By: Lucia Moses Newspapers will resume growth in the next five years, but at a slower pace than in recent years, according to a forecast set for release today.
Advertising and circulation spending on U.S. daily newspapers is expected to decrease 0.9% this year, but increase by a compounded annual rate of 3.4%, to $70 billion, by 2005, predicts New York-based media merchant bank Veronis Suhler in its annual "Communications Industry Forecast." From 1995 to 2000, spending on dailies grew at a compounded annual rate of 5.3%.
The future of retail ad spending appears bright. Aided by small advertisers and growing national chains, retail is expected to rise by a compounded annual rate of 4.5% from 2001 to 2005, versus 3.4% in the earlier five-year period.
The outlook for classified and national ads is dimmer. Classified ads over the next five years are expected to grow 1.3%, compounded annually, versus 7.4% in the previous five years. National ad growth is expected to slow to a compounded annual rate of 6.5% over the next five years, following a 13.2% growth rate the last five years.
Robert J. Broadwater, managing director at Veronis Suhler and a 20-year observer of the industry, remains bullish on newspapers. "They still gather more spending than any other media segment," he said.
There's hope on the circulation front. Hurt by declining daily circulation and publishers' reluctance to raise cover prices, circulation revenue last year reached its lowest level as a percentage of total daily revenue since 1981.
The slowing decline in evening papers, aging American population, and loosening of circulation rules should grow daily circulation by a compounded annual rate of 0.1%, Broadwater said, while price hikes by some leading dailies are expected to nudge circulation revenue.
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