For those in the media there is some terrifyingly bad news from the US. US newspaper sales continue to slump, The New York Times corporate debt is now rated as ‘junk’ by a leading ratings agency, and newsrooms continue to shrink, with TV networks, such as ABC hinting of further cuts to come across the board.
The current state of the US media with falling sales and ad revenues, is what leading analysts here see ahead for the Australian media. It’s what Goldman Sachs JBWere forecast last Friday and reported by Crikey (Friday, October 24 2008, item 21 “Goldman Sachs: Australian media companies to suffer into 2010“).
The New York Times revealed late last week that it had a third-quarter loss from continuing operations. It also said its ad revenue fell and that it would write down the value of its New England properties, including The Boston Globe, by up to $150 million. After CBS cut the value of its intangible and good-will assets by a massive $US14 billion more of these cuts will become commonplace.
When will see News Corp bite the bullet? It reports its first quarter figures next Thursday. After severance costs, the company lost money, while before those costs and the impairment charge, the company reported that third-quarter operating profit fell to $US10.0 million from $US28.1 million in the third quarter of 2007. The final figures, including the impairment charge, will be revealed shortly, possibly by the end of this week.
But ratings group Standard & Poor’s isn’t waiting: it looked at the preliminary report and cut its rating on The Times to junk, while Moody’s Investors Service said it might do the same because of revenue declines and risks associated with paying its debt.
S&P said a likely US recession will exacerbate declining advertising revenues and prolong the time until the declines will be made more manageable, possibly until 2010:
It is our estimate that the company’s total revenue will decline in the mid-teens percentage area in 2008 year over year, and that earnings before interest, taxes, depreciation and amortization (after buyout expenditures) will decline by more than 30 percent in 2008 and by about an additional 30 percent well into 2009.
It cut the Times’ rating three notches to “BB-minus”, three levels below investment grade, from “BBB-minus”. The outlook is negative, indicating an additional cut may be likely over the next one-to-two years.
Rival Moody’s in warning that it might follow summed up the outlook for the US media for next year and beyond:
Newspaper advertising market conditions are likely to remain challenging in 2009 and continuing revenue declines will make it difficult for the company to bring its credit metrics in line with its investment-grade rating.
After the credit rating downgrade, The New York Times Co said it was considering axing its dividend.
In Los Angeles, websites were reporting that 75 more jobs went at the LA Times on Monday and in New Jersey, the Star-Ledger told its journalists last week that 40% of them would lose their jobs by the end of the year. The only good news came from News Corp’s Wall Street Journal (the Number two selling paper) and the other national paper, USA Today, (the country’s biggest seller). Both saw circulations rise 0.1%.
Figures from the US Audit Bureau said that the average weekday paid circulation for American papers fell to 38.2 million copies in the six months to September 30, 4.64% lower than in the same six months of 2007 (as the credit crunch was just starting to develop, but with the economy still buoyant). That’s a faster fall than was seen this time last year, when the audit bureau reported a drop of 2.6% on the same period of 2006 (when the economy was far stronger). There were 507 papers covered in the ABC figures.
The paid circulation of US Sunday papers fell 4.85% in the September half, a rate significantly faster than the 3.5% drop seen in the same period of 2007, compared to the September half year of 2006.
US media outlets highlighted some papers that rose: Ad Age pointed out that the Wisconsin State Journal‘s paid weekday circulation increased 10.6% to 87,012, for example and the the Trenton Times in New Jersey increased its paid weekday circulation by 5.3% to reach 53,303. Other small papers posted gains too.
The bad news was that apart from the top two national papers (the only two in the US), the 25 leading US newspapers experienced big declines.
The New York Times and the remainder of the top 25 weekday papers all sank. Paid weekday sales fell 3.6% at The Times, 5.2% at the Los Angeles Times, 7.2% at the Daily News in New York, 6.3% at the New York Post, (We won’t see Murdoch or News Ltd papers boasting about that); 1.9% at the Washington Post, 7.8% at the Chicago Tribune and 11.7% at the Houston Chronicle.
All but two of the top 25 Sunday papers suffered lost sales in the six months: The Sunday New York Times fell 4.1%, the L.A. Times 5.1%, the Washington Post 3.2%, the Chicago Tribune 5.8% and the New York Daily News lost 7.2%.
Based on Audit Bureau of Circulations report for six months ended Sept. 30. Shown are the circulation and percentage increase or decrease from the year-ago period.
- USA Today: 2,293,310 (0.01%)
- The Wall Street Journal: 2,011,999 (0.01%)
- The New York Times: 1,000,665 (-3.58%)
- Los Angeles Times: 739,147 (-5.20%)
- New York Daily News: 632,595 (-7.16%)
- New York Post: 625,421 (-6.25%)
- The Washington Post: 622,714 (-1.94%)
- Chicago Tribune: 516,032 (-7.75%)
- Houston Chronicle: 448,271 (-11.66%)
- Newsday: 377,517 (-2.58%)
Source: Editor & Publisher