Five Reasons Why Newspaper Industry Will Bounce Back

Despite high-profile bankruptcies and doom-and-gloom forecasts for traditional media, Borrell Associates predicts that print newspaper revenues will stop declining this year and rebound 2.4% in 2010 as newspapers redefine their products, focus on local and niche audiences, and take steps to “right size” themselves.

According to Colby Atwood, president of Borrell Associates, the outlook for the industry will improve even more after next year. By 2014, newspaper income will be up a total of 8.7% over the 2009 figures, to slightly more than $39 billion (not including online revenues), he said.

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Though this rebound will be mild and still short of its 2008 level, it will be enough to increase newspapers’ overall share of total ad revenue 1.5 points, from 14.4% to 15.9%.

Atwood believes that newspapers will bounce back because they already are heeding the call to redefine their products and target a significantly distilled audience of higher-educated, higher-income readers.

As an example of these changes, Atwood points to the fact that many newspapers already have morphed into a magazine-like products, with more colorful images, smaller page widths and less frequent publication schedules.

As proof that the newspaper industry is serious about changing various aspects of its revenue model, news mogul Rupert Murdoch announced this week his News Corp. (NWS) will begin charging for access to all news websites, including FoxNews.com, by the middle of 2010. Murdoch plans to use the UK’s Sunday Times as a test model for such subscription-based content.

The top five reasons why Borrell Associates thinks newspapers will rebound:

1. First in, first out: Newspapers were the first medium that the internet forced into a “period of adjustment,” and they will be the first to emerge from it after working their way up the learning curve.
2. Big papers took the hit: When the internet decimated classifieds and major retail, this affected the industry’s biggest papers which took the whole industry’s revenues down. However, the revenue decline has been much less severe for the majority of the US’s smaller newspapers. For these papers, Borrell expects growth to come from geographical targeting to a wide base of non-classified, non-department-store local advertisers. This will happen even as larger papers continue to experience layoffs, abbreviated publication schedules and outright closures in order to “right-size” themselves.
3. Newspapers selling smarter: After emerging from a long-time, complacent “comfort zone,” newspaper sales and marketing teams are evolving in earnest. They are becoming proactive about discovering and meeting customer needs, selling against the competition, and taking no client for granted, especially in local ad markets.
4. A rising tide lifts some boats more than others: As the country’s economy begins to improve in the latter part of this year, newspapers will capture a bit more of the resulting growth in ad spending than their current share. This will come in part from growth in pre-print and free-standing insert revenue from advertisers migrating out of direct mail. Additionally, the auto, real estate and recruitment sectors will resurge as the economy improves and some revenue will flow to newspapers.
5. Internet contributions: Beyond simply enduring the punch landed by the internet, newspapers are using the web to generate a significant portion of their revenues and profits. Although Borrell Associates counts newspaper online revenues as online rather than newspaper revenue, it forecasts that side of the business will begin to provide more support to the print side.

Other thoughts from Borrell Associates related to the newspaper industry recovery:

• The forecast of increased newspaper revenue does not mean that all papers will be posting bigger numbers in five years. Bigger papers will likely endure more pain.
• The papers that will do the best are the ones that can reinvent themselves to serve smaller advertisers on the marketing side. This means actively pursuing customers that have never done business with newspapers before.
• On the editorial side, successful papers will do a better job of focusing on unique local content and less on wire service feeds.
• If the newspaper industry can figure out a way to let national advertisers make a single newspaper buy, it will make an important contribution to its own well being. Agencies do not seem to be filling the void, but the need is there.

Newspapers Not Alone in Need to Change

Atwood also noted that other forms of legacy media-such as Yellow Pages, TV, magazines and direct mail- are headed for downward spirals that will continue after newspapers rebound. It remains to be seen how these media can transform their businesses to meet future challenges.

More information about newspaper industry revenues and specific DMA market projections is available from Borrell Associates.

Comments

[markfl:]

Some of the analysis in this article seems counterintuitive. Specifically, the argument for daily newspapers changing to a magazine model is belied by the fact that consumer appetite for magazines seems bleak. U.S. News and World Report switched to monthly publication, and BusinessWeek will be lucky to give itself away at sale. One model for print publication has been tried with such names as Creative Loafing, a weekly that filed bankruptcy last year. The problem is that of printing and distribution costs for a paper product in a digital age.

Aug 09 02:58 AM

[LarryG:]

MarkFL is being generous. The Borelli argument is more loopy than counterintuitive. People don't stop reading newspapers because they have fewer ads in the them; they stop because they can get their news more easily elsewhere, and for free. If I want to read ads without being polluted by real information, I can do that in the local Penny Saver. First the papers pared down their news staffs, cutting originally reported news, and then they watched their ads disappear. Well, duh, it doesn't take a genius (or an ad agency media buyer) to know that if there is nothing to read, then no one is reading. And if no one is reading, spend your ad dollars elsewhere. Hard to figure out how the newspapers will make money off the few of us old folks who love to wash the ink off our hands. Quick: When is the last time you saw a 20 something with a newspaper in his/her hands?

Larry

Aug 09 09:21 AM

[ido:]

I fail to see any fact to the opinion offered. You cant just have 5 forces in bold and hope they are true. Most dont make much sense.
First in, first out - um, who said this was ever the case. maybe in determining accounting systems.
Big papers took the hit - many small newspapers went out of business and closed their doors. smaller papers are struggling to stay afloat.
Internet contributions - online revenues still dont generate enough revenue to make up for the lost profits of ads in print form...

i dont buy this article at all...

Aug 09 10:23 AM

[MSimon:]

Most papers do a very poor job of serving their audience. The political slant of most of them cuts their audience in 1/2 to start with. And it has nothing to do with local/national.

Aug 09 11:03 AM

[Duude:]

I agree the bigger newspapers with the exception of the Wall Street Journal, will suffer much more pain. Some of the pain is due to a stubborn refusal to cut back at nearly the pace that large American businesses cut. Look no further than the recent 2nd quarter earnings reports of major corporations. They made huge cuts, and even though they experienced a big drop in revenue, many were still profitable. Large newspapers were seeing a drop in circulation well before the recession occurred and yet, they were stuck in denial. The New York Times who has always been very union friendly has fought tooth and nail to get some of their other newspapers like the Boston Globe to force their unions to accept major cuts. Unfortunately, its never enough as they are now looking to sell the Boston Globe altogether. Now if only they were to turn that same force to cut upon themselves. Thus far, they've just bled red ink and will continue till they dismantle their union newspaper and refocus their efforts where they can produce a reliable and profitable income stream. As for Murdoch's call to charging for content, while the Wall Street Journal has successfully sold online subscriptions for years, other papers lacking much distinction from competitors will find charging for online content a difficult road. Magazines like Newsweek, and Time will simply whittle away awash in red ink. Its a medium whose most at risk. Timely publication of information is the issue. Daily newspapers are beat by the Internet, weekly news magazines are beyond archaic and will likely largely disappear or turn become monthly highlights in news publications.

Aug 09 11:30 AM

[User 468869:]

this idea is far from new to the online news business model, Murdoch is just one of the big dogs who's is finally taking the chance on it. The question is, can it work? www.newsy.com/videos/r...

Aug 09 02:02 PM

[Buckoux:]

I agree. To paraphrase the character, Carl Denim, from the movie, "King Kong", it wasn't the free news content of the Internet that killed off the newspapers, it was the slanted content (is truth beauty?) of the newspapers themselves.


On Aug 09 11:03 AM MSimon wrote:

> Most papers do a very poor job of serving their audience. The political
> slant of most of them cuts their audience in 1/2 to start with. And
> it has nothing to do with local/national.

Aug 09 03:30 PM

[rockermom:]

In my town, there's no place, other than the laughable 30-minute locally-produced 6 o'clock news broadcast, to get information about what's going on in my town. I can't get that information from anywhere else, at any price. People who believe that they will always be able to find any information they want "for free" on the internet are deluding themselves. The majority of the news they are reading comes from newspapers, and it isn't really free.

Aug 10 05:16 PM

[Maxe Paul:]

This article is the biggest load of utter crap i have read on here for quite a while, figures plucked out of thin air, and a made up load of BS hypotheticals.

Sounds like a Murdoch "bum boy" job to me.
Seriously, give it up.

Aug 10 10:42 PM

[Maxe Paul:]

I second the motion.


On Aug 09 10:23 AM ido wrote:

> I fail to see any fact to the opinion offered. You cant just have
> 5 forces in bold and hope they are true. Most dont make much sense.
>
> First in, first out - um, who said this was ever the case. maybe
> in determining accounting systems.
> Big papers took the hit - many small newspapers went out of business
> and closed their doors. smaller papers are struggling to stay afloat.
>
> Internet contributions - online revenues still dont generate enough
> revenue to make up for the lost profits of ads in print form...<br/>
>
> i dont buy this article at all...

Aug 10 10:44 PM

[jay fredric...:]

Looking at the chart of ad revenues Borrell predicts, it shows that the revenue figure is stuck at nearly $40 billion until 2015. So basically, next year revenue goes up 2%, then stays flat for the next 5 years? Not really a healthy picture as there is no way newspaper companies can continue to show positive earnings growth if the top line is not growing.
The story also says that preprints will move from direct mail back into papers. Has that started to happen? Last I saw, the price of Valassis stock was up 700% in the past 5 months. Doesn't appear that they are losing too much preprint revenue to newspapers, does it?

Aug 11 10:28 AM

[holmesnmanny:]

Much agreed. The critics of this article are merely doing the "cool" thing among supposed internet news junkies right now and criticizing newspaper companies to death. Just because you can get free news from yahoo right now doesn't mean it's always gonna stay that way. As soon as all newspaper companies get on board with Murdoc's committment to start charging for access to his companies news the sooner the stocks will start making their way back up. Sure, the game is changing and newspaper companies are starting to move their content online, but that doesn't mean that they are all gonna go out of business like the kiddie critics seem to think. If all newspaper companies went out of business, who's gonna do all of the legitimate local reporting? A bunch of kids that don't care about anything local? I think not. Furthermore, how long do they think the ad revenue is gonna keep going down as a whole? Forever? I think not. It looks like it's starting to even out with most newspaper companies starting to get more and more of their revenue from online publishing. Things are gonna start to change. It's all about when investors wanna get in and start taking the profit. Look at last earnings. All(not some, but All) newspaper companies reported a profit......and this comes after most reported only their first loss before making cuts necessary to get back to a profit. I mean, this isn't rocket science.

An otherwise good article showing common sense. It's just a shame some really don't wanna see the facts, instead choosing to bash 'cause it's the supposed "cool" thing to do.

On Aug 10 05:16 PM rockermom wrote:

> In my town, there's no place, other than the laughable 30-minute
> locally-produced 6 o'clock news broadcast, to get information about
> what's going on in my town. I can't get that information from anywhere
> else, at any price. People who believe that they will always be able
> to find any information they want "for free" on the internet are
> deluding themselves. The majority of the news they are reading comes
> from newspapers, and it isn't really free.

Aug 13 11:58 PM

[User 474571:]

Take it from someone who works for a local community newspaper, trend shows the same track as stated in the article and have for many years. The key to increasing revenue is targeting the market area & building relationships. Of course this all takes time if you’re pulling a local newspaper out of hardship and poor management. However, I’ve learned that it’s really not all about editors; it has a lot to do with press releases and printing local family’s generation after generation. By doing this these families remain loyal readers for life; even after they’ve moved out of the community.
Newspapers have been a proven medium for centuries and still ranks number one for people to turn to when looking for something or searching for deals. They may review the ad websites to get a fuller version of the product, but overall businesses must continue or start using print advertising to stay in business and direct readers to their websites.
Local newspapers struggle because most large companies don’t support their community newspaper, they’d rather send in a free press release. It cost $1,190 a week, if not more, for 16 pages not including color, your distribution cost can be anywhere between $400-$1,000 a week; if you don’t use postal mail for all, then it would cost over $5,000 a week. Not to mention a full-time staff for legal & classified line ads which can run well over $800 a week. (add in the office rent, electric, etc..)When all you have in a poor economy is small business advertisers who support their local community news, they’re the ones who should get the free press releases. When revenue is only $2500-$3500 a week, it’s hard to stay open to serve our community. A few years back it was worth it, local newspapers were selling anywhere between $9,500-$16,000 a week. I can’t wait till that time returns because it will and hopefully soon.
It’s a lot of work to put together a local newspaper and most of it is done for the community non-profits, if you are a media buyer, please remember your local newspaper. Local newspapers are a huge tool to your media budgeting and is most likely the least expensive. Support your community and they’ll intern support your company.

Aug 21 12:13 AM