• by Paul Gough , October 7, 2003

Despite a gloomy August and September for many ad revenue categories, analysts say the newspaper industry might be moving into the fourth quarter with momentum toward a sustained recovery.

Although newspapers saw modest increases in ad revenues and linage beginning a year ago, the growth mostly sputtered over what was a difficult summer for many ad-supported mediums. In a recent research report, Goldman Sachs put it this way in its title: "Bouncing Along at a Bottom." It pointed out that national ad spending was in double digits in August but retail and employment classifieds continued to weigh overall ad revenue. Average revenue growth among newspaper companies was between flat and 4% over the past two quarters "with no clear directional improvement," Goldman Sachs noted.

Publicly traded newspaper companies finished their third quarters on Sept. 30. Within the next few weeks, everyone from Dow Jones to The New York Times Co. to Lee Enterprises will be announcing their earnings and meeting with investors and analysts. Blaylock & Partners said in an Oct. 2 research report that it expects earnings growth for newspaper companies' stocks through the rest of the year to be disappointing because of sluggish ad revenues.

But both Blaylock & Partners and Goldman Sachs think there's light at the end of the tunnel. Fourth-quarter ad revenues could be boosted by an economic recovery. Blaylock & Partners analyst Edward J. Atorino said 2004 could be a year for more growth in ad revenues.

Goldman Sachs said that stronger retail sales and a healthier national ad market boded well for newspaper ad revenues over the next six months.

"We believe we are at (or very close to) the bottom of the current newspaper ad cycle," Goldman Sachs said. "Accelerating ad revenue growth and margin upside create a positive backdrop for the sector moving into 2004."