By: Jennifer Saba Goldman Sachs analyst Peter Appert called 2007 "Annus Horribilis" in a note to investors in December. Overall ad revenue tumbled for the industry, hitting new lows not seen since the recessionary period following Sept. 11, 2001.
This transpired with the economy not completely in a deep freeze ? but that may not be the case in 2008, as more voices warn of a recession. "We see nothing on the near-term horizon to alter our long-held view that investors should remain underweight in the sector," Appert wrote. "Results in 2008 could be particularly difficult in the face of weakening macroeconomic trends and higher newsprint prices," thanks in part to a strong Canadian dollar.
Merrill Lynch slashed its 2008 forecast, and is expecting total newspaper advertising to drop 5.1% after an estimated 7.1% falloff this year.
Fresh from the December Media Week conference in New York, Wachovia completely revised its numbers, knocking more than three percentage points off its old 2008 estimate for print and online advertising from a decline of 2.7% to a new decline of 6.1% (see p. 68).
Bear Stearns' Alexia Quadrani wrote about the somber tone of executives during the conference: "Unlike years past, the companies provided less detail and did not brush off poor results as being only temporary. ... Almost all companies believed the fundamental issues will continue into 2008."
Not all observers are gloom and doom. The sunny-side-up Newspaper Association of America's estimate figures 2008 ad revenue will drop only a hair, down 1.2% (provided there's no recession). And Credit Suisse analyst John Klim goosed the market in mid-December with his upbeat note proclaiming the woes of the industry are mostly cyclical due mainly to the crumbling housing market, the AP reported. Klim believes the industry has enough vim and vigor to shift to an online model.
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