The Overall Stock Market is Up 5% But Newspapers are Down 12%; 3rd Quarter Newspaper Earnings Expected to Drop an Average 8.5% But the S&P 500 Index expected to Gain 12%. And There Is Absolutely Nothing Out There to Indicate Things Will Get Better Any Time Soon

The share price for the New York Times Company is down 30% on the year. The Times has already announced two rounds of layoffs so far this year indicating it does not see a bright future. The Tribune Company shares are down 21%. It too has announced cutbacks at most of its properties and it just lost a $1 billion tax case that caused Fitch Ratings to downgrade its debt rating from A to A- with a negative outlook. The shares lost 4% on the tax ruling to a four-year low. To put the $1 billion into perspective, it is more than double the group’s 2004 profit.

ftm background

The Times Raises Its Newsstand Price 5p, Ending The 12-Year UK Quality Newspaper Price War; But In Eastern Europe Newspaper Wars By Free and Paid Tabloids Are In Full Swing
It was September 1993: Circulation of the Times broadsheet was continuing its spiral downwards with no end in sight, so owner Rupert Murdoch resorted to that old standby in times of circulation crisis – he cut the newsstand price by 30%. That single move is credited today, 12-years later, with causing such a financial bloodbath for all of the UK national quality broadsheets that they have yet to recover fully. And it also literally changed the face of most British quality national newspapers.

London Gets a New Free Financial Daily That Distributes At the End of the Commute While In Geneva, Where There Is No Free Daily, The Tribune de Genève Tries to Persuade Readers It Is Not a Freebie
With the Financial Times seeing its UK circulation hovering around 121,000 and if anything decreasing the last thing it really needs is a new free financial tabloid newspaper distributing some 60,000 copies in the city’s major financial centers and aiming to get those numbers up to 100,000 within three months.

Now It’s Confirmed: Some of That Double Digit Internet Advertising Increase Forecast For Each of the Next Five Years Will Come Directly From the Pockets of Newspapers
While mainstream newspapers are bemoaning circulation declines, and trying to get the young more interested, they were at least secure knowing that while the industry’s $47 billion spend hasn’t grown much over the years it is still 40 times more than Internet advertising.

Online Revenues Shine While Print Revenues Fade as Two Large US Media Groups Prove Their Internet Investments Were the Right Thing to Do
The New York Times and Dow Jones both made large Internet investments this year, and already they are successfully impacting the bottom line, with online ad revenue increasing for each company in excess of 25%, according to the Q2 earnings reports. Print, on the other hand, showed a low single digit increase at the Times and a decline for Dow Jones.

French, Spanish and Italian Financial Backers Provide Le Monde With Much Needed Financial Support
Look Soon for Big Changes in How a French National Newspaper Gets Marketed.

Gannett, the nation’s largest newspaper publisher, is down 18% with its USA Today flagship slowing down but basically the drop is more because newspaper groups are just plain out of favor right now. Knight-Ridder, which has announced large editorial cutbacks in Philadelphia and at its flagship San Jose, newspaper is down 18% this year at a 52-week low.

The only bright spot for everyone is that advertising revenues are up some 20 – 30% at the new Internet buys, but that’s not near enough to neutralize the rot in print.

The reasons have been spelt out clearly before – the young are leaving in droves for the Internet or free tabloids; advertisers are moving their spend away from traditional media; costs for newsprint and other necessities have taken a jump, classifieds are taking a bath because of Internet free classifieds, and let’s not forget that it is in such an environment that many newspapers have tried to increase their advertising rates as if it was business as usual. Well, it ain’t!

Newspaper ad revenues for the third quarter are estimated to increase by 1.7%, the weakest performance in two years, according to Goldman Sachs. Ad revenues rose 2.8% in the year’s first half.

If there is any hope at all it is that although Banc of America Securities (BofA) confirms in a recent report that advertising money is being shifted from traditional media to new media, the shift may not be as dramatic as previously thought. In other words, the slow death may be a little slower.

BofA believes the Internet is beginning “a multiyear share grab of ad dollars” from traditional media but, and here is the silver lining, in its study of 100 national advertisers that spend more than $1 billion with newspapers, that newspapers still get the lion’s share of their ad revenue even though fully one-third of the spend diverted from newspapers is now going to the Internet.

Newspapers, according to BofA, got $29 billion or 21% of the 2004 total US advertising spend whereas the Internet languishes with just $7.4 billion – 5.3% of the spend (but that was a 21.4% increase over the year before).

BofA figures it will take at least another 10 years for the Internet to equal the newspaper ad spend which by then should be about $35 billion -- that’s annual Internet ad growth of 15-20% compared with low single digit growth forecast for newspapers; in September Merrill Lynch lowered its 2005 overall newspaper ad revenue growth forecast to 2.4% and for 2006 it was even worse, a 2% gain against the previously forecast 2.6% gain.

It’s not that newspapers aren’t trying to fix their problems. Taking a page from the book of the free tabloids, some newspaper groups that own paid weekly newspapers are turning them into free newspapers in the hope increased circulation can justify increased advertising rates that will result in higher profits than when the weekly was paid for.

Newspaper web sites are successful at pulling in local readers who do not read the print edition, so newspapers now are trying to combine those unique web visitors to the print edition’s circulation to show advertisers a larger readership count.

US newspapers may also want to take a look at what the Guardian recently did in the UK. With circulation at a 27-year low, the Guardian trimmed its broadsheet size to Berliner size (between broadsheet and compact) and via its $150 million investment in new color presses it floods the new newspaper with color; it fine-tuned its editorial product more towards satisfying women readers, and armed with a large marketing budget it has managed to increase circulation by some 20% -- some days, particularly Saturdays, better than others – all within a couple of weeks in a very competitive market.

It shows that newspapers can pick themselves up if they are willing to make the investment and follow the research. The Guardian has one of the world’s most successful web sites, but it correctly saw that was no excuse for throwing in the towel on print. The two can live in harmony, and each can be a major profit center.

Lesson: Print does not have to surrender to the web, but it does need investment and it does need to act on the research into what its readers say they really want.

The Overall Stock Market is Up 5% But Newspapers are Down 12%; 3rd Quarter Newspaper Earnings Expected to Drop an Average 8.5% But the S&P 500 Index expected to Gain 12%. And There Is Absolutely Nothing Out There to Indicate Things Will Get Better Any Time Soon

As the third quarter earnings reporting period approaches expect nothing but bad news for the US newspaper industry. Even worse, don’t expect to see even a glimmer of hope that Happy Days may soon be back again. The numbers are bad and expected to get even worse.