Thursday, September 25, 2008

‘Make or break’ time for newspapers

Newspapers have 18 months to prove themselves as valuable cross-media partners for retailers or the flow of advertising dollars away from them may accelerate, publishers were warned this week by their customers.

“The next year to 18 months may be ‘make or break’ for the newspapers,” says David T. Clark of Deutsche Bank in a report summing up the NAA Retail Advertising Forum that just wrapped up in Dallas.

Noting that all signs point to weak retail sales and lean advertising budgets for the balance of this year and much of next, Dave says it is “unclear” whether newspapers “are moving fast enough to secure local market share for when the economy climbs out of its hole.”

In the longest sales setback ever, advertising revenues at newspapers declined for 9 of the 10 consecutive quarters in the period ended on June 30, 2008. This surpasses the downturns in 1990-91 and 2001-02, when sales in each case slid for six of eight consecutive quarters before they revived.

If sagging newspaper sales don’t turn around in the second half of this year – which few expect they can do – then the decline will be on track to be twice as long as any in history.

Based on the industry’s performance in the first half of the year, it appears that publishers will be lucky to break $40 billion in combined print and online sales in 2008. That would be 19% lower than the turnover in 2005, the most recent year of positive sales performance, and the lowest annual volume since 1996.

Things could get worse in 2009, because the retail sector – which generates almost half of all newspaper revenues – is suffering from depressed consumer demand and the inability of merchants to borrow the money they need to stock their shelves. Barring an unanticipated consumer shopping frenzy in the fourth quarter, the retail sector may be headed for an unprecedented wave of bankruptcies.

“Already, more than a dozen retail chains have filed for bankruptcy this year — including Boscov’s, Mervyn’s, Steve & Barry’s, Linens ’n Things and the Sharper Image,” reports the New York Times. “That is double the volume of bankruptcies last year, according to the International Council of Shopping Centers, an industry group. And a new crop is expected in February and March.”

With fewer retailers on the scene and constrained profitability crimping the ad budgets of many of the survivors, newspapers will have their work cut out for them.

While most of the retailers appearing at the NAA conference continued to profess their appreciation for newspaper advertising, Dave Clark says nearly all of them are moving ever-greater percentages of their advertising budgets to the interactive media – especially when young people are the targets.

This presents both a challenge and an opportunity.

Marketers “are ‘flummoxed’ by the multitude of media choices they have right now, so there is an opportunity for newspapers to step in and offer a multi-platform ‘big idea’ to major retail advertisers,” says Dave. “However, it is unclear whether many newspapers are up to the challenge, though there appear to be some that are.”

A successful cross-media program would combine print, online and mobile media to deliver targeted and customized solutions for retailers.

With their superior brand strength, unrivaled content-creating capabilities, unmatched print and interactive media and unsurpassed local reach, newspapers are naturals to be the preeminent cross-media sherpas in the markets they serve.

In other words, as advertising executive Dave Walker of NSA Media told the publishers in Dallas, “Newspapers should own this.”

11 Comments:

Anonymous Anonymous said...

Ads contracts fell flat on the floor last week as a result of the nationwide credit lockup, and I don't see them coming back any time soon. This $700 billion Treasury bailout will help, but only in the long-term. In the short-term, newspapers are looking at a very bleak three or four quarters ahead. Some doomster economists say we won't get out of this until 2010, but even optimists are writing they only see a turnaround by Q3 or Q4 2009 with only shallow growth.
This could not be worse news for America's debt-encumbered newspapers, most of which are incapable of enduring such a long downturn.
So I think that local markets are about to open up in a very radical way. Will new newspapers start up to replace the wheezing dinosaurs that are going to die off, or will the carnage to come enrich community newspapers that have stayed local and stayed offline?
I don't see any imagination in the ranks of newspaper executives that would prevent this. A generation of executives who grew up in the glory days of print are still fighting the changes the Internet brought, and they will go down with their dailies. You seem more sanguine than I, but I see more "break" than "make" ahead -- and very soon.

8:39 AM  
Blogger kwilson said...

Having owned and operated small town daily and weekly newspapers in the plains states, I am appalled that newspaper brokers continue to say small town daily newspapers in the plains states are worth 10 to 12 times cash flow. With the depressed economy we are in, I value small town daily newspapers in the plains states grossing $500,000 to $1,000,000 at maybe $200,000 assuming there is real estate and a printing press. You can buy small town buildings in decent shape suitable for newspapers at $25,000... A 4 unit printing press goes for $35,000... It's fun to own a small daily newspaper but servicing the debt load is what causes publishers sleepless nights.

12:51 PM  
Anonymous Anonymous said...

Just today my local paper cut out more coverage - eliminating part of its editorial page. How in the world can newspapers survive if they consistently give us less product -- it truly is starting to look like a death spiral and it is very scary and depressing. At some point the economy will pick up and papers may get a breather, but if they think this is just a swoon, they are wrong.

This is kind of like the sudden spike in gas costs a while back - people quickly realized that this was the new normal,not a temporary spike, and that the day of the gas guzzler was over. The era of the general service, monopoly regional paper is gone as it is too bland and predictable to appeal to a population that is increasingly balkanized.

Yes there will still be journalists, but (with a handful of exceptions) it will not be the kind of journalism that many people entered the field for - no more big investigations, no more stories that "right wrongs."

5:07 AM  
Blogger 10ksnooker said...

2008 will be remembered as the year journalism died, worldwide. It's all partisan propaganda from here on ... RIP, you had a good run.

Our local news paper, you couldn't even make a parrot happy.

Once the local stores put their ads online, it was so long ...

11:45 AM  
Anonymous Anonymous said...

gosh, I'm a pessimist, but I can't compete with these doomsday comments.

My paper is going through hard times and I feel I could lose my job at any moment, but I simply can't feel that newspapers are dead men walking.

I think our newsosaur is right in saying that newspapers have the right assets to offer a secure and versatile place to advertise, once there's more advertising to go around. If our sales departments can be creative and newsrooms flexible, newspapers can have much to offer for a long time to come.

I understand the pessimism in whether this will happen, but I think the journalism we offer is too valuable to kiss off just yet. I don't think journalism can just die in a free society, and I will fight for it as long as I possibly can.

11:21 AM  
Anonymous Dave D. said...

...Journalism hasn't died, it just moved to the net. The type of journalism newspapers offer , biased, hyped, lacking in facts; that has been voted on by the public and found wanting. Maybe your ad dept. has all the attributes you claim, but their billboard isn't facing traffic any more, it's facing the cemetary.

8:53 AM  
Anonymous Anonymous said...

oh, so you mean the public has left the biased hype of newspapers for the internet - that paragon of calm and objectivity?

2:01 PM  
Anonymous Dave D. said...

...That's exactly what I mean; glad you caught it.

6:24 PM  
Blogger rknil said...

But three newspapers unveiled redesigns today! All is well!!!!!!!!!!!! [/extremesarcasm]

Journalism has been dying ever since the know-nothing artistes were given any credibility.

7:04 PM  
Anonymous John said...

Redesigns. Ha. Talk about lipstick on a pig. ;-)

All this talk is fun, but I look around the newsroom and see all of the reporters working hard but rarely leaving the building and I have to wonder if our biggest problem is that we've lost touch with the communities we're trying to cover.

10:00 PM  
Anonymous KenN said...

The fact that the same old crowd (what's left of it, anyway) is still attending the same old NAA meetings (& wasting how much money, while also laying off hundreds?), to hear the same old message that they will never follow until all of those attending are retired/fired/layed-off...is a disgrace.

'Reboot' yourself, my beloved Newspaper biz! You don't a chance until then, I'm afraid.

2:05 AM  

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