Ad losses send industry into a tailspin
By David Olinger
The Denver Post
Updated: 12/04/2008 11:37:41 PM MST
http://www.denverpost.com/business/ci_11142071Scripps puts Rocky Mountain News up for saleAcross the United States, more than 30 daily newspapers are for sale, and buyers are scarce. From Los Angeles to New York, leading newspapers have slashed newsrooms with buyout offers, and when those failed to reach budget-cutting goals, with layoffs.
The newspaper industry has been caught in a tailspin for three years, a trend variously blamed on plummeting ad revenues, declining readership, growing competition from the Internet and a deepening national recession.
On Thursday, Colorado's oldest newspaper joined the growing list of dailies on the market. E.W. Scripps Co., owner of the 149-year-old Rocky Mountain News, offered to sell it after reporting an $11 million loss through the first nine months of this year.
"It's a terrible time to put the Rocky Mountain News up for sale, clearly," said John Morton, a veteran newspaper-industry analyst in Maryland. "Whatever price they might attract probably will be quite low. I think it's going to be very difficult to find a buyer."
The main culprit in the newspaper business decline: shrinking classified-ad sections.
Newspapers depend on advertising for about four-fifths of their revenue, and at big-city dailies, the classifieds used to bring in half of that money.
Through 2005, print-advertising revenues grew nationwide, according to Newspaper Association of America data. But the industry took a $5 billion loss in advertising dollars during the next two years, and this year could be much worse.
In the third quarter of 2008, print-advertising revenues were down 28 percent from the third quarter of 2005. Most of that loss came in the classifieds.
"The heart of the matter is losing classified advertising to various electronic competitors," said Rick Edmonds, a media business analyst at the Poynter Institute in Florida. "First, it was gradual. Now, it's precipitous."
Next year could be worse. In a report this week, corporate-ratings agency Fitch predicted that some newspapers and newspaper groups are likely to default on their debt in 2009 — possibly leaving some cities with no daily newspaper.
Newspaper ads for jobs, houses and cars, the backbone of classified-ad sections, typically shrink during a recession and grow during a recovery.
In the past, "newspapers have been able to recapture the advertising that was lost," Morton said. But in previous recessions, "the Internet had not become so attractive for advertising and readers' attention."
"This time, there's a very large question" about the newspaper business' ultimate recovery, he said. "What's different this recession is we're awash with newspapers for sale, and there aren't any buyers."
Morton estimates at least 30 daily newspapers have been offered for sale across the country, including some owned by three chains — Cox Enterprises, Landmark Community Newspapers and the Journal Register Co.
Alan Mutter, a former newspaper editor who now runs a blog about the industry, said retail-store advertising in newspapers has been "reasonably stable" so far, but "there's every reason to believe that next year will be worse."
He sees newspaper classified ads as a revenue source in deeper trouble: Consumers now hunt for jobs, houses and cars on Internet websites, which have become so specialized that there's even a job site for anesthesiologists.
"The same thing has happened across the board for all kinds of advertising," he said.
Newspaper classified advertising "has been superseded by a highly vertical, highly searchable world. Consumers like it," Mutter said.
The losses have not been spread evenly across the newspaper industry. Many small-city newspapers remain relatively unscathed while larger newspapers watch ad revenues and readership dwindle.
In newsroom staffs at major metropolitan dailies, "we've seen roughly 15 percent shrinkage in the last two years," said Bernard Lunzer, president of The Newspaper Guild. "Most of the reductions have come through buyouts," but "in almost every case, there was the threat of layoffs."
Paper Cuts, a website that tracks newspaper buyouts and layoffs, estimates that at least 14,447 jobs have been lost this year.
