 billion in cash - and assume $560 million more in debt - to buy Multimedia Inc., a midsize newspaper and broadcasting company. Last week, Westinghouse Electric Corp. began discussing a $5 billion buyout of CBS Inc., owner of broadcasting properties and a ratings-deficient TV network.

Why bother paying big money for companies whose basic businesses are losing customers? The simple answer is another question: What's the alternative?

In a world in which the number of ways to receive news and information seems to climb daily, newspapers and TV stations are still the biggest players around, if only by default.

Thus despite their downward drift, TV stations and newspapers still do something better than anyone else: They command the attention of huge numbers of people all at once. This fact alone makes them the first and last resort of advertisers who want to announce a big sale, introduce a car model or simply push a few more tubes of toothpaste.

``There's a very simple economic principle behind this,'' said David Wilkofsky, an economist who specializes in the media industry. ``When you have a unique product, you can continue to raise the price of that product. ... No matter what an advertiser says about reaching a niche audience, what every advertiser wants is to distribute his message as widely as possible to his potential customers.''

And the old media still have their way over the new media when it comes to doing this. Even in its weakened state, the CBS network's average prime-time audience last season was about five times that of the highest-rated cable networks. No one really knows for sure how many people are on-line, but even the most optimistic numbers don't amount to a fraction of the 62 percent of adults who in 1993 claimed to have read a newspaper in the previous week.

For publishers and broadcasters, the value of their properties also lies in their scarcity. Most major cities in America are now served by just a single daily newspaper. Broadcasters, on the other hand, are protected by the scarcity of the airwaves themselves; the government for decades has limited the number of stations in each market to keep one station's signal from interfering with another.

Indeed, because of this relative scarcity, many observers believe newspapers and broadcast outlets will become even more valuable vehicles for advertisers in the years ahead. This may well be so, even as the number of media choices - remember the much-touted but as yet unrealized 500-channel world? - grows.

So far, advertisers have confined most of their efforts to harness the new media to experimental projects - many companies, for instance, have interactive promotional pages on the World Wide Web, a subset of the vast Internet computer network. Yet ads in these forms appear to be limited by two factors: Not only is it unclear how many people are accessing such material, it's unclear who, demographically speaking, these people are.

By contrast, newspapers and broadcasters offer their advertisers highly detailed audience surveys.

The next wave of competition threatens existing niche services much more than the mass-market media. A cable channel that lost half its audience, after all, would be virtually invisible, while a network-affiliated broadcast station in that position would still command roughly 10 percent of all viewers in its market during a given evening.

Recognizing this, smaller broadcasters and cable operators lately have been trying to become more mass-market, rather than less.

by CNB