Newspapers will take it on the chin in 2008, according to analysts with Goldman Sachs, who warned Wednesday of a potential double-whammy, as the industry's secular downturn converges with a broader economic slowdown. Overall, they forecast a 7.9% decline in revenue, a much more substantial drop than their earlier prediction of just 2.6%.
The predicted 7.9% drop is especially gloomy as it comes after several years of losses, compounding a 1.8% decline in 2006 and a roughly 8% drop in the first three quarters of 2007 compared to the same period in 2006 (fourth-quarter figures aren't yet available).
As always, the collapse in classifieds leads the way. In a note to clients, GS said: "We expect the classified categories to be very weak with the real estate, help wanted and auto categories particularly sensitive to broader economic activity." All three categories are also suffering from intense competition from the Internet.
The downturn in the housing market has led to a meltdown in real-estate classifieds in particular, with overall real-estate classifieds falling 24.4% in the third quarter of 2007, compared to 2006. Recruitment is down 19.7%, and automobiles 17.7% in the same period.
As a result, GS cut earnings forecasts for the New York Times Company, McClatchy, Gannett, Belo, Journal Communications, and E.W. Scripps.
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