Overall US Newspaper Revenue in 2007 Plunged $3.9 Billion From 2006, The Drop In 2006 Over 2005 Was Just $167,000, and Before Then Joint Print/Internet Revenue Was Up Each Year; Spot A Nasty Trend There?

Philip M. Stone April 1, 2008

What started as a small trickle in 2006 – a slight overall revenue decline of $167,000 when US newspaper print revenue losses were offset against the Internet’s gains -- became a raging torrent in 2007 with newspapers reporting a $3.9 billion decline and the second worst print drop since those measurements began in 1950.

Just  repeating those numbers again -- a $167,000 decline versus a $3.9 billion decline a year later tells the American newspaper financial story better than a 1,000 words.  And the expectation is that this year will be even worse with forecasters already reducing their newspaper print advertising figures – ZenithOptimedia doing so just this week -- and Online’s growth rate expected to  falter. Perhaps the headline in a recent American Journalism Review article is closer to the truth than most would care to admit –“Maybe It’s Time To Panic”  with the subhead, “Why news organizations have to act much more boldly if they are to survive.”

From 2003, when the Newspaper Association of America (NAA) started keeping   joint print/Internet revenue  figures, through 2005  the joint numbers increased from the year before. But 2006 was a milestone, Online’s 31.5% gain (some $637,000), could not offset  print’s 1.7% decline (down around $800,000) and although the overall decline was just 0.32% it was clear the rot had started to take hold, for 2005  had been 2.47% better than 2004, and 2004 was 4.5% better than 2003. And now  2007 has blown everything out of the water!

The NAA reports that 2007 print advertising dropped 9.4% -- from $46,611 billion in 2006 to $42.209 billion in 2007, a fall of $4.4 billion. Print’s revenue has not been that low since 1997. The Internet revenue growth went from $2.664 billion in 2006 to $3.166 billion in 2007, an 18.8% increase of $502 million but those extra online monies covered only 11% of print’s declines.  Add it all up and the total revenue decline was $3.9 billion over the year before, an overall 7.9% fall.

The instant analysis is easy – print’s revenue decline, especially from Q4 onwards, is seemingly in freefall and while newspapers have been pouring most of their efforts in increasing their online revenues and that part of the business is indeed continuing to grow it is, albeit, at a far slower rate than previous years. For many newspapers their online revenue is still but a very small part of their revenue stream – the NAA says in 2007 it averaged about  7.5% which is up from 5.7% in 2006. It just looks like a losing business plan that says print’s losses will be offset by online and other digital platforms. The readership for the online services is certainly there, but not the necessary advertising numbers

Print’s figures were so bad that the NAA in its news release didn’t even mention them except near the end when disclosing Q4 results that showed print down $1.5 billion while Internet revenue was up $100,000. To find out the total 2007 print picture one had to go  to a Trends and Numbers page on the NAA web site for an annual chart showing print’s dismal performance  There was no commentary.

Robert MacMillan of Reuters had a fascinating interview with Phil Bronstein, former editor of the San Francisco Chronicle, who has now been appointed by Hearst to come up with ways to ensure newspapers remain viable. In his blog MacMillan said he asked Bronstein how the newspaper business needs to change in order to survive. “Anybody who tells you they have the answer to that question, or the answer to the question, “what’s the successful business model for journalism’, is lying to you, because no one has it.”

And on the financial future of newspapers he said, “They are not viable in their current mode. Some newspapers are still making a lot of money, relatively a lot less than they were. So at some point you’re not making any money  and in fact you’re losing a bunch of money. And so then who’s going to want to put up with that? Certainly not the new billionaires. How long ago was it that reporters were saying, ‘This was the savior?’  All these quirky pioneering billionaires were buying newspapers, and now you’ve got the billionaires saying, “What the hell are we doing? What were we thinking?”

One such obvious billionaire with that problem is Sam Zell who made his highly leveraged buyout of Tribune last December with the company now some $12 billion in debt. Zell said he was not about to sell any strategic media properties to pay off debt  but when cash flow dropped 30% in Q4 it came time for revaluation and Newsday is now on the auction block  with Rupert Murdoch (New York Post)  and Mort Zuckerman (New York Daily News)  both apparently keen to get their hands on the property. Zell must make a $650 million debt payment on Dec. 4, and if he hasn’t sold by then the Chicago Cubs  baseball team and its Wrigley Field Stadium then the money will have to come from the likes of Newsday and Tribune’s 30% holding in the Food Network. 

Wall Street, of course, has hammered the price of publicly traded newspaper companies so hard that it is frightening to see how low some shares have gone. So, with the price of a newsstand copy of the New York Times at $1.25 and the shares of the Journal-Register Company closing on the New York Stock Exchange (NYSE) Monday at 55 cents each which is the better bargain – one copy of the Times or two shares of the Journal?

Could anyone have ever imagined that one copy of a newspaper could cost more than twice the price of one share of a NYSE publicly traded national newspaper company?