Newspapers: the slo-mo train wreck

I have a friend in the newspaper business who remarked a couple years ago that watching what was happening to the papers was like watching a slow-motion train wreck. The good news is that he’s wrong; the bad news is that he’s wrong only because it’s no longer slow-motion.

On top of long-term changes in the industry, the weak economy is also hurting ad sales, especially in Florida and California, where the severe contraction of the housing markets has cut deeply into real estate ads. Executives at the Hearst Corporation say that one of their biggest papers, The San Francisco Chronicle, is losing $1 million a week.

Over all, ad revenue fell almost 8 percent last year. This year, it is running about 12 percent below that dismal performance, and company reports issued last week suggested a 14 percent to 15 percent decline in May.

“Never in my most bearish dreams six months ago did I think we’d be talking about negative 15 percent numbers against weak comps,” said Peter S. Appert, an analyst at Goldman Sachs. “I think the probability is very high that there will be a number of examples of individual newspapers and newspaper companies that fall into a loss position. And I think it’s inevitable that there will be closures in this industry, and maybe bankruptcies.”

This is not a problem peculiar to newspapers, of course; it’s in part a media fragmentation issue, with the proliferation of new media meaning that radio and TV are seeing hard times as well. Newspapers are especially hard-hit because classified ads have proven the easiest form of advertising to move to the web, and because classified was a huge cash cow for the papers.

I examined the issue of media fragmentation in general and as it impacts trade promotion back in 2005 (time really flies, doesn’t it? I was shocked when I saw that date on that piece) and later the same year, I went into it a bit more, focusing more closely on newspapers, as the primary vehicle for trade promo in many product categories.

On the rare occasions when I’m right, I like to trumpet that fact, and so I’ll point out that I predicted back then that a result of the decline of the media would be a greater reliance on in-store marketing. Okay, so it was pretty obvious – still, I was right.