Nov. 21 (Bloomberg) -- The Wall Street Journal is invading the New York Times' advertising turf as competition intensifies in a souring U.S. economy.
Saks Inc., a Times advertiser since 1924, recently chose to promote a new Chanel boutique and made-to-measure men's suits in the Journal. Owner Rupert Murdoch's expansion of general news coverage and a new lifestyle magazine are starting to attract wealthy consumers and create ad space for retailers, said Milton Pedraza, chief executive officer of Luxury Institute LLC.
``They certainly have become a significant part of the advertising mix for luxury brands where they were not before,'' said Pedraza, whose New York research group tracks the market for the most expensive lines of consumer goods and services. ``They're definitely stealing advertising dollars.''
Italian fashion label Dolce & Gabbana SpA and LVMH Moet Hennessy Louis Vuitton SA have also started advertising in the Journal as Murdoch, 77, seeks to overtake the Times. Both newspapers are fighting for a piece of a shrinking U.S. ad market with spending set to contract 6.8 percent next year to $150 billion, according to a Sanford C. Bernstein & Co. estimate. Murdoch is also pressing the fight online.
New York Times Co. cut its dividend yesterday by almost three-fourths as revenue crumbles. The flagship newspaper will probably ``moderate'' ad rate increases for next year and is discussing discounts with advertisers, chief advertising officer Denise Warren said in an interview before the announcement.
``Given what's going on with the economy, we want to be careful,'' she said.
The Times is also expanding financial news coverage, executive editor Bill Keller said. While Keller says the newspapers aren't locked in a ``mano-a-mano death struggle,'' he can name more than 25 business stories where the Times beat its New York rival this year.
``When somebody says he's willing to spend the bank to become the new version of the New York Times, you watch them closely,'' Keller said in an interview. The Journal is the first newspaper he reads every morning after the Times.
Keller isn't the only one eyeing the competition. Michael Rooney, the Journal's chief revenue officer, said he flips through the Times everyday to see who's advertising and instructs sales people to contact potential clients.
News Corp. has the resources to keep investing in the Journal, said Wachovia Capital Markets analyst John Janedis. The Times hasn't been as aggressive, he said.
``If this becomes a prolonged recession, it becomes an advertising war, and it becomes who can tough it out longer,'' New York-based Janedis said.
Ad revenue at the New York Times, the International Herald Tribune and their Web sites fell 15 percent in October to $113.9 million, the company said yesterday. Luxury accounts for more than 10 percent of ad sales within that unit. News Corp. doesn't break out financial information for the Journal.
Class A shares of News Corp., which acquired Journal-owner Dow Jones & Co. last year for $5.2 billion, have lost 70 percent this year on the New York Stock Exchange and rose 13 percent to $6.19 at 4:15 p.m. today. New York Times, also down 70 percent for the year, slid 6.6 percent to $5.34.
The Journal is only offering set discounts for bulk, new advertiser or repeat-purchase deals, Rooney said. The publication plans to raise rates for 2009 because of expanded coverage, more subscribers and other investments, Rooney said.
``We will increase rates next year,'' he said. ``We'll do that because we're investing in our product.''
The average individually paid circulation of the Journal rose 2.4 percent to 1.4 million as of September from a year ago, according to the Audit Bureau of Circulations. The Times' slid 5.5 percent to 858,985 on that basis.
`Willing to Play'
``We are twice the size of the New York Times,'' Wall Street Journal managing editor Robert Thomson said in an interview last month. ``We are way ahead, and we are getting further ahead.''
Overall, media companies have been selling ad space at ``fire-sale'' prices for incremental revenue, said Paul Silverman, executive media director at the Team One ad agency. Silverman, who plans marketing and negotiates ad buying for Lexus and Ritz-Carlton, said he is pushing harder for price breaks for his clients after hearing more companies are willing to discount.
``They're still trying to make it appear as though things are quite healthy and they don't need to do deep discounts,'' Silverman said.
The Journal's premiere issue of glossy magazine insert WSJ. in September and the upcoming December publication have attracted 28 new advertisers, Rooney said.
Luxury ad sales in the Times' magazines, ranging from style to real estate, haven't been hurt by the Journal's foray into magazines, Warren said. Financial ads have gained since early August, she said.
A non-contract full-page color ad in the Journal's national edition costs about $264,426. A full-page color ad for a bank that advertises in the Times' national edition costs about $193,800 at the published rate. That includes a built-in 8 percent discount for full pages.
The next key battleground may be the Internet. Nytimes.com offers stories for free, while WSJ.com charges a fee for premium business content. Murdoch said in September he plans to boost subscription revenue by more than $300 million a year.
Keller said he doesn't share the Journal's view of a head- to-head competition. The Times' reporting is also up against Conde Nast Portfolio, the Los Angeles Times, TV stations and Internet news sites, he said.
``Believe me, my life would be a lot easier if we were in a one-on-one battle with the Wall Street Journal,'' Keller said.
To contact the reporter on this story: Sarah Rabil in New York at email@example.com