By: Lucia Moses After five years of meager growth, the newspaper industry should rebound nicely in the next five, according to Veronis Suhler Stevenson's Communications Industry Report for 2002-2007, due out Monday.
The annual forecast calls for daily newspaper advertising and circulation spending to grow 2.5% to $56.5 billion in 2003, based on a second-half recovery. Total spending should then advance at a compound annual rate of 5.4% to $71.8 through 2007, compared with a growth rate of 1.4% from 1997 to 2002.
The industry's share of ad spending and people's time spent with newspapers will continue their slow decline, however, said Robert J. Broadwater, managing director.
"It's a pretty durable industry," he said, noting that while its share has gone down, the overall media spending pie continues to expand.
Circulation remains a huge challenge, though. The report calls for improved unit growth over the forecast period, but credits the slowing rate of decline of evening papers, which account for 15.2% of total weekday circulation, and the fact that many of the trailing papers in two-daily markets have already gone under.
Papers' lack of success to date in expanding successive generations' interest in their product remains a concern, and the emergence of free-circulation commuter papers "may keep somewhat of a damper on circulation pricing," Broadwater said. A newfound priority by some companies to grow circulation, however, should spur spending by 2.1% to $12.2 billion in 2007, compounded annually.
Leading the ad growth in the years ahead will be the less-mature national segment. Veronis expects it to advance at a compound annual rate of 7.9% to $10.5 billion by 2007, aided by improved service by national rep firms.
Classified will grow 6%, to $21.3 billion in 2007, compounded annually, as newspapers' more aggressive online help-wanted strategies pay off, the report states.
"The real issue is when employment classified comes back," Broadwater said. "I don't think it'll come back to previous highs anytime soon."
Finally, retail will advance 5.8% to $27.9 billion, compounded annually, helped by papers' heightened focus on small local accounts and the elimination of weaker retailers as a result of consolidation, Veronis predicts.
After declining for the past five years, newsprint prices will grow at a compound annual rate of 2.1% through 2007 as an ad recovery lets mills enact price increases. The report says price hikes should be limited by publishers' improved ability to curtail consumption, though.
And weeklies remain the big newspaper growth story. They are projected to grow total spending at a compound annual rate of 6.6% to $9.8 billion over the next five years, as national advertisers continue to find value in the targeted audiences of niche papers, the report says.
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