Hang On, Folks. Things Are Getting Worse

The past couple of months have seen a drumbeat of announcements of newspaper layoffs, cutbacks and other bad news. Just today, A.H. Belo announced that it's cutting 14 percent of its workforce. Last week, it was the lenders who put up the money to buy the Minneapolis Star-Tribune running for the exits. And it's raining lousy second-quarter earnings reports.

It all seems pretty bad. But hold on to your press hats: Things are going to get worse in the newspaper industry, perhaps much worse. Three sharp new analyses of the second-quarter newspaper results–by fellow recovering journalists Alan Mutter, Ken Doctor and Wall Street analyst Mike Simonton–suggest that declines in ad revenue were generally accelerating in June, and worst of all, that the existing cuts and layoffs at newspapers are not keeping up with the decline of the business.

"Unless sales improve or the industry is willing to accept lower profitability in the future, the companies evidently would have no choice but to consider even further spending cuts," Mutter warns. Echoes Simonton, "We haven't yet reached the bottom for revenue declines." And Doctor asks, "So you think current cuts are tough?"

They're probably not nearly tough enough, unfortunately. We'll see more layoffs and cutbacks for the rest of the year, and then a fresh round of deep cuts around the first of the year, as companies assess their 2008 results and the new, even-more-shrunken budgets take hold. And don't go looking for an economic miracle to turn things around, because odds are that the structural changes rocking the industry are so profound that there won't be a significant advertising rebound even if the economy improves.

In other words, it's not only going to get worse before it gets better–it may not even get better. The next few months could bring a bloodletting in the industry that will make what's currently happening look like a picnic.

But here's the big, really painful prediction: Before long, we're going to lose a big newspaper (several, actually). And it's going to happen sooner than anybody thinks.

Comments

[ed]

Read the reports from the newspaper companies this month, and you see that they are reporting no turnaround into July, which means the promise of big Olympics spending and back-to-school ad spending isn't showing up in contracts. I'm betting that political spending won't show up at newspapers, either, as candidates aren't going to pour money into products people aren't reading and no longer have broad circulation in their regions (thanks to circulation cutbacks to reduce distribution to close-in metro areas). Politicians need to read the broadest number of voters, and it doesn't help that local newspapers have stopped covering politics. If you are a newspaper executive looking at your stock going down from 3 to 5 percent each day, what do you do but cut more?

[Stever]

Same is coming for print magazines too

This today; http://www.huffingtonpost.com/2008/08/04/emplaygirlem-magazine-fol_n_116785.html

Playgirl magazine is shutting down the presses and going online only.