Goldman Sachs: 2008 Already a ‘Record’ Year

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By: Jennifer Saba

This year is a record-breaking one for the newspaper industry — but not in good way. In a short note issued by Goldman Sachs analyst Peter Appert, he and his team point to three unsettling trends: three consecutive years of advertising revenue declines (two was the previous record); double-digit drops in ad revenue; and likely big dips in operating margins.

“All-in-all, a year of records that most industry participants would prefer to miss,” wrote Appert.

The companies that have reported May results show that the downturn is even sharper than previously thought. Goldman Sachs estimates that in May, ad revenue plummeted 14.6% compared to the same period a year ago, after April’s 10.7% drop.

“So much for the theory that easing comps will pave the way to improved results as the year progresses,” wrote Appert. “Particularly troubling is the broad-based weakness, with all three primary ad categories — national, retail, and classified — experiencing sharp declines.”

What these “records” point to, Appert and his team contend, is that it’s becoming clearer the industry is going through structural changes. The southbound direction of the economy is only making the challenge tougher.

Goldman Sachs maintains its “neutral” rating on A.H. Belo, Gannett, GateHouse Media, Journal Communications, and Scripps. McClatchy and The New York Times Co. are still rated as “sell.”

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