Alan Mutter writes perceptively on the recent plunge in newspaper revenues on his outstanding Reflections of a Newsosaur blog.

“Print advertising sales for newspapers appear to be on track to plunge by $2 billion this year, which would make for the worst performance in a decade other than the disastrous period following 9/11,” he writes, noting that this will be the first time newspaper revenues have ever declined in a time of economic prosperity.

First quarter revenues for classified advertising – the most profitable part of the newspaper business – were off a staggering 13.2% in the first quarter, Mutter notes. Automotive advertising, which is newspapers’ Rock of Gibraltar, was off nearly 13% last year. Nearly all of this business is going online and it’s not coming back.

I’ve characterized the scenario facing major metro dailies as a “death spiral” in my own writing on this topic. Alan Mutter’s statistics and analysis bear this out. In a spiral, the speed of descent increases as the object hurtles toward the ground. The numbers indicate that a spiral could be developing. According to Mutter, print advertising revenues were off .5% in 2005, 4.6% in 2006 and are on track to decline 6.4% in 2007. It’s too early to call this a pattern, but in an industry that Mutter notes “has been masterful at increasing its revenues in good times and bad,” this twist of fortune is unprecedented and alarming.

Desperate acts like the San Francisco Chronicle’s recent decision to eviscerate its newroom staff indicate that the industry is in panic mode. The Chron is basically committing hara-kiri rather than continuing the fight. I suspect it’s only the first of many to do so.

Mutter, a newspaper-editor-turned-entrepreneur, offers some historical context:

“In retrospect, it is clear that newspaper publishers were lulled into complacence in the early years of the Internet by their prior skill in achieving consistent sales growth in even negative economic conditions. But the growth was not achieved as much by recruiting new customers – or even selling more advertising to existing ones – as by using their monopoly-like positions to force hefty annual rate increases on advertisers who essentially had nowhere else to go.”

Monopolies thrive in the absence of competition, but they tend to let atrophy the skills needed to compete. Newspapers have almost no weapons with which to fight the online hordes that are devastating their business.

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This entry was posted on Wednesday, May 30th, 2007 at 1:15 pm and is filed under Advertising, BusinessModel, Classifieds, Layoffs, Newspapers, OnlineMedia. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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