Wednesday, March 16, 2011

Newspaper ad sales hit 25-year low in 2010

While ad sales rose in every other mass medium in 2010, newspaper revenues plunged to the lowest point since 1985, falling to nearly half of the all-time high of $49.4 billion achieved just five years earlier.

Combined print and online sales at newspapers slid 6.3% in 2010 to $25.8 billion, according to end-of-year statistics released yesterday by the Newspaper Association of America, the industry’s principal trade association.

The last time sales were this low was 1985, when newspaper ad revenues were $25.2 billion, an amount that, adjusted for inflation, would be equal to $49.6 billion in today’s dollars.

As the economy struggled out of the worst recession in a generation, newspapers were the only traditional advertising medium to suffer a sales setback in 2010. Instead of rebounding like the other media, newspapers extended what has proven to be an unprecedented five-year decline in ad sales.

While newspaper sales contracted…

:: Internet advertising sales leaped 13% in the first nine months of 2010, according to the Internet Advertising Bureau, an industry trade group. (Full-year stats have not been published.)

:: Broadcast television sales rose 11% through September, 2010, according to TVB, the television trade association. (Again, full-year figures are not available.)

:: Radio revenues climbed 6% for the full year, according to the Radio Advertising Bureau, a trade group.

:: Magazines managed a 3% sales gain, according to the Publishers Information Bureau, a trade organization.

The one bright spot for publishers in 2010 is that digital ad revenues edged slightly past $3 billion, a gain of 10.9% over the prior year. Even this improvement remained about $100 million short of the peak online sales achieved by newspapers in 2007 and 2008.

Strong as they were, digital sales accounted for only 11.8% of the industry’s total ad sales in 2010, hardly enough to offset the deep – and traumatic – declines in every print ad category since 2005.

Total print advertising last year fell 8.2% to $22.8 billion, reducing the principal revenue source for newspapers by 51.9% from the $47.4 billion booked in 2005. Here are the details:

:: Retail advertising, the largest remaining vertical of print advertising, skidded 9.1% in 2010 to a bit less than $13 billion, representing a 41.7% drop from $22.2 billion in 2005.

:: Classified advertising, the most battered category in the last five years, fell 8.6% to $5.6 billion in 2010, finishing the year at well under a third of the $17.3 billion produced by employment, auto, real estate and other types of want-ads in 2005.

:: National advertising last year fell 4.6% to $4.2 billion, representing a drop of 46.6% from $7.9 billion five years ago.

The 6.3% tumble in newspaper advertising in 201o was the least worst since 2006 and far more tolerable than the staggering drops of 27.2% in 2009 and 16.6% in 2008. And publishers can take some comfort in the fact that sales slid "only" 4.7% in the fourth quarter of last year vs. 9.7% in the first period and about 5.5% in each of the second and third quarters.

These less-bad declines may be the prelude to a turnaround. But we ain't there yet.


Blogger Steve Outing said...

Hold on a minute. So in 1985, revenues adjusted for inflation were $49.6 billion. Using adjusted-for-inflation numbers going back historically, wouldn't you have to go back much further than 1985 to match a year as bad as 2010?

6:43 PM  
Blogger Profit Perspectives said...

It is hard see how classified ads can ever recover. Technology has moved on and sites like Craigslist, eBay, Monster, Zillow, Realtor. Com and many others have been the beneficiaries. At best, newspapers will be relegated to "me too" niche provider status in this space. Newspapers sorely miss this former profit gold mine.

8:06 AM  
Blogger Robert H. Heath said...

In inflation adjusted terms (using CPI-U) 2010's $25.8 billion in total revenue compares to 1956.

Since 2000, newspaper ad revenue per subscriber has lagged growth in personal consumption expenditures, and that gap widened after 2006.

If real PCE per capita grows at 1.5% and inflation at 2.3%, I expect you'll see news print ads shrink between 6.4% and 8.7%, depending upon newspapers' ability to raise pricing in line with inflation.

Here's how to think about it:

Real Trend(per sub) + Pricing + SubLoss = Total

Flat pricing
- 3.7% + 0.0% - 5.0% = -8.7%

Price = inflation
-3.7% + 2.3% - 5.0% = -6.4%

This estimate is based on the relationship between real growth of PCE per capita and real per-subscriber growth in retail ad revenue for newspapers, which I discuss here, going back to 1950.

It's important to note that this analysis is explicitly "adjusted for recession" since growth in personal consumption expenditures declines during economic slowdowns.

The 2010 results are entirely consistent with the analysis.

I expect 2011 will be as well.

9:18 AM  
Anonymous Anonymous said...

While newspaper linage revenue (national+retail+classified) continues to decrease, FSI revenue continues to show steady growth. Would be interesting (and more accurate) to restate newspaper revenue inclusive of FSI spending.
Have never quite understood why FSI category is never mentioned when tracking newspaper.

10:00 AM  
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10:47 PM  

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