Into the perfect storm of Internet competition, spiraling newsprint costs and the decline of classified advertising has come a fourth factor: probable worldwide recession. It couldn’t happen at a worse time for the beleaguered newspaper industry.

Newspaper advertising revenue is expected to decline a record 11.5% to $40.1 billion this year, the Newspaper Association of America says. The organization does see light at the end of the tunnel; it’s predicting that the nosedive will level off a bit in 2009. But such forecasts should probably be taken with a grain of salt, considering that no one knows the full extent of the current financial crisis or the likelihood that worldwide government interventions will succeed. Also consider, at Tim Windsor points out in a comment on the E&P blog, that the NAA initially forecast just a 1.2% decline in business this year.

The 11.5% revenue drop would be the largest the association has seen since it started tracking results 58 years ago, and it reflects the continuing collapse of the classified advertising market at the hands of Craigslist et. al. In fact, the NAA expects classified revenues to fall from $14.1 billion in 2007 to just $9.4 billion in 2009, a 33% crash in a business that is already off by 50% from its peak. Retail advertising is expected to decline about 10% and national advertising should drop 13% in the same time period. Online revenue won’t pick up much of the slack: the NAA forecasts meager growth of 1.8% this year.

Media Life magazine catches up with David T. Clark, senior research analyst for publishing and advertising at Deutsche Bank Securities, to get his take on the wreckage. Here are a few quotes:

“This is a pivotal time for the newspaper-retailer relationship…Share losses now will be amplified when we emerge from this downturn.”

“Newspapers must be perceived as a marketplace in which the advertising is considered content, not clutter.”

“I think we’ve got at least several more quarters of very steep industry ad revenue declines to go before we see much improvement.”

“Newspapers do digital pretty well, but…it doesn’t look like a viable business model will emerge in time to save some metro dailies…They are at the bleeding edge of the structural issues the industry faces…Metro papers over-index to classified advertising, which is disappearing fast….They need to variabilize as much of their costs as possible, get all of that old media hardware off of the balance sheet…Tough to sell a printing press these days, though.”

Desert Storm

The East Valley Tribune of Mesa, Ariz. will make massive cutbacks, laying off 142 people, or about 40% of its staff. The daily will also withdraw coverage from nearby Scottsdale and Tempe and scale back to four days a week, most likely Wednesday, Friday, Saturday and Sunday. The print format will also be scaled back to two  sections ‑ one for local news and one for sports, entertainment and late-breaking news.The Tribune has a paid and free distribution of around 100,000. It’s owned by Freedom Communications, a publisher of more than 100 mostly small newspapers and a few big ones, including the Orange County Register. Ray Stern analyzes the impact on the valley, including the huge loss the cutbacks represent to the city of Scottsdale, which may become the US’ largest major metro area without a daily newspaper.He also lists some of the prominent journalists who will be exiting the scene.

Spokane Spokesman-Review Girds for More Cuts

The Spokane Spokesman-Review, whose editor quit last week over cutbacks in his staff, named Gary Graham to the post. Publisher W. Stacey Cowles took some questions from staffers and offered little optimism about the immediate future. His responses are noted on a staff blog. Highlights:

• The S-R “is planning for the possibility of not having” the Associates Press in the future.
• Potential cost-cutting measures include a reduction in trim size reduction (next June), dropping some circulation routes in outlying areas, reconfiguring press runs and office space consolidation. The paper is likely to close its Spokane Valley bureau.
• “The company would like more flexibility in compensation of newsroom employees, more flexibility to change compensation to reflect market rates.” In other words, pay cuts are likely.

Tumbleweeds in Albany

The New York Times writes of the impact of staff cuts on the press corps covering goings-on in Albany. With the closure of the New York Sun last week, five newspapers have exited the state capitol in less than two years. The organization of statehouse journalists in Albany has seen its ranks dwindle from 59 members in 1981 to 42 journalists last year. “With the exception of Buffalo, Watertown and Albany itself, no city outside the New York metropolitan area has a newspaper with a dedicated, full-time correspondent in the Capitol,” writes Jeremy Peters. Wire-service bureau reporters don’t offer the local angle that correspondents used to provide. Reporters who once jostled for desk space now have their pick. “It’s like tumbleweed should be blowing around here,” says one reporter. Observers fret that the cutbacks are leaving legislators to play in their own private sandbox withoutthe limits of citizen oversight.

Layoff Log

• More cutbacks at the Los Angeles Times. LA Observed is reporting that the paper will cut 75 positions, which would bring total newsroom staffing to about 650. That’s down from a high of nearly 1,200 in 2001. The reductions will be achieved through buyouts, if possible, but staffers will be told that this round of cutbaks will be their last chance to get a package of two weeks’ pay for each year of service. Media Bisto says the Washington bureau will be cut back right after the election.  American Thinker comments“More and more unemployed left wing journalists are joining the sans culottes. History teaches us that unemployed intellectuals are fodder for revolutionary movements.” (via Edward Padgett)
• The Cleveland Plain Dealer plans to cut 38 unionized newsroom jobs, or about 13 percent of the newsroom’s staff. Most of the jobs being eliminated are held by Guild members. Employees have until Nov. 20 to accept a buyout offer, with layoffs expected to make up the difference. The Plain Dealer, which has 299 newsroom employees, cut 64 journalist jobs in 2006. The actual reductions are somewhat below the rumors of 20% cutbacks that circulated in June.
• Boulder’s Daily Camera is moving all of its remaining printing and packaging operations from Boulder to Denver and laying off 29 more workers by the end of October.The paper will now be printed at the Denver Newspaper Agency facilities, where the Denver Post and the Rocky Mountain News have recently taken up residence.

And Finally…

The industry downturn has claimed one of the world’s most famous journalists – and he isn’t even a real person. Rick Redfern, the resident ink-stained wretch of the Doonesbury comic strip for more than 30 years, has decided to accept a buyout. “Redfern leaves with utter resignation, apparently having reasoned that he has no real newsroom options,” writes The Washington Post‘s Michael Cavna. “Thanks for the 30-plus years, Rick. By the fourth panel — in the style of a true newspaperman — you always had the perfect line.”

We constantly hear about the angst that aspiring young journalists face as they wrestle with the decision of whether they made a huge mistake in choosing journalism as a career. Let us share a story that hopefully provides some encouragement. We can’t name all the names because we don’t have permission.

A friend of ours has a son attending a Boston area university.  In his sophomore year, this young man found himself interning at the Boston Globe, where he worked the overnight shift on the rewrite desk.  This past summer, the Globe offered him the opportunity to write a daily blog about activities in the New England area.  Last month, the young man headed back to school and a paid internship at a major newspaper, where he is spearheading an initiative to build a new online community.  This young man is 21 years old.

There’s a lesson in this anecdote.  The decline of traditional media creates huge opportunities for those who have the stomach to take a chance. Back in the 1970s, the conventional wisdom was that the path to a journalism career involved slaving away at a small daily paper, working for food and rent and hoping to catch the eye of a big-city editor.  Today, so few young people want to go into journalism that the opportunity for those who do is virtually limitless.

Savvy investors know that the people who make the biggest killing in any market are those who are willing to buy when everyone else is selling.  The field of journalism right now is a buyers market for the few who buck the conventional wisdom.  Newspapers may not survive much longer in their print form, but most people agree that the core skills of journalism will be needed in one way or another long into the future.  Risk-takers like our young journalist are capitalizing on this trend to gain experience and visibility that a decade or two ago would have taken many years of hard and anonymous work.

That’s why it’s a great time to get into a journalism career.  The current malaise about media will eventually give way to optimism about new models.  The people who have gained the core skills that are necessary to succeed in a reinvigorated industry will rocket ahead in their careers.  Sure, there’s plenty of uncertainty about what media institutions will look like in the future, but if you’re willing to take a chance, you stand to reap huge rewards.  Newspapers are hungry for new ideas, and the best ideas are coming from the generation of young people who aren’t burdened by a romantic attachment to the past.  There’s never a better time to take risks than when you’re in your 20s.  My friend’s young son knows that, and we predict he will be one of the big winners when the trend inevitably reverses itself.

Redesigning Newsrooms

The Tampa Tribune will introduce a new design on Monday, and it’s keeping the details secret. The St. Petersburg Times has some inside dope, though. An interesting sidelight is that the merged Tribune/WFLA/TampaBayOnline.com newsroom is also being redesigned around these subject areas: data, deadline, watchdog journalism, personal journalism and grassroots. We wouldn’t have thought of those ourselves. Give credit to Executive Editor Janet Coats, who’s communicating some urgency: “For most of us, it’s only been in the last year to 18 months that we’ve started getting away from the idea that the Web site is the newspaper on a computer screen . . . I’m worried that if we don’t change how we think about this further it won’t matter what falls through the cracks because we’ll have no readers.”

Speaking of redesigning the process, editors at the UK’s Birmingham Post, Sunday Mercury and Birmingham Mail are also turning the newsroom on its head. Editors Weblog reports that the three papers now share a physical space and some resources. The process of publishing news story has been condensed from five steps to three, with online leading the way. News editing and production have been merged into a single stage. Reporters carry laptops and video cameras and can file from anywhere. There’s been tension, of course; 65 jobs were eliminated in the redesign and staffers were made to re-apply for available positions. However, these three paper are envisioning a future and doing something about it, which is what we call leadership.

Editor Quits, Speaks

Yesterday, we noted the resignation of Steven A. Smith as editor of the Spokane Spokesman-Review in protest of job cuts that he said were cheapening the product. Knight Digital Media Center caught up with Smith for an interview and provides interesting background. If you think this guy is some old-line curmudgeon who won’t face up to new realities, think again. Smith has actually be an outspoken proponent of the need to change calcified newsroom thinking and to reinvent newspapers around digital platforms. He conceived of an innovative idea to invite readers to observe and participate in daily news meetings. There’s more detail in the Knight story. We think Steven Smith won’t have trouble finding a job. Vision like that is still rare in this business.

Miscellany

Calamity and politics are good for online traffic. The Washington Post’s Web site, washingtonpost.com, scored a 42% jump in year-over-year traffic. The trend was driven, not surprisingly, by political and business stories.

Google says it’s figured out a way to tell when bloggers are writing news. A new feature of Google Blog Search shows categories of blog entries in a left sidebar. In some cases, the popularity of topics is displayed in chart form on the right. Here’s an example.

And Finally…

When you can’t beat ’em, steal ’em. Fading to Black has a short item about a newspaper war in the San Francisco Peninsula area that heated up this week when the San Francisco Examiner caught a delivery man for the Palo Alto Daily Post apparently stealing copies of the Examiner as he delivered his own newspaper. When confronted and asked to open his trunk, the man had more than 1,000 copies of the rival newspaper stashed away. Maybe he just had a lot of birdcages to line.

With the newspaper industry already reeling from a perfect storm of recession, Internet flight and falling real estate prices, it’s hard to imagine how things could get much worse. Well, they just did. The bankruptcies and sales of several prominent Wall Street firms have severely tightened capital markets at a time when many newspaper companies are already groaning under the burden of enormous debt. The collapse of the mortgage industry will also drive down real estate prices, further crimping a vital source of classified advertising revenue. One analyst estimated that the total value of US real estate could fall from a high of $22 trillion to a low of $9 trillion before the healing begins. This will leave creditors will massive amounts of real estate assets that are worth pennies on the dollar. And there are few buyers available. As John Duncan explains in this insightful analysis, no one is giving credit right now, which drives prices lower and further limits the pool of available buyers.

With credit markets tightening, publishers have few places to turn to raise capital. Duncan cites the example of McClatchy which just restructured its debt payments. McClatchy’s debt is based on the London Interbank Offered Rate (LIBOR), which is the rate at which the world’s most preferred borrowers are able to borrow money. The LIBOR climbed to an all-time high of 6.88% this week, which Duncan estimates will cost McClatchy at least $1 million a week more in debt service payments than it expected just a week ago. The same dynamic applies to any other publisher looking to relieve debt loads. Restructuring will only force those costs further upward.

For businesses like Tribune Co., the news gets even worse. Sam Zell has been performing financial card tricks just to meet quarterly debt payments. His ace in the hole has been non-newspaper assets like the Chicago Cubs and Wrigley Field, as well as real estate picked up in the Tribune LBO. Those assets are now valued at significantly less than they were just a few weeks ago, meaning that Tribune Co. has far less leeway to leverage them to generate cash.

On top of all this, of course, is the worsening outlook on the revenue side. As the economy settles in to what is likely to be a protracted recession, ad revenues will shrink further. The real estate sector, which has traditionally been a profitable source of classified advertising revenue, will suffer most of all. Just look at the effect that the devastation of the Florida real estate market has had on newspapers there. Now imagine this scenario spread across the entire country.

Alan Mutter theorizes that even a broad recovery in real estate prices wouldn’t help very much. He notes that advertisers are spending a shrinking proportion of their dollars on newspaper advertising. The emergence of more-efficient online channels is sucking dollars away, meaning that even an unlikely quick recovery in large consumer markets like housing and cars would benefit newspapers disproportionately less than other media.

Duncan’s likely scenario is that cash-rich investors will sit on the sidelines until the carnage is complete and then enter the markets to buy properties at pennies on the dollar. This isn’t necessary a bad thing: “If newspapers were managed by new groups of people with no real romantic link to the glory days of newspapers, and freed from management grown fat and lazy on the easy profits of the glory days of American local newspapers, maybe titles can innovate again and start thinking about how they serve audiences better in print and online,” he writes. In other words, instead of saving the American newspaper industry as we now know it, the more likely scenario is that the business collapses completely and is reinvented by people who have no romantic attachment to earlier times.