Ad Revenue Hasn't Hit Bottom, But Free Fall Has Stop, NYT Says

Despite some tentative optimism from Washington, Wall Street and Madison Avenue, people who monitor the newspaper business for a living say it has not yet hit bottom, writes Richard Perez-Pena in The New York Times. But in what passes for good news these days, the free fall in newspaper advertising may be slowing, and specialists predict it will ease through 2009 and into 2010.

With 10 days left in the third quarter, analysts, publishers and ad buyers say that ad revenue will be down about 25 percent industrywide from the third quarter last year, possibly a little less. They predict that the decline will be smaller in the fourth quarter. Several of them say the usual back-to-school uptick in newspaper advertising seems to have been a little better than in most years, if only because July and August were so weak.

Ordinarily, such numbers would be seen as catastrophic, but these times are not ordinary. The drop in combined print and digital ad revenue last year, 16.6 percent, according to the Newspaper Association of America, was the worst since the Depression. But it looks rosy next to 2009, when revenue fell 28.3 percent in the first quarter and 29 percent in the second.

In the last few days, signs of life have been seen from struggling retailers, and the Federal Reserve chairman, Ben S. Bernanke, and others have speculated that the recession has ended. Media executives, including Rupert Murdoch, have talked about advertising starting to rebound. Last week, shares in several newspaper companies, including Gannett, McClatchy and The New York Times Company, jumped 10 percent or more, to their highest prices this year.

Alexia Quadrani, an analyst at J. P. Morgan, said newspaper stocks had benefited from a trickle-down effect, as investors, hearing positive news about advertising, asked, “What stocks are still looking relatively inexpensive among media stocks?” She said ad revenue would show a percentage decline in the mid-20s for the third quarter, about 20 in the fourth quarter, and next year, “more modestly negative, but still negative.”

Several publishing executives said those numbers seemed about right. The executives, who insisted on anonymity because they are prohibited from discussing financial information until it is made public, also said they saw no particular justification for the recent spike in stock prices.

If the rate of decline in advertising slows, it will largely be because 2008 grew steadily worse as the year wore on and the recession deepened, making year-to-year comparisons less stark. The figures for the fourth quarter of 2009 will be compared with the final quarter of 2008, when the financial markets were in crisis and newspaper advertising fell almost 20 percent, at that time the worst performance in generations.

Roberta Garfinkle, director of print strategy at TargetCast TCM, was skeptical about any improvement in the third quarter, but said signs of recovery could appear in the fourth quarter.

“Newspapers will be the last media to get any ad comeback,” Ms. Garfinkle said. “But we’re seeing more people wanting to have the conversation about doing some print advertising, where earlier we weren’t even having the conversation.”

Edward Atorino, with the Benchmark Company, a broker dealer, is one of the more optimistic analysts, predicting a decline in ad revenue of about 20 percent in both the third and fourth quarters.

“You’ve had Bernanke saying the economy is better, Murdoch saying advertising is getting better, broadcasting looks like it’s in a recovery stage, even magazines may be picking up a bit,” Mr. Atorino said. “But for newspapers, I don’t think I see much to cheer about yet.”