No Newspaper Growth Until 2014, VSS Forecast Says

By: E&P Staff

Declines in newspaper spending are expected to slow this year, with the market eventually stabilizing by 2013 and growth beginning in 2014. But with spending of only $36.76 billion in that year, newspapers will not come close to the $66.37 billion in peak spending the industry saw in 2005, according to the Veronis Suhler Stevenson Communications Industry Forecast 2004-2014.

The private equity firm specializing in the business information and services, education, media and business and marketing services industries foresees retail, classified and national advertisers continuing to shift spending to digital platforms “to target audiences and improve return on investment” as print circulations decline, reflecting younger consumers’ migration to new electronic media.

Noting newspapers’ pursuit of alliances to expand into those new media, as well as changing business models that involve charging fees for online content, the report goes on to state that “weekly newspapers are no longer insulated from the migration of users and advertisers to the Web.”

VSS expects total newspaper spending to fall this year by 9.5%, to $37.79 billion, driven by declines in dailies of 10.6% (to $30.2 billion), in weeklies of 7.1% and digital platforms of 1.1%.

By 2014, some local advertisers will return to print media to reach its loyal older demographic. But the industry’s earlier shortfalls will lead to a decline of 2.5% in the compound annual growth rate (CAGR) in the forecast period.

Dailies will post a compound annual decline of 4.1% from 2009 to 2014, while weeklies’ compound annual decline will be 0.7%, according to the report, which adds that a 9.2% CAGR for digital platforms will help offset those declines.

Rebounding national and classified auto advertising in 2010 should “nudge the newspaper advertising market toward a recovery,” even as employment and real estate classifieds, as well as retail advertising, remain weak in some regions, the report says.

Continued pursuit of operating efficiencies such as outsourcing printing, distribution, copyediting and design can be expected, but the massive cost-cutting trend should dissipate, according to VSS, which noted that the Minneapolis Star Tribune, which recently emerged from bankruptcy, announced it will restore its 401(k) match for employees.

The report further points to investments in new sections and editions, citing The Wall Street Journal’s New York edition and The Philadelphia Daily News’ slated October launch of a weekend edition.

Forecasting accelerated investment in digital platforms, the report mentions the possibility that Journal Register Co., which recently emerged from Chapter 11, may change its name “to better reflect its transformation into a multiplatform news and information company” since CEO John Paton created a board of digital experts to advise the company. JRC, reporters’ new equipment includes the video cameras that led to 600,000 video streams in March of this year.

Newspapers are expected to offer more e-reader apps in hopes of attracting readers and advertisers who have abandoned print editions.

VSS figures for 2009 show total newspaper spending was down 22.7% to $41.76 billion, caused by declines in all segments, including dailies, weeklies and digital platforms. The industry sustained a CAGR decline of 8.5% in the 2004-2009 period. Daily newspaper spending declined 24.5% to $33.78 billion, weekly newspaper spending sank 16.0% to $5.03 billion, and “a significant decline in Internet advertising” led to a 10.6% fall-off in spending on digital platforms, to $2.94 billion — although it rose at a 12.9% CAGR from 2004 to 2009 despite the downturn in 2009.

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