Sunday, October 28, 2007

Newspaper biz is healthy in the (very) long term

Those who have read this blog for a while will know that I'm pretty negative about the newspaper industry. In part because of external factors -- there's little anybody could do about many of the problems the industry faces; and even more because of the incredible blindness and arrogance of those in the industry -- there are things that could be done to mitigate the damage of those external factors, but ...

Fortune's Richard Siklos recently published a column arguing that things aren't quite as bad as the seem, noting correctly that newspapers still account for about a quarter of all advertising revenue in the US.
So much depends on how you view the numbers. A report by PriceWaterhouse Coopers estimates that revenue for the newspaper industry will be down 1.4% for 2007 to $59.2 billion, the second straight down year. The report sees advertising for the industry at essentially flat through 2011, after taking into account papers' rising online revenues. Put another way, according to this analysis nearly one out of every four dollars spent on advertising in this country is spent today on newspapers. And much of the upheaval is due to the fact that it is moving to one in five dollars in a hurry, largely thanks to online upstarts. There are plenty of businesses that wish they had these problems.
Meanwhile, an analyst for Deutsche Bank was announcing what amounts to good news these days -- that growth will return for newspapers ... in 2012. But even that tempered optimism had to be tempered further, by noting that the good ol' days will never return:
Wall Street analyst Paul Ginocchio predicted that big metro newspapers would bounce back—but not until 2012. But the Deutsche Bank Securities analyst warned that when earnings turn positive again, they would be in margins far below the levels newspapers got used to in the 1990s.
For the newspaper business today, every silver lining has a cloud.

And then, of course, there are ongoing rumors about a potential buy-out of the New York Times, and one look at their stock price over the last couple of years shows why:


But even the gloomiest viewers of the newspaper biz (a category in which I could probably be placed) think newspapers are going to disappear. As Siklos notes, "[I]t's instructive that no legacy medium has been obliterated by a new technology: consumers simply adjust and adapt. In the era of DVDs and downloads, we still go the movies and listen to the radio."