Thursday, March 25, 2010

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.


Anonymous Anonymous said...

Have you been watching the stock market? Newspaper stocks have taken off with investors expecting newspapers to join other industries in the recovery. But as you point out, the figures aren't coming in. A day of reckoning is coming, and I had expected it with the second quarter reports. Your posting indicates it may come with the first quarter.
What is to blame? I think content. Publishers need to put the new back in newspapers rather than the horse-race stories on who has the votes on health care, or stories that broke yesterday and that were fully covered on the network news.

5:33 AM  
Anonymous Anonymous said...

@Anon 5:33 - It's not just the "new" they need to put back into newspapers, but the "news".

Having given up on factual reporting, newspapers only offer opinion on each page - and usually monolithic left-wing opinion at that.

However, everyone has an opinion. They are selling snow to Eskimos.

If only there was an industry dedicated to reporting facts, not creating narratives ...

3:31 PM  
Anonymous Anonymous said...

The stock market is not an indicator of economic health returning to the nation, much less any expectation of such for newspapers.

It's merely showing a return of investors to the market, whose money had been scared to the sidelines since late 2008. The recent acceleration of $ into the market is a false signal; it's only a reaction to 0.1% returns -or less- on money market accounts.

5:56 PM  
Blogger Unknown said...

I've noticed some erosion in McClatchy stock, probably in response to continued continued erosion in ad sales.

11:10 PM  
Blogger Unknown said...

McClatchy stock has been slipping in recent days, probably as bad news on ad sales sinks in.

11:14 PM  
Anonymous Anonymous said...

I'm no sophisticate, but I think most investors buy stocks expecting they will go up. So given Alan's (I think dismal) analysis here, what explains the big run-up in newspaper stocks?

6:14 AM  
Anonymous Anonymous said...

Advertisers are fickle, and want to go with whatever is hot. The WSJ is making noise about growth, includind growing circulation, and advertisers go there.

The WSJ announced a 5% increase in print advertising in 2009's 4th quarter, and I bet they have a bigger increase in the current quarter. Other papers can talk about nothing but circulation declines and layoffs and furloughs, and why would you want your product in that environment.

Hire some more reporters, add a section to your paper, pump up circulation, and I bet many newspapers can take part in a little bit of advertising rebound.

7:52 AM  
Blogger John A. Newby said...

Please don't confuse the artificial stock market run with an economy on the mend. Name one positive fundamental indicator that has turned.

Housing continues to tank, non-government jobs continue to be lost, money supply expanding, credit continuing to tighten, taxes increasing, public revenue dropping and the list goes on.

Beware of the stock market; charts show traditional buyers are staying away and government stimulus is the only thing contributing to uptick. That is not good news.

8:46 AM  
Anonymous Anonymous said...

xxxName one positive fundamental indicator that has turnedxxx
The Commerce Department says GNP grew 5.6 percent in the 4th quarter of last year.

10:30 AM  

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