Skip to main content

PROFITS, RECESSION, AND RECOVERY

New York Times Co., Gannett Co., Media General , and McClatchy Co. have all reported profits in the second quarter and the results have led to share prices doubling and tripling.

The developments must come as a surprise to those who saw the poor performance of recent quarters and convinced themselves that the newspaper industry is dead and gone.

Admittedly, the positive results in the past 3 months were achieved through restructuring, reducing news staffs to their 1970s levels, heavy cost cutting everywhere, and postponing reinvestments. But it shows there is still life in the industry and that the industry can be expected to recover in the coming year if economic conditions continue their current rate of improvement. As I have said many times, a industry with $50 billion in revenue is not going to ignore that revenue, close the doors, and disappear overnight.

Many have viewed the poor company performance in the past 2 years and then mistaken the steep concurrent drop in advertising as evidence of a general decline caused by long-term industry trends. In doing so, they have disregarded the impact of the economy on newspaper advertising and mistaken the dramatic drop in advertising as being an indicator of the industry's broader condition rather than the shorter-term results of 4 quarters of negative growth that have affected the economy as a whole. Some have also ignored the effects of corporate debt problems had on the industry's overall condition.

In multiple blogs and articles journalists and editors have pointed out that newspapers have fared worse than other media in the recession and used that the fact as evidence that the industry is a death's door. Two decades of research on newspapers during recessions, however, has shown newspapers typically fare worse because retail and classified advertising on which the industry relies are more affected by downturns than brand advertising (See post “The Credit Crisis, Volatile Markets, and Recession and Media” and the articles below). Obviously a lot of newspaper managers and journalists don't pay attention to research about their own business.

If one looks at the newspaper advertising expenditures over time (see Figure below), one sees that they fall with recessions and then recover. This pattern was especially evident from 1991 to 1993 and 2001-2003 when short downturns pushed newspapers into decline.

If one considers different category of advertising, it is clear that the classified advertising—which was a driver of growth in the 1990s—was significantly troubled after 2000, but recovered and spiked in 2005 (Figure 2). Its relative decline by comparison to retail and national advertising is probably the result of some substitution with the Internet, nevertheless newspaper classifieds produced $10 billion in 2008—3 times that of online classified.

U.S. newspapers are in a mature industry with low growth potential once recovery from the recession occurs. Most companies will performance reasonably well after the recovery, but certainly some companies will have difficulties because of imprudent strategies and choices. Nevertheless, the industry as a whole will still remain in place producing revenue for many years to come.

It will do so because more than 45 million people are still willing to purchase a paper daily and retail advertisers still gain better results from newspaper advertising than from broadcast, Internet, and other forms of advertising.


Related Articles of Interest
Picard, R.G. & Rimmer, T. (1999). Weathering a Recession: Effects of Size and Diversification on Newspaper Companies, Journal of Media Economics, 23(4):21-33.

Picard, R.G. (2001). Effects of Recessions on Advertising Expenditures: An Exploratory Study of Economic Downturns in Nine Developed Nations, Journal of Media Economics, 14(1): 1-14.

Picard, R.G. (2008). “Shifts in Newspaper Advertising Expenditures and their Implications for the Future of Newspapers,” Journalism Studies, 9(5):704-716.

van der Wurff, R., Bakker, P. & Picard, R.G. (2008). Economic Growth and Advertising Expenditures in Different Media in Different Countries, Journal of Media Economics, 21:28-52.

Popular posts from this blog

CAN PUBLIC BROADCASTERS HARM COMPETITION AND DIVERSITY?

This is not trick question and it is being increasingly asked as public broadcasters grow larger, offer multiple channels, move into cross-media operations, and increasingly commercialize their operations. The Federal Communications Commission will have to consider that question shortly when it considers the effort of WGBH Education Foundation—operator of WGBH-TV, the highly successful Boston-based public service broadcaster—to purchase the commercial radio station WCRB-FM. WGBH is the top ranked member of the Public Broadcasting Service in the New England and produces about one third of PBS’ programming. It operates a second Boston television station, WGBX-TV, and WGBY in Springfield, Massachusetts. In addition it operates FM radio stations WGBH (Boston), WCAI (Woods Hole), WZAI (Brewster), and WNAN (Nantucket) and is a member of National Public Radio and Public Radio International. It operates two commercial subsidiaries involved in music rights and motion picture production. This mo...

Slow down

Estamos na última semana do verão e por aqui o tempo continua bem bom. Claro que não está mais tanto calor como em Agosto, mas ainda consigo andar de camisolas e tops de alças, t-shirts, vestidos e saias. Num ou noutro dia lá precisei de um blazer ou quimono de manhã cedinho ou de noite, mas ainda está calor. E o que é que eu quero com este paleio todo? Não, não é conversa de circunstância vir aqui falar do tempo. Só me chateia um bocado ver imensa gente já cheia de frio e em colecções de outono dos pés à cabeça quando ainda temos muitos dias com máximas perto dos 30º!! Really!!! Eu já dei uma olhada nas novas colecções e já me apetece o frio para vestir-me em layers, cores mais escuras, malhas, mas calma... O chinelo no pé e a sandália ainda estão mais do que permitidos! Porque já andam de botas, camisolas com gola e manga comprida, casacos de couro... se está tanto calor? Estamos em Setembro, ainda está bom tempo, não andem por aí cheias de roupa da nova colecção, qual vitrina da...

Why should you have a uniform?

Desde maio que não partilhava um look meu aqui! Oh-Meu-Deus!!!! IMENSO!!! Acho que nunca estive tanto tempo sem publicar por cá os meus outfits, mas a verdade é que não tenho tido tempos mortos para conseguir fotografar. Quando tenho tempo não tenho fotógrafo disponível. Este foi o look que usei no jantar do meu aniversário, há mais de um mês, I know, e é daqueles looks bem simples mas que resultam sempre lindamente. Eu adoro este tipo de combinações. E não podia ser mais apropriado aos últimos meses que têm sido non stop. Confesso que cada vez mais sou adepta de deixar pronta a roupa que vou vestir no dia seguinte antes de dormir. Pensar no que vou vestir antes de sair para o trabalho acaba por me gastar demasiados minutos, ainda não estou bem acordada, tenho o raciocínio lento, noto que perco mais tempo quando na verdade o que eu queria era ainda estar a aproveitar a cama! Não sei se são como eu ou não, mas este tipo de combinações salva-me os dias, ou melhor, uns minutos a ma...