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Times and Sun squeezed as News International freezes budgets

LONDON – News International has imposed a three-year budget freeze on its newspapers as publishers face up to a weakened ad market and rising costs.

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According to a report in the Financial Times, staff were told that cutting overheads would be a priority, adding that costs have risen by £135m over the last three years.

Les Hinton, News International's chairman, told staff: "Circulation is under pressure across the industry and competition is more intense than ever. Advertising revenue, which accounts for half NI's income, has also slowed in a tough retail market."

The cuts come as industry forecasts suggest a worsening outlook for advertising and newspapers.

Yesterday, Opera, the Omnicom media buying operation, predicted that 2006 will be a bad year for the red-tops. It said there would be a 3.5% circulation decline for the tabloids. However, there was better news as Opera said that that papers, like The Times, that have switched to compact sizes will perform well.

Despite a headcount freeze already in place, News International, which also publishes the News of the World and The Sunday Times, has been hit by rising newsprint and marketing costs, particularly the expensive music and movie CD and DVD giveaways.

Last week, Rupert Murdoch, chairman of NI parent News Corporation, hit out at the ongoing flood of DVD giveaways, which he said gave no sustained long-term circulation lift but were simply a short-term promotional tool.

He said: "I personally hate this DVD craze. It doesn't matter that it was the Mail on Sunday who started it, or anyone else. The fact is, sales go up for a day. And are right back to where they were the following day."

He said the craze for DVDs is damaging journalism, despite his papers The Sun, News of the World, Times and Sunday Times joining in on the trend. He said it had to stop.

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