Newspapers Tout '07 Recovery

Industry analysts and organizations are predicting that newspapers' decline will slow and maybe even stop in 2007--a piece of relatively good news that may herald a stabilization of the industry. Although it's far too soon to tell if the print newspaper market is bottoming out, there are a few encouraging signs.

A forecast from the Newspaper Association of America (NAA) expects total print advertising revenue to fall 1.1% in 2006 compared to 2005, but then stabilize in 2007, which the NAA believes will be flat compared to this year. The NAA figures for 2007 take into consideration the continuing losses in advertising by local automobile dealerships and classified ads, including job recruiting. The NAA's prediction is counting on other sources of revenue, including a small recovery in revenue from national advertisers and more display ads from retailers such as grocery chains and electronics stores.

Meanwhile, an independent analysis from Deutsche Bank also forecast revenue growth of 1%-2% in 2007, citing a recovery in retail advertising as well as some benefits from consolidation among telecoms. As in previous years, DB expects online revenue to be the major growth driver, forecasting up to 40% year-over-year growth compared with 2006. That's somewhat at odds with the NAA's own forecast, which expects growth to slow to 22% in 2007 in year-over-year terms--a dip from 28% growth in 2006.

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Recent figures for newspaper's online revenue do seem to point to a slowdown, although these changes may also be attributable to cyclical or seasonal variations. In the third quarter, revenue from online newspaper Web sites totaled $638 million, marking a 23% increase from last year--but that also marked a slowdown from the first half of the year, when growth averaged 30%. By way of example, one of the nation's largest newspaper chains--Gannett--has seen the rate of online growth at its domestic community newspapers slow dramatically: first-quarter revenue was up 35% over the same period in 2005, while the second quarter showed 27% growth, and the third quarter showed just 21%.

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