A large US regional newspaper group has gone bust for a second time in three years, despite heading down the digital route. Given the latest figures on US newspaper ad revenues show another decline in print ads and sluggish growth in online revenues in the three months to June, it’s hardly a surprise.
The Journal Register Company, which had pushed the switch to digital from pure print since emerging from its first collapse in 2009, filed for bankruptcy overnight for the second time, according to a statement on its website.
The company, which serves 992 communities across the US and owns titles including the New Haven Register and Michigan’s Oakland Press, blamed falling revenues and said the move would allow it to cut “legacy obligations” including pensions and leases. JRC said it wanted to sell itself to a firm linked to its current venture capital backer, Alden Global Capital. Analysts said the move to go bust deliberately appears designed to allow the JRC to continue in business with the present ownership structure, but without the burden of financial obligations that it can’t meet.
The weakness in the “go digital route” was underlined by the latest ad revenue figures, which showed that online ads for US newspaper grew a bit faster in the second quarter, but remain a fraction of the stronger rates seen last year, while print ad revenue fell for the 25th quarter in a row in the three months to June.
The second-quarter data from the Newspaper Association of America reveal that total print and online advertising fell 6.41% to $US5.608 billion, from $US5.992 billion for the same quarter of 2011. It was up from the $US5.176 billion of the first quarter, which is always the yearly low after the Christmas-New Year period.
Print advertising dropped 7.85% to $US4.781 billion from $US5.188 billion in the March quarter of last year. That was after an 8.2% fall in the first quarter. Online advertising grew 2.90% to $US816 million, from $US803 million. That was a faster growth rate than the 1% seen in the March quarter of this year, but it is still the second-slowest growth rate since the recession in 2009 saw big falls in print and online ad spending.
As a percentage of total ad spending in the quarter, online fell to 14.7% from 15.7% in the first quarter.
Analysts say the slowdown is being caused by the huge expansion in the amount of online advertising space as companies who manage this emerge to dominate the space. In short there’s just too many ad slots chasing ads that are growing, but at a rate slower than the creation of potential ad slots.
This means the chances are dimming that online ad spending would gradually grow to make up for some of the falls in analogue spending in print. The experience of The Journal Register Company underlines that point and also tell us that the struggle here by Fairfax Media and News Limited papers to boost revenues online to replace the falling print income. Staff numbers and the attendant costs of doing business have to be slashed heavily to account for the lower yield and revenue from online ads.
The success of the Financial Times in boosting online revenues and sales past 50% of total revenue and sales seems to be a one-off because of its position as a global paper of importance. The same could be said about The New York Times and The Wall Street Journal.