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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%.

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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. (NASDAQ: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.

Source: Five Reasons Why Newspaper Industry Will Bounce Back