'05 Proving To Be Worst Newspaper Year Since Recession

It's official: 2005 will be the newspaper industry's worst year since the last ad industry recession. And things aren't looking much better for next year either, according to a top Wall Street firm's report on newspaper publishing.

"Sadly, 2005 is shaping up as the industry's worst year from a revenue growth perspective since the recession impacted 2001-2002 period," says the report from Goldman Sachs, adding a warning that meaningful growth in 2006 is "very unlikely."

In particular, national advertising has under-performed, remaining essentially flat this year, as has the retail category, the report said--while classified, both print and online, has shown positive gains so far this year, up 4-5 percent.

The weak ad environment for newspapers has caused Goldman to scale back its 2006 growth forecast to 3.5 percent from 4.0 percent. The note said national ad growth would once again be weakest at 1.0 percent, followed by retail, 2.5 percent, and classifieds at 3.6 percent. The bright spot continues to be online newspaper revenues, which are projected to grow an impressive 25 percent in 2006. Despite this, online will still represent 5.0 percent of total newspaper revenues.



The only really good news for publishers is that the investment firm believes the cost of newsprint, which has risen recently, is likely to fall slightly in 2006, as demand falls more quickly than production capacity. The report said newsprint prices would peak and then slowly recede in the second half of the year.

Even so, this good news is scant relief for an industry besieged by flat ad revenues, falling stocks, and fleeing subscribers. Last week, Rishad Tobaccowala, chief innovation officer for Publicis Groupe, told a newspaper--the Chicago Tribune--"newspapers are at a tipping point," in which online media will start to take more readership and more ad dollars. He added that newspapers are in the worst situation of all news media for growth as "the least visually engaging and least youth oriented" medium.

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