Moody’s predicts ad revenue will fall faster than publishers can cut costs and boost digital ad sales.
"Technology-driven shifts in consumer reading habits keep hurting newspapers, and competition for advertisers continues to rise from search engines, social media and digital video," commented Alina Khavulya, VP and senior analyst at Moody's.
Moody’s expects newspaper print ad revenue will decline by “low-to-mid teen percentages” through the first half of 2018. And, the report added, the newspaper industry will continue to reduce costs by low-to-mid single-digit percentages through mid-2018 to support weakening earnings.
National newspapers will suffer more than community newspapers. Newspaper ads make up less than 10% of total U.S. advertising, down from the peak of 26% in 2004.
Moody’s also predicts the publishing industry's organic earnings — or EBITDA — will decline by 7% to 10% through early to mid-2018.
Mergers and acquisitions will continue, as larger publishers acquire smaller ones and consolidate resources. Publishers will also continue cutting production and distribution costs associated with print. Local coverage of national or regional issues will shrink.
The magazine business is predicted to fare a bit better than newspapers.
In early 2016, Khavulya said this was due to "continued demand for glossy weekly and monthly publications from readers.”
According to the latest quarterly report from the U.S. Census Bureau, total newspaper publishing revenues fell 6.3% from $7.12 billion in the fourth quarter of 2015 to $6.67 billion in the fourth quarter of 2016 — a 4.4% decline in newspaper publishing revenues for the full year.
Magazine publishing revenues slipped 0.4% from $7.21 billion in the fourth quarter of 2015 to $7.18 billion in the fourth quarter of this year, contributing to a 3.2% drop for the full year.
Over the last decade, newspaper revenues have fallen by almost half, with a 45% decrease from $46.4 billion in 2007, and magazine
revenues fell 42% from $47.5 billion.