The economy may
have emerged from a recession last year, and ad forecasts may be moving up -- but none of this is helping the newspaper industry, according to Moody's Investors Service, which downgraded its outlook
for the medium from stable to negative.
Overall, Moody's sees annual revenue declines of 5% to 6% for newspapers in 2010 and 2011, raising the prospect that publishers -- having cut other
parts of their businesses to the bone -- will be forced to start making deeper cuts in newsroom staffs. In addition to reducing the amount of content available for monetization, this will raise
severance costs.
Moody's cited the continuing decline in print circulation and advertising sales and increasing competition from digital news sources and distribution platforms.
John
Puchalla, Moody's vice president, stated that the medium's "longer-term secular deterioration is returning to the forefront ... as readers embrace free and low-cost content on the Web and mobile
devices."
advertisement
advertisement
The only hope for the newspaper industry, according to the company, lies in "further development of user fees and advertising in new distribution channels through pay walls or other
means that would not overly cannibalize traditional print volumes or pricing."
Some newspaper publishers are moving toward charging for online content -- most notably at The New York
Times, where an online pay wall is supposed to debut sometime in the first part of 2011.
The Moody's downgrade comes close on the heels of a similarly gloomy forecast from ZenithOptimedia,
which upgraded its U.S. ad-spending forecast for 2010 to 2.2% growth -- but maintained its projection of a 10% decline for newspapers.