NEWSPAPER ADVERTISING REVENUE TO SCALE RECORD HEIGHTS

By: Joe Nicholson

Forecast: Dailies Will Shatter $50-Billion Ad Revenue Ceiling





from this week’s Editor & Publisher magazine. To subscribe, click
here.



by Joe Nicholson



Advertising revenue for newspapers will scale record heights this
year, next year, and the following year. And the only clouds
threatening to dampen the celebration – uncertainties about retail
advertising and more than a decade of declining circulation – are
expected to dissipate in the bright sunshine of an economy that
continues to expand.



That is the almost-too-good-to-be-true news in a new five-year
forecast by the media merchant bank Veronis Suhler, which believes
only ‘a worse-than-forecasted showdown in economic growth’ will
spoil the fun.



The newspaper business ‘is better than many people who are financial
analysts and who are media buyers think – and the industry could do
a better job of communicating its value to these people,’ declared
John S. Suhler, the firm’s partner, president, and co-CEO, in an
interview with E&P. ‘Basically, this is a terrific business.



‘It’s a business that has got good, solid, dependable growth in its
future,’ added Suhler, who has analyzed media for three decades and
who advises many of the world’s leading media companies.



By the end of 2000, Veronis Suhler’s Communications Industry Forecast
projects that daily newspaper ad revenue will hit a record $49.8
billion, up from $46.3 billion last year and an eyelash short of
cracking the $50-billion plateau. In fact, Robert J. Broadwater,
managing director of the newspaper group at Veronis Suhler, told E&P
there is ‘a possibility’ daily newspapers could crack the $50-billion
barrier ‘if there’s a pleasant surprise any place’ in the upcoming
months. All three ad revenue categories also will set records this
year, said the forecast, with retail hitting $21.77 billion;
classified reaching $20.65 billion; and national soaring to $7.36
billion.



If not this year, daily ad revenue will crash through the $50-billion
barrier next year and reach $53.3 billion, the forecast said. The
merry ride is projected to careen along with the total rising to $56.8
billion in 2002; to $60.3 billion in 2003; and to $63.2 billion in
2004.



As has been the case for the last three years, the brightest of bright
spots was national advertising. Last year, the category jumped a
remarkable 17.7%, which Veronis Suhler called ‘unprecedented’ in recent
history.



Weekly newspapers continued their long-term trend of growing even
faster than dailies. When ad and relatively stable circulation revenue
are combined, weeklies grew 8.7% to $6.3 billion last year, compared
with dailies’ 4.7% growth to $56.7 billion.



Report says newspapers have survived ‘Internet age’



The picture of prosperity painted by Veronis Suhler contrasts
dramatically with the contentions of some Web hypesters. Its forecast,
which covers all major communications industry segments from old-media
newspapers to the new-media Internet, said recent results show ‘the
newspaper industry once again defied the skeptics who have been
proclaiming the demise of this print format since the dawn of the
Internet age.’ (The authoritative 357-page document can be purchased
for $1,495 by calling (800) 935-4990.)



The forecast does not even support scolds among newspaper leaders and
forecasters who have been singing fretfully about advertising and
circulation soft spots: ‘Well, you got trouble, my friend! Trouble
right here in River City!’



Rather, the forecast predicted a more-than-welcome end to the long
industry nightmare of dailies’ declining circulation, saying
circulation finally will edge upward as a result of various factors,
including increased promotional efforts, stable prices, and a
dwindling number of dailies going out of business. The good news in
circulation appeared to be partly the result of good news – perhaps
it would be more precise to say good luck – in newsprint prices,
which dropped 11.8% last year, cutting the price per metric ton
from $587 to $518. Some papers used newsprint savings to invest in
building circulation. Newsprint prices were projected to increase
a modest 3.3% this year and 1.9% next year.



Among dailies, aggregate weekday circulation is projected to tick
upward this year from a little less than 56 million to 56.1 million;
Sunday editions are projected to end 11 years of declines with an
uptick in 2004 from 58.9 million to 59.0 million. ‘If weekday
circulation does in fact increase in 2000, it will end a 12-year
slide,’ the forecast observed. With four more small upticks in
weekday circulation in each of the next four years, weekday
circulation is expected to rise in 2004 to 57.4 million.



‘I am very encouraged by what appears to be the imminent end of
circulation decline,’ said Broadwater. ‘It is critically important
for this industry to at least stabilize its overall circulation
and, hopefully, grow it because [newspapers are] one of the few
remaining mass-circulation media around. … You have to maintain
your position as the dominant voice in the community.’



Newspapers with stable or growing circulation also will be in
better position to recruit and retain the most talented workers.



‘Most people I deal with feel better,’ reported Broadwater, who said
accept stable or slightly growing circulation helps demonstrate
newspapers ‘are still an important and vibrant big-coverage medium on
the local level.’ He observed, ‘It’s easier to sell advertising against
growing circulation.’



In the future, some dailies may weigh the costs and benefits of
converting to free distribution, said Broadwater. The New York-based
alternative weekly Village Voice converted to free distribution in
1996, and went from a circulation of a little more than 100,000 to a
distribution of more than 250,000 – and significantly improved total
revenue – all within two years, said Broadwater, whose firm brokered
the sale of the weekly and its alternative siblings earlier this year.
He said a newspaper would have to determine whether it can more than
make up the loss of circulation revenue with added advertising revenue.



Retail will rebound



The other feared trouble in River City has been retail advertising,
the largest source of dailies’ ad revenue. Ad forecast guru Robert J.
Coen, who has been reading the crystal ball for more than half a
century, reported two months ago that newspaper retail advertising
rose an anemic 0.5% in the first quarter of this year compared to the
same period last year. Coen, senior vice president and forecasting
director at Universal McCann, said the 0.5% figure might be an
aberration or might indicate newspapers were losing local retail
share to radio and other media.



The Veronis Suhler forecast found recent newspaper retail weakness
similar to what Coen reported. Retail ad spending in dailies rose
only 2.8% last year, the weakest result of any newspaper ad category
in the last three years.



But Veronis Suhler predicted daily newspaper retail will mount a
moderate rebound, posting increases that range between 4% and 5% this
year and in each of the next three years. The projected retail growth
during the next four years will not nearly match classified ad growth,
which is forecast to range from 6.9% to 10.7% annually during those
years, or national ad growth, which is expected to jump between 8.7%
and 9.9% a year over the next four years.



But 4% to 5% growth isn’t Trouble in River City. ‘It’s not an
embarrassment for someone to say that they are growing at 4% or 5%,’
declared Suhler, who said retail advertising was still recovering
from the restructuring of the retail industry in the early and
mid-1990s. ‘I don’t think there is anything to be embarrassed about
when retail spending is within [1%] of growth … I don’t think that
retail is being siphoned off.’



Nonetheless, Suhler said the newspaper industry may be getting ‘a
little bit less than its fair share’ of retail ads, and newspapers
were smart to try ‘to reinvent themselves to help retailers.’



In addition to all the other nice things Veronis Suhler foresees, it
predicts newspaper classified advertising will overcome occasional
defections to the Web and post impressive gains this year and over
the next few years.


Some real-estate and employment ads have been lost to the Web and
contributed to a decline in classified ad growth from 11.3% to 6.6%
to 4.3% over the last three years, said the forecast. But it predicts
classified will rebound to grow 10.7% this year. (And keep in mind
that 10.7% growth translates into an additional $2 billion in this
mature, if not elderly, industry.)



After the 10.7% spurt this year, classified growth is projected to
remain healthy: 8.5% next year, 7.8% in 2002; 6.9% in 2003; and 6.4%
in 2004.



‘No doubt there is some classified advertising that used to appear in
newspapers that now appears on Web sites and won’t come back to
newspapers,’ said Broadwater, who explained it was difficult to
estimate the size of the loss. ‘The feeling is that it is a relatively
small amount,’ he said, referring to anecdotal accounts.



Newspaper executives were ‘galvanized’ by the challenge of the Internet
in recent years and responded by setting up their own Web sites, many
with ad support, said Broadwater. While those Web sites may not yet
make a profit, he said, they have become ‘a necessary part’ of the news
and ad operations at flourishing newspapers.







~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~





Joe Nicholson (jnicholson@editorandpublisher.com is an associate editor
for E&P.





(c) Copyright 2000, Editor & Publisher

Like & Share E&P:
RSS
Follow by Email
Facebook
Facebook
Google+
https://www.editorandpublisher.com/news/newspaper-advertising-revenue-to-scale-record-heights/
LinkedIn

Leave a Reply

Your email address will not be published. Required fields are marked *