SPINNING NEWSPAPER DOLLARS INTO SPARSE CHANGE
By Lawrence Gibbons
Daily newspapers have been busy writing their own obituaries. In the US the Tribune Company the owners of the Los Angeles Times and the Chicago Tribune, filed for bankruptcy. In France, the situation is so dire the government has announced a bailout plan for the industry. In Britain the Daily Mail Group has reported massive ad declines and the Guardian put a freeze on all staff positions. Here in Australia Fairfax Media cut 550 full time positions after Rural Press’ owner John Fairfax overextended himself buying back the family farm. And the Grandfather of Australian media Rupert Murdoch announced corporate cash flow reductions of 30% globally, after News Limited bought up everything from the Wall Street Journal to the Wentworth Courier.
Over the last decade, many newspaper corporations borrowed big to expand their global media empires and are now struggling to meet massive debt repayments at a time when advertising revenues are in a steep decline. Since 2006 daily newspaper advertising revenues in the US alone have fallen steadily every quarter. In 2009 ads are projected to decline by a further 17%, all the way back to 1993 levels. From 2006 to 2009, ad sales will have dropped by 37% and one smug online marketing firm predicts newspaper advertising revenues will fall by 42.5% by 2012. The last time advertising sales fell as steeply was in the four years following the Great Depression when revenues dropped by 57%. Still during the 1930’s, American newspapers continued to pull in 44% of the overall advertising pie. By 2000 dailies’ market share had fallen to 20% and in 2007 they were down to 15%.
Here in Australia, newspapers still account for 40% of the overall advertising market, though this year all advertising expenditures including spends in newspapers are expected to fall from 3 to 5% nationally. While media experts believe the Australian newspaper market has been less affected than elsewhere, because media ownership is consolidated in so few hands, some market forecasters believe that print editions of Australian newspapers will die in a few years time.
Market predictions of the death of daily newspapers are nothing new. During the 1930’s, while US newspaper revenues collapsed during the Depression, the radio, a new electronic competitor saw phenomenal growth with advertising revenues growing a staggering sixty fold from 1926 to 1936 during the peak of the downturn. The death of newspapers was again predicted during the post war years, when the new medium of television saw US ad revenues skyrocket twenty-six fold from 1949 to 1959.
Nowadays of course, the Internet is either credited with or blamed for the death of dailies. In just ten years, the Internet bubble has inflated, collapsed and returned to centre stage. Still despite the tough times, newspapers’ share of global ad spend is expected to be 25.0% in 2011 (a decrease from a projected 26.5% in 2008). Meanwhile, the Internet’s share of revenues will grow from 10.8% to 13.8% over the same period, close to half of newspapers’ total worldwide revenues.
While it may be too early to sound the dirge for dailies, the newspaper market is definitely contracting, papers are closing and journalists are losing their jobs. The sad fact is that very few will replace their incomes posting blogs or working for an online content provider. As one wag put it: newspaper dollars become pennies online. Large media corporations like the New York Times and the LA Times have only been able to generate 10% of their overall advertising revenues online. In real terms, advertisers pay substantially less to reach consumers online. In the US hundreds of millions of dollars worth of classified advertising revenues were decimated by one online company, Craig’s List whose annual revenues are $80 million, none of which is used to pay journalists.
Meaning that local stories and information becomes even harder to find on the Internet, which is by its very nature a global medium. Sure you can log on to find the weather in Mumbai, an old friend in Munich and the class schedule for economic courses at Harvard University, but good luck learning that the State Government plans to locate a massive cruise terminal at White Bay. And since many small businesses don’t even have websites good luck locating a local café or a retail shop. Despite all the hype, in mid February Webvisible and Nielsen, reported only 44% of small businesses have a website and half spend less than 10% of their marketing budget online. Nor does it look like advertising dollars are likely to migrate to the web anytime soon. As Business Week reported last month, ‘Local interactive advertising is headed for a big slowdown this year.” Sure the web allows businesses to reach a global market, but when it comes to targeting locals, good old-fashioned newspapers still remain the most cost effective way to get the word out.
Amidst all the gloom, the New York Times ushered in the New Year with an upbeat story of one local newspaper in New Jersey who has eschewed the Internet age. The paper, which employs three and a half full time staff and six contributors has seen steady growth since 1999. As the publisher of the Tri City News said, ”Why would I put anything on the Web’ I don’t understand how putting content on the Web would do anything but help destroy our paper. Why should we give our readers any incentive whatsoever to not look at our content along with our advertisements, a large number of which are beautiful and cheap full-page ads” While large transnational media corporations struggle to service their debts in the face of shrinking chain store and national product advertising, the market for local newspapers remains the local businesses.
