By: Jennifer Saba The newspaper industry experienced its weakest performance in several years in Q1, with a 2.6% revenue gain for the quarter, according to a report released today by Goldman Sachs.
The slowdown in advertising revenue growth coupled with circulation revenue declines are the culprits for the lackluster results. The firm estimates that Q1 ad revenue grew 3.3%, compared with 4.2% in Q4 2004 and 5.4% in Q3 2004. Circulation revenue dropped about 2.7% in Q1.
The trend doesn't seem to be reversing anytime soon, the report noted. An early Easter impacted March numbers -- advertising slows on holiday weekends -- but April isn't looking much better. April results will most likely lag January and February.
There are a few upsides to soft ad and circ revenues: Newsprint consumption is down. The proposed $35/ton newsprint price increase proposed for March 1 has been pushed back until sometime in June.
The other piece of good news, though perhaps not if you're an employee, is that executives are "aggressively" holding down labor costs. Industry headcount is down about 0.5% year-to-date and average hourly earnings are up roughly 2.6%, "translating into low-single-digit increases in wage expenses."
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