Newspapers
For papers, 2009 looks even grimmer
By Toni Fitzgerald
Dec 29, 2008 - 8:15:48 AM

A few years ago, even the most cynical newspaper people would not have anticipated the sharp declines in circulation and advertising revenue that defined 2008 and, perhaps more damning, how ill-equipped papers were to handle them.

In recent months several papers have severely curtailed their print editions, some eliminating them altogether, to focus on the internet, while the Detroit papers just this week said they would stop home delivery most days of the week.

The layoffs that have battered the industry accelerated this year, with more than 15,000 losing their jobs, while big companies like Tribune Co. and McClatchy were racked by mounting debt, credit problems and declining stock value.

Things are looking even worse in 2009.

Forecasters have predicted more declines in newspaper advertising revenue, hurt by the recession and the continuing competition from the internet. Ad spending could be down anywhere from 9 to 16 percent, after falling 10 percent through third quarter 2008, according to TNS Media Intelligence.

Circulation, too, is expected to keep declining after slipping 4.6 percent at dailies across the country during the first half of the year. Some is coming from voluntary cuts in undesirable outlying circulation that advertisers don’t care about, but far more is readers being lost to the internet or other media.

“Unfortunately, advertising will continue to collapse,” says analyst John Morton, president of Morton Research. “There’s no indication that automotive or real estate are going to come back strong in 2009. That means that 2009 will be very much like 2008, only worse.”

“Newspaper advertising dipped by an enormous amount in the last few years, even before the economy took a turn for the worse,” adds Alan D. Mutter, the onetime No. 2 editor at the San Francisco Chronicle and author of the blog Reflections of a Newsosaur. “The concern many have now is how much worse will the economy be and how bad will it get.”

The economy is impacting advertiser spending in more than one way. Companies are cutting back because of the recession, but there are also fewer advertisers out there as auto dealerships, toy stores, electronics retailers and more shut down.

With less competition, there’s both fewer dollars in the marketplace and less need for the remaining competitors to advertise. That could eventually hurt newspapers nearly as much as the decline in auto, real estate and classified revenue.

“Advertisers have already begun to vote with their feet,” Mutter says.

There is also a real chance that some prominent newspapers will shut down in 2009. E.W. Scripps’ Rocky Mountain News is almost certainly a goner if no new buyer arises, and McClatchy recently put the Miami Herald on the block. The Journal-Register has threatened to close a handful of Connecticut papers if buyers don’t emerge.

It’s hard to imagine anyone buying a newspaper at this time, and even if someone came forward, the credit crunch makes such a purchase seem nearly impossible. Landmark took the Virginian-Pilot off the market a few weeks ago after potential buyers had difficulty securing funding.

“We’re going to see a lot of contractions, particularly larger-city markets,” Morton predicts. “Most smaller-town newspapers are doing okay. They’re down but it’s not nearly so much as has been experienced by some big-city papers.”

That could lead to more radical changes like the one in Detroit, where home delivery will be eliminated on all but three days a week.

Still, don’t expect a plethora of papers to abandon print for the web. The vast majority of their revenue still comes offline. And while some have talked of the day when online gains might offset print losses, that seems less and less likely with the accelerating declines on the print side.

The biggest question for newspapers once the recession ends may be whether advertisers will return or if they’re gone for good. Analysts aren’t sure of the answer.

“The problem is when advertising, particularly classified, recovers, and I don’t expect it to happen before 2010, will newspapers recapture what they lost or will it go to competing sites?” Morton says. “I suspect at least a sizeable portion will be lost.”