In a week where the New York Times revealed it was on the edge and trying to raise cash by selling off its head office, the huge Tribune Co went bust with losses that could top $US6 billion and Fairfax slashed its dividend and changed CEOs, a report has been released that forecasts an even tougher year ahead for newspapers and magazines in 2009.
The report, explained in the Financial Times, makes very depressing reading: one in 10 print titles could be forced to cut their publishing frequency, move on line or simply shutdown.
At the same time more and more people became aware of third quarter advertising figures for the US newspaper industry as posted on the Newspaper Association of America website earlier this month.
Even online ad revenue fell, down from the June quarter and down 3% on the third quarter of 2007. Print ads were down 19% from the September quarter of 2007, and off 7% from the June quarter or more than $US660 million.
The year-on-year quarterly percentage decline was the worst since since the Association has been keeping these figures. It is the fastest rate of fall in ad revenues since the trend first emerged in the US in the September quarter of 2006.
Since then ad revenues have fallen from $US11.791 billion to $US8.942 billion and total print revenues have slumped from $US11.152 billion to $US8.192 billion. Total online revenues have only risen from $US638 million to $749 million in the September 2008 quarter. Total newspaper ad revenues peaked in the 4th quarter of 2004 at $US14.308 billion, with print ad revenues peaking at $US13.759 billion in the 4th quarter of 2005.
These figures were posted late last month and they support the Deloitte report conclusions as explained in the FT.
The report says the newspaper industry outlook has gone from difficult to “impossible”, as newspapers and magazines — already weakened by the rise of online advertising and falling readership — experience further declines in circulation and advertising rates.
“This is a downward spiral,” said Howard Davies, partner at Deloitte and co-author of the report. “It has already become quite difficult for print publishers, but it is going to get much worse as the advertising market deteriorates.”
The report goes on to say:
Advertising revenues may fall up to 20 per cent with classified advertising, traditionally one of the most lucrative elements of a newspaper, particularly badly hit. The subsequent decline in revenue leaves free newspapers — funded entirely by advertising — the most exposed but will affect all newspapers. While the industry has built an online presence over the past decade in response to its perilous situation, historic levels of profitability are unlikely ever to be restored. Not even the most successful online newspaper and magazine sites generate sufficient profit to offset declining margin from print versions. In late 2008 the online contribution is at most a few per cent of a title’s revenues and most of those are tied to the print version in various ways.
The report should be studied closely by new Fairfax CEO Brian McCarthy. Fairfax has a solid online business, but online revenues and earnings can’t replace those generated by print. So either costs have to be cut or titles will have to go.
One irony of the US figures is that they allows outsiders to chart the disaster that the print industry now confronts. That disclosure is part of the commitment of the newspaper industry to openness and transparency. There is no such commitment at Fairfax, News Ltd and APN, the three big print proprietors here.