Moody's Downgrades U.S. Newspaper Industry to 'Negative'

According to Moody's Investors Service, matters in the U.S. newspaper industry have now gone from bad to worse in the past six months.

Moody’s has revised its outlook on the U.S. industry to negative from stable, blaming unfavorable advertising and circulation trends.

The industry’s “longer-term secular deterioration is returning to the forefront … as readers embrace free and low-cost content on the web and mobile devices," despite a slowly growing economy, Moody’s Vice President John Puchalla said in a statement.

Moody’s forecasts that newspaper revenues will decline 5% to 6% in 2010 and drop roughly the same amount in 2011.

Although aggressive increases in home-delivery prices have helped revenues, Moody's said, further newsroom cuts are “unavoidable” as “newspapers will continue focusing on structural cost changes, eventually leading to more headcount reductions and a slight uptick in severance costs.”

In order for the newspaper industry to return to a “stable” rating, Moody’s said the sector would have to see "further development of user fees and advertising in new distribution channels through pay-walls or other means that would not overly cannibalize traditional print volumes or pricing."