• by Frank Saxe , December 19, 2002

As newspaper groups close the year, most look back at 2002 as a year when meager advertising increases in the low single-digits were seen as a success. Several groups continued to see red on their spreadsheets throughout the year. Yet it appears the coming year will witness the industry crossing back over into the black, as several media forecasters are calling for growth in 2003.

“We are now in a phase of recovery,” says James Conaghan, VP/business analysis and research for the Newspaper Association of America (NAA). In each of the last four quarters, newspaper advertising revenues have been down over the previous year according to NAA figures, although the level of decline has been improving throughout the year. Conaghan is forecasting the industry will finish the October to December period with an actual increase, albeit just 1% over 2002. “National is growing faster than expected,” he explains, pointing to a 5.2% increase in national spending in the third quarter, with sharp increases in spending in the utility and telecommunications, transport and travel, and motion pictures ad categories. Retail is recovering as well, with a 36% increase in advertising by department stores and discounters. The biggest declines in advertising continue to be in classified ad spending, with employment ads leading the way. While classified spending was down 2.9% in the third quarter, employment ads have been down as much as 47% over the past year. Says one newspaper economist, “It is not the year anyone expected.”

Looking ahead to 2003, there is a universal consensus that the newspaper industry will beat 2002 hands down. Credit Suisse First Boston is among most bullish, predicting ad revenues will grow as much as 6%, while Morgan Stanley analysts foresee a 4.5% increase.

The NAA’s Conaghan sees total ad dollars growing 3.2% to 6.1% in 2003, with national dollars increasing 4% to 8%, and retail gaining 3% to 4%. He also forecasts some returned health in classified advertising, with an upturn of as much as 8%. Conaghan says going into the new year, it has been particularly tough to predict where the economy is going. “There are a lot of concerns about what might go on in the world,” he explained.

Miles E. Groves, chief economist for The Barry Group consultancy, is also predicting better times in the coming year, although he believes the recovery will not occur as quickly as he had just a few months ago. Groves is forecasting a 5.69% increase in advertising revenues, to $46.6 billion. Like Conaghan, he says national spending will lead the way, with a predicted 8.11% increase, with a 4.58% jump in retail spending. Groves also believes help-wanted ads will grow quickly later in the year, to help classifieds finish the year with a 6.09% increase. “If business is slow to take up the mantle and we continue to be driven by consumer investment, then the classified forecast will be way too aggressive,” he warns.

“It can’t get much worse,” says Universal McCann’s veteran forecaster Robert Coen, who supplies what is among the least optimistic outlooks for 2003. “Not a boom, but better than ’02,” is the way he summarizes his forecast, which calls for total spending to increase 5.3%, with national ad revenues growing 6% and local increasing 4.5%.

As the final numbers for 2002 begin to be tallied, it appears newspapers have fallen below the 20% share of overall advertising revenues that it has held for decades. Indications are it will finish 2003 at 19.5%. “That’s a scary place to be, and I think that’s caught a lot of attention,” says Groves, who predicts that figure will act as a wake-up call for the industry in the coming months.