2010 may be even worse for newspaper sales

Last year may have been the worst in the history of the newspaper business but this year could be even worse.

After advertising plummeted by a historic 27.2% in 2009 to $27.6 billion, sales continued to fall at mid-teen levels in the first part of 2010, according to anecdotal reports from publishers in diversified markets in various regions of the country.

In candid conversations, even the most optimistic publishers say they cannot foresee the day they will begin booking consist gains in sales. “We have some good days,” said a typical publisher. “But then things fall apart again.”

While these early soundings are not systematic or definitive, they suggest that newspaper advertising, which accounts for some 80% of the industry’s revenues (circulation makes up the rest), could hit another new low if the long-running sales decline is not arrested abruptly by the middle of the year.

In what now passes for good news for publishers, the Newspaper Association of America yesterday reported that the skid in newspaper sales was “only” 23.7% in the final period of 2009 – a year in which sales declined 28.3% in the first quarter, 29.0% in the second period and 29.9% in the third quarter.

If the rate of decay continues to slow in 2010, the industry will shrink at a slower pace than it did last year. But it still will continue to shrink. And declining shrinkage should not be taken as a sign of health.

The year 2009 marked the fourth straight year of rapidly accelerating revenue declines for the industry since it hit all-time high revenues of $49.4 billion in 2005. Thus, 43% of the industry’s sales have gone up in smoke.

Sales cratered in every print category in 2009, as follows:

:: Classified advertising dived 38% to $6.2 billion, falling 64% from the $17.3 billion booked in 2005.

:: National advertising skidded 26% to $4.4 billion, dropping 44% from the $7.9 billion sold in 2005.

:: Retail advertising plunged 24% to $$14.2 billion, sliding 36% from the $22.2 billion posted in 2005.

Online advertising last year tumbled nearly 12% to $2.7 billion, which represents an improvement from the $2 billion in digital advertising sold in 2005. The 1% decline in online ad sales in the fourth quarter of 2009 suggests interactive advertising could be the first category to turn the corner. Unfortunately, digital advertising represent only 10% of total ad revenues.

While the 2009 ad slump undoubtedly was aggravated by the worst economic calamity since the Great Depression, the erosion in newspaper ad sales commenced well before the economy soured. As illustrated in the chart below, newspapers have not had a positive quarter for print advertising sales since April 1, 2006.

Although it is too early to try to project what newspaper sales will be in 2010, you are entitled to an accounting for how well I did in 2009. As you can see here, I projected on Aug. 31 that “consolidated print and online ad sales likely will be no better than $27 billion this year” vs. the actual $27.6 billion.

For the sake of the battered industry, I wish I had been wrong.