TO: TSP Board of Operating Trustees

FR: Kathy Lawrence

DATE: March 21, 2005

RE: 2005-2006 budget

The student and professional staffs of Texas Student Publications are pleased to present next year’s budget to you.

As you will note, the budget has decreased by $30,000, or about 1 percent, to $3,181,363 for this year. This is in line with expected year-end performance across all media units this year and last year and accounts for shifts in rates, the chief one being a 3 percent increase in Texan ad rates.

As you know, we are preparing the budget well before we know the outcome of the current fiscal year. Income projections for 03/04, the basis for the 04/05 budget, were not met, thus compounding our problem as we ended last year and entered the current year. These difficulties were likely fueled, in part, by the departure of key advertising personnel, both student and professional. We are confident the numbers we are now presenting are reachable.

Expense increases include a general 4 percent salary hike in most areas, although some staff members will receive higher increases and a few lower, depending upon performance issues and some reclassifications. No new positions are included in this budget, although we are shifting two members of the Creative Services Department (formerly Composing) from the Operations area to Sales and Marketing. This shift reflects changes in the way this staff works and encourages closer collaboration between sales, marketing and promotions. Overall, however, wage and salary costs are reduced in this budget by $23,000, and benefits have been lowered by $57,000 to reflect actual experience in recent years.

Other increases on the expense side include increases in travel, primarily in The Daily Texan. This area was cut substantially in the aftermath of income drops in 00/01, and we are attempting to restore this to more realistic levels. Travel is important in this area for two reasons – students must travel to sporting and other news events, and we rely on travel for student training. The budget includes funding for additional newsstands, as well as increases in the prices of newsprint.

On the revenue side, as mentioned, the budget is influenced by a 3 percent rate increase across most departments with exception of Texan Classifieds and Inserts.

- Classified currently is struggling with four clerks who don't make outbound calls and only two telemarketers. To fortify the effort we plan to double the telemarketing staff and reduce the clerk head count to one. It is our firm belief that the web will become more viable now that we've invested in a product that is light years better than the prior offering. We are now charging print advertisers an incremental $5 to appear online for as long as the print campaign runs. The Classified Web estimate assumes we will convert a conservative 10 percent of our monthly average of 5,421 ads.

- Insert Rates have been addressed. We no longer give advertisers with more than two pages the same ride as those with just two. In the past, a 52-page Target insert would only cost $70 per 1,000 circulation per the rate card. The same unit will now cost $121 per 1,000. The open rate for inserts has increased 7.2 percent.

- The Local Web budget of $18,000 only represents six sales of $250 per month. This should be reachable by a staff of 14 reps. After producing $2,130 in February and eclipsing the current budget, this estimate is reasonable. Four of the six sales will come from the retail staff, and the remaining two sales will come from the rep responsible for servicing Campus advertising requests. Campus accounts should embrace the web as a supplement to a print buy.

-National is showing no signs of weakness as it's on a pace to easily eclipse a solid 03/04 performance of $474,858.

-KVRX and KVR will both experience an influx of $1,500 each in March for their role in the first Daily Texan Housing Fair. This will be repeated twice in 05/06. Other multimedia packages to include our Tres Chic Fashion Show and Getting Around Transportation Fair will also generate revenue for both entities. The KVRX web site is a jewel as evidenced by the recent Waterloo Records partnership that should begin to generate monthly commissions. The growth for KVRX web is yet to come as we begin to get a firm footing with the whole concept of web marketing. We are a few months away from marketing both entities as an a la carte option. We are selectively selling KVR Baseball right now for sponsorship.

We are prepared to discuss the budget with you in great detail at the Wednesday meeting and welcome your participation.

Thanks in advance.