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Newspapers feeling the heat of recession

Grave predictions, made during the recent economic boom, that newspapers would last only another few decades are starting to look real rosy.  

The US recession may be hastening the decline, and even ringing the death knell, of the newspaper industry:

  • According to the Financial Times: “The recession has turned the long, slow decline of newspapers into a brisk fall”. According to the WSJ: “More than 20% of the newspaper industry — measured by daily circulation — is currently in financial distress”.
  • Andrew Sullivan wrote this week: “Between March and September the 500 biggest newspapers in America reported an average circulation decline of 4.6%. In six months. That’s close to a 10% decline per year. No newspapers showed any but fractional gains. It is therefore a near-certainty that many towns and cities in America will no longer have a newspaper after the down-turn. And that may apply not just to small names but to some big ones as well. The Los Angeles Times, for example, has gone from a circulation of 1.1m to 739,000 since the turn of the millennium. Its staff has been halved. Morale has never been lower.”
  • In the third quarter of 2008 in the US the biggest problem area continued to be classifieds: “As expected, classified ads took the biggest hit, down almost 31 percent, to $2.3 billion, reflecting the nation’s weakening economic condition. Within that category, help-wanted revenues fell by almost 44 percent; real estate dropped by 38.6 percent and automotive declined by 29.2 percent.”
  • On Monday, the Tribune Company filed for bankruptcy. The company, which owns 8 daily newspapers (including The Chicago Tribune, The Los Angeles Times, and The Baltimore Sun), 23 TV stations and the Chicago Cubs, came into the possession of Sam Zell over a year ago. Its current debt comes out to roughly $13 billion.
  • In addition, “The New York Times Company followed by saying it might mortgage its Renzo Piano-designed headquarters building by Times Square to reduce debt”.
  • Another major title is also up for sale: “Financially strapped McClatchy Co. is considering selling The Miami Herald, one of its best-known and most-respected newspapers, according to published reports. Last month, the company reported continued double-digit drops in revenue in October with revenue dropping 17.8 percent to $176 million, from $214 million in October 2007. Advertising revenue was down 20.4 percent in October to $145 million, from $181 million a year ago. Declines in print advertising drove the decline, falling 23.3 percent to $128 million in October. Online advertising revenue partially offset the decline, with a 12.4 percent gain in October to $16.4 million.”
  • In the UK, circulation figures also continue to decline: “the comparison between average sales in the six months to November 2007 and the same period this year showed a total fall of 3.6 per cent. (This) figure masked much steeper falls of about 8 per cent for The Independent, Daily Mirror and Daily Star, with smaller drops for the Daily Express (6.4 per cent), Daily Mail (5 per cent), The Guardian (4.2 per cent), The Daily Telegraph (3.9 per cent) and The Times (3 per cent). The circulation of the Financial Times was down 0.7 per cent year-on-year.
  • Newspaper ad revenue is predicted to keep falling rapidly in 2009, so the financial pressures on the newspaper industry will get worse next year.

As the WSJ argued: “One thing is certain about the newspaper industry: It is going to look very different two years from now. The recession will fast-forward a restructuring that had to happen because of the decline caused by the switching of ad dollars to the Internet. But without a sharp economic downturn it might have taken many years.”

Paradoxically, “newspaper readership is actually up in most markets when print and online readership are combined.”

The problem is that newsprint is very expensive but online ad revenue is much lower. Consequently, the cost and revenue structures are way out of whack. Have been for a few years, and its getting much worse.

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  • 1
    Vis
    Posted January 30, 2009 at 12:01 pm | Permalink

    I guess video did kill the radio star…. or have i missed something in my rush to spread the doom and gloom?

    Trevor, the Australian newspaper industry is different from the US, and the climate that’s affecting them does not affect us. It’s not to say that Australian publishers don’t have their fair share of problems, but comparing us to the US or UK over-simplifies your theory to the point of nullification. It’s like Pauline Hanson looking at immigration figures and then ranting about an ‘asian invasion’. Put some perspective on this issue; look at it in a historical context – and then back up argument up with figures that reflect the Australian market. You’ll probably end up shattering more myths than perpetuating this cloud of pessimism.

    I don’t think they’ll ever be a day traditional printed newspapers will become a historical relic. It’ll evolve – as all mediums do.

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