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.”

Newspaper Print Ad Sales Should Bottom Out in 2009, Study Predicts

A new study shows that newspaper advertising sales are likely to bottom out after four straight years of decline in 2009, but they aren’t headed back to where they used to be, reports Alan Mutter on his blog, Reflections of a Newsosaur.

In what passes nowadays for an upbeat take on the newspaper industry from an independent observer, the Virginia-based market research firm [Borrell Associates] boldly predicts that print advertising sales for the nation’s 15,000 daily and weekly papers will bottom out at $35.9 billion in 2009 after peaking at $57.3 million as recently as 2005.

Borrell forecasts a 2.4% sales rebound in 2010 to $36.8 billion and modest annual gains to take sales to $39.0 billion by 2014. With the over-all size of the national advertising pie likely to shrink in the next five years, Borrell believes newspapers could regain a 15.9% share of the advertising market in 2014 vs. 14.4% in 2009.

PricewaterhouseCoopers: Newspapers to Lose 32 Percent of Ad Revenue by 2013

Over the next five years, newspapers will lose $13 billion on the weight of dropping about 32 percent of its advertising revenue as digital technologies become increasingly widespread, according to the PricewaterhouseCoopers Global Entertainment and Media Outlook 2009-2013 recently released report.

The report expects print advertising to fall the most from $36.7 billion in 2008 to $24.3 billion in 2013. Online advertising revenue is anticipated to decline over the next two years. PWC expects online ad revenue to grow to $3.7 billion in 2013 -- a 2.5% increase when compounded annually from 2008.

The global entertainment and media market as a whole, including both consumer and advertising spending will grow by 2.7 percent compounded annually for the entire forecast period to $1.6 trillion in 2013. Initially, the report said, the industry should expect to see a 3.9 percent drop in 2009 and a mere 0.4 percent advance in 2010, with a period of much faster growth during the remaining period to 7.1 percent in 2013.

The report said PreicewaterhouseCoopers is expecting that this recession will last longer than previous ones because of a steeper downturn, and that the impact on consumer spending will be much steeper than in the past. However the economic downturn does not change the underlying drivers for digital migration and will more likely influence their pace and power and hence the timing of industry change. In short, making it more difficult to hide from the digital migration, the report said.

During the period under review, the switch to digital will drive divergences in revenue performance between different segments and geographies. Change will impact the managing of brands, characters, titles and talent across distribution platforms supported by new commercial models.

Marcel Fenez, global leader entertainment and media practice officer for PricewaterhouseCoopers, said, “In some ways this could be called 'the perfect storm.' Inside every cloud is a silver lining and in this case, a digital one. Companies who grasp the opportunities which are appearing in this fast changing marketplace and are agile enough to adapt their business models will be able to take full advantage of the potential and new revenue models as they emerge.

“In previous years we have talked about the Net Generation and how their demands are driving the industry towards new business models," Fenez said. "Interestingly, in this “income elastic” climate where spending power has to stretch even further than before, this younger generation is now exerting influence over older generations who are, in turn, taking a growing interest in new and emerging platforms. End-user spending through digital/ mobile platforms accounted for 23.4 percent of the overall consumer/end-user/ access market in 2008 and we expect this to account for 78 percent of total growth during the next five years.”

Newspaper Ad Revenue Plummets by $2.6 Billion in First Quarter

Newspapers revenue is off by $2.6 billion in the first quarter of this year compared to the same period in 2008, a new study shows.

Retail advertising sales for newspapers in the United States fell at an alarming, but not unexpected, rate of 23.7 percent in the first three months of 2009 compared to the same time period in 2008, according to the Newspaper Association of America. Retail advertising sales in the first quarter of 2008 was $4.360 billion nationwide. In the first quarter of 2009, it was $3.328 billion.

National advertising revenue fell from $1.527 billion in the first quarter of 2008 to $1.132 billion in the first quarter of 2009. That's a $395 million loss over the same time period, or 25.9 percent.

Print advertising sales fell by 29.7 percent to $5.9 billion in the first period of this year. Even online sales are taking a hit, falling 13.4 percent to $696.3 million.

But the biggest drop came in classified advertising revenue, which dropped from $2.537 billion in the first quarter of 2008 to $1.463 billion in the first quarter of 2009, the report said. That $1.074 billion loss represents a 42.3 percent decline. These numbers come on the heals of a Pew Research Center study that reported annual classified revenue for newspapers in 2000 was more than $19.608 billion, but in 2008 it was $9.975 billion.

In total, newspaper print and online advertising revenue fell from $9.230 billion in the first quarter of 2008 to $6.620 billion in the first quarter of 2009, representing a fall of $2.610 billion, or 28.3 percent.