Can The Newspaper Industry Recover?

pile of mainstream newspapersThere have been many different industries that have taken vicious beatings during this current recession/depression.

However, the newspaper industry has hit particularly hard, and you have to wonder if they will ever be able to recover.

The flow of news from the industry is just bad, bad, bad.

Here's a quick sampling for you:

-the New York Times just announced that it is suspending its dividend, and is currently trading at $3.51. NYT was trading at around $20 in May of 2008

-Tribune Co., which owns the Chicago Tribune, Los Angeles Times and Baltimore Sun, recently filed for bankruptcy. They cited declining revenues and mounting debts as the reason for their bankruptcy.

-the Seattle Post-Intelligencer will shut down or move to online-only if they can't find a buyer by March

-the Tucson Citizen will close if it can't find a buyer

-Gannett, the largest US newspaper publisher, is down approximately 90% on the year. Gannett owns the USA Today, amongst others. The company is desperate to cut costs.

-the Buffalo News, New York Daily News and three other papers recently signed a content-sharing deal that will allow the five papers to cut costs

-News Corporation, which is the globe's "leading publisher of English-language newspapers" (including the WSJ and the New York Post), is currently trading at $6.68. This is a stock that was trading at around $20 this time last year.

This is just a small sampling of some of the bad news that is currently hitting the industry. I would imagine that if I kept digging, then I would find nothing but more bad news.

The newspaper industry is being negatively affected by a number of different things, including:

1. An increasingly older customer base (in 2005, a survey was released claiming that the average age of a newspaper reader was 55). More and more people are getting their news online these days. Younger people (at least in my experience) are just not taking to newspapers, and prefer to get their news online because it is more timely and easily accessible.

2. Dropping subscription numbers.

3. Dropping daily circulation numbers.

4. Dropping advertising revenues.

5. Increased debt loads.

Why are advertising revenues dropping? A number of reasons:

a) Many companies are choosing to allocate more of their advertising dollars to other forms of media (namely, the Internet)

b) Declining readership means that newspapers can't justify asking for as much money for ad spots

c) Many advertisers are suffering in the recession as well, and have to cut back or pause their campaigns altogether

I talk with people who do media buys on a daily basis. Most tell me that they are allocating more and more of their budgets to online advertising spends. The reason? It's much easier to measure their ROI, and they are able to really target their preferred demographics.

Can the newspaper industry possibly recover?

It's not as if the industry will suddenly rebound when the economy rebounds.

I mean - advertising revenues will almost certainly recover (somewhat) when the economy starts to rebound, but how will the industry deal with a steadily declining base of readers?

Filed under: The Economic Meltdown | General Knowledge

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