Newspapers: Have We Hit Bottom Yet?

The NY Times summarizes the dismal state of print newspaper ad revenues and the industry generally:

On top of long-term changes in the industry, the weak economy is also hurting ad sales, especially in Florida and California, where the severe contraction of the housing markets has cut deeply into real estate ads. Executives at the Hearst Corporation say that one of their biggest papers, The San Francisco Chronicle, is losing $1 million a week.

Over all, ad revenue fell almost 8 percent last year. This year, it is running about 12 percent below that dismal performance, and company reports issued last week suggested a 14 percent to 15 percent decline in May.

The prediction is for M&A consolidation, driven by necessity. While some call it a “correction,” given the fat historical profits of newspapers largely shielded from effective competition before the Internet, I’m disheartened by the outlook for the industry. 

However, this may be one of those “whatever doesn’t kill you makes you stronger moments.” 

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9 Responses to “Newspapers: Have We Hit Bottom Yet?”

  1. Dave Oremland Says:

    That is a depressing fact. I hope your last sentence is the one that holds.

    Dave

  2. Stan Gauss Says:

    Newspapers are really focused on local and solving the ‘long-tail’ equation. I believe a new model will emerge in the next couple of years that will help move them in the right direction.

    I believe they will exchange lower profit margins for deeper market penetration.

  3. David Thurman Says:

    It would be nice as Stan suggested that service will somehow trump profits someday from many of the businesses out there. Sadly I don’t see that trend yet…

    My brother works for a large regional daily, that has been bought out 3 times now, and they all are on pins and needles as to what their future holds. Currently the plan is about profits, not better service or penetration, saving costs seems to be the way, 6 Sigma anyone?

  4. Greg Sterling Says:

    The question is how much profit (historical levels can’t be sustained) and what leads to profitability — there’s a short-term/long-term view. And the longer-term view has something to do with quality and coverage I believe.

  5. Scott Says:

    There will be a ton of consolidation in the newspaper industry over the next several years and many papers will go out of business. At the end of the day, I think there will be 3-4 national papers (NYT, WSJ, FT, USA Today) and then a bunch of smaller, regional papers that get published either weekly or every couple of days and be much smaller in size than today’s papers (AM NY is a great example). The fact is, most newspaper content is not that valuable anymore given whats available on the net and the speed at which it gets posted there. What would be interesting is an AP for local content. I think that is a model that can be quite powerful especially if this entity sydicated the content onto the web as well.

  6. Dave Oremland Says:

    In “officially” noting the departure of their executive editor, Leonard Downie, after 17 years at the position, the Washingtonpost ran an editorial describing losing him, new actions, etc. It included this paragraph referencing revenues, the web, etc……..

    So what happens to our standards now? Unquestionably, the next editor will face steep challenges. Many of the revenue sources that used to support our news-gathering — classified ads for jobs, for example — are shifting to the Internet, and not exclusively to washingtonpost.com. Meanwhile, the newspaper habit is no longer a given for young Washingtonians. The combination of declining advertising and declining or static circulation is afflicting just about every newspaper in the country.

  7. Greg Sterling Says:

    Yes, this is a very grim period for newspapers and the industry will be permanently changed by the confluence of factors affecting it today.

  8. Dave Oremland Says:

    I should have added the paragraph which followed the one I cited. To paraphrase the editors noted that Post readership is up due to web readership.

    So interesting. Paid subscriptions are down. Anecdotally, I’m well aware of how many younger people never turn to the paper, as noted above.

    On the other hand, active access to the paper’s web properties overall adds readership. The problem is though, that all of these web properties, which are aggressively marketed and monetized with ads….don’t come close to making up for the revenues that the print versions generated.

    I’ve been an admirer (and have met on a number of occaisions) the ownership family, have known many post employees, have followed the paper and business for decades. I’ve also been a buyer of print advertising for local businesses in that region.

    As the dominant print player in that market, the Post could charge significant if not exorbitant prices. Nothing else had anywhere’s near the penetration and effectiveness on the print side. Even as I knew some higher ups in the advertising side of the business when I purchased advertising, when I did it without asking help I was usually treated lousy although they were always accurate and quickly corrected mistakes (few and far between over many years). They raised prices regularly.

    The Post was in a monopoly position with regard to selling print advertising and could command high prices.

    Selling advertising on the web is totally different. Its anything but a monopoly, is subject to wide competition and the pricing is far lower for the same impact of ads.

    The ability of newspapers to monetize ads on the web, even with wide readership is simply a very different game. Ultimately craigslist and other low cost effective classified advertisers have simply taken the legs out of that aspect of the revenue side of the business.

    Its going to be a long tough haul for this industry to face the future, at least IMHO.

    Dave

  9. Greg Sterling Says:

    You’re exactly right: different rules and competitive landscape online; different reach and billing/business models. Bottom line: online won’t replace print losses for a long time to come if ever.

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