By: Jennifer Saba "Newspaper stocks had their worst year on record," so starts a note to investors about the newspaper industry from Wachovia Equity Research's John Janedis. Strip out Dow Jones and Tribune, and stocks fell 40%, according to the report.
This year should be more of the same for the industry as Wachovia estimates that ad revenue will slip more than 6% led by a 12% drop in classified revenue. National and retail should be down too, 10% and 3.5%, respectively.
The fall off is a mixture of secular ? the shift to online ? and cyclical factors, believes Wachovia. Taking classified as an example, help-wanted should fall off. Janedis dinged pure-play Monster Worldwide, a company that he also covers, noting a slowdown in year-over-year postings.
Making matters worse, newsprint producers should be turning the screw on pricing. It's anticipated that the price per ton could increase around 5% to 7% since supply is tight and the exchange rates favor suppliers.
There is, however, a little bit of relief on the horizon: the alliances with Yahoo, Goggle, and others should start producing results. While Wachovia admits it's difficult to eyeball, "we estimate the partnerships could contribute $10 million plus in revenue this year from many companies in the Yahoo consortium," wrote Janedis.
Meanwhile, online ad revenue should keep growing, albeit at a slower pace. Last year, Wachovia thinks it grew about 20% and this year it's expected to increase about 15%. Online share as a percentage of total revenue should gain ground in '08 to 8% from about 6.5% last year.
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