By paulgillin | September 6, 2008 - 7:51 am - Posted in Business News, BusinessModel, Classifieds, NewMedia, Newspapers

The chart (from Alan Mutter) says it all. The U.S. newspaper industry experienced its ninth consecutive quarter of falling print revenue, according to the Newspaper Association of America. Worse is that the rate of decline is accelerating and online revenue is now dropping, too. Although the second quarter decline was only 2.4%, it’s a stark contrast to the 20%+ growth rates the rest of the industry is experiencing.

Classified advertising is a disaster. Look at these numbers: Real estate ad revenue down 36% to $619 million; recruitment advertising down 40% to $600 million; automotive classifieds down 23% to $580 million. The lifeblood of newspaper profitability has historically been classified advertising and the blood is gushing away.

This has a ripple effect on online ads, which had previously been the industry’s sole bright spot. MediaPost puts its finger on the problem: “Unfortunately, most of the growth in [newspaper] online revenues was due to ‘up-sells’ from print classified listings. As the volume of print listings declines at an ever-faster pace, that means there are fewer opportunities for online ‘up-sells.'”

TechCrunch chips in: “Advertisers trained to buy bundled ads are more likely to drop the entire bundle when making budget cuts.”

Inflation-adjusted newspaper revenues

Inflation-adjusted newspaper revenues

These trends continue to have all the makings of a classic death spiral: accelerating revenue declines create alarm among traditional customers who start fleeing in droves out of fear of being associated with a dying business. Print revenue declines have accelerated each quarter for the last two years, with the most profitable parts of the business taking the biggest hits. For example, automotive advertising, which totaled $5.2 billion in 2003, is now on track to do less than $2.5 billion in business this year. That’s more than a 50% fall without accounting for inflation.

If you do account for inflation, it gets worse. As the above chart by Tim Windsor shows, inflation-adjusted newspaper revenues are now below 1982 levels (click here for a readable version). The right side of that chart looks like a cliff, which is what the newspaper industry is hurtling toward.

There are simply no bright spots left. Between a recession, Internet competition and dramatically increased newsprint costs, this is a perfect storm. Quoting TechCrunch: “At this rate, there won’t be an industry left by the end of next year.”

Or, as one comment on Mutter’s blog put it, “The best news recently at our paper: the cleaning staff determined that the mold growing under the Coke machine is not hazardous.”

Comments

comments

This entry was posted on Saturday, September 6th, 2008 at 7:51 am and is filed under Business News, BusinessModel, Classifieds, NewMedia, Newspapers. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Comments Off on Death Spiral Gains Momentum

Comments

  1. September 8, 2008 @ 10:00 am



    Why I think newspapers will die: Part Six – The Reader…

    This is my last post in the series. I hope you enjoyed reading it as much as I enjoyed writing it. I want to wrap-up by looking at the newspaper industry from the perspective of the all important reader. Most…