• by Erik Sass , October 18, 2007

Another round of bad news has begun for the newspaper industry, with Gannett's announcement Wednesday that newspaper ad revenue fell 6% in the third quarter to $1.19 billion, compared to the same quarter in 2006. The decline contributed to a 10.5% slump in earnings, with net income falling to $234 million in the third quarter. The news follows McClatchy's negative earnings report on Tuesday.

Gannett's broadcasting business is suffering, too, recording a 3.4% dip in the third quarter. The broadcasting division reported revenues of $189.5 million, versus $196.2 million in the same quarter a year ago. The lack of political ads were blamed for the fall. CEO Craig Dubow has said that unlike Scripps or Belo, Gannett will not spin off its assets.

Like McClatchy, Gannett attributed the drop in newspaper ad revenue to weakness in all three classified categories--with real estate dropping 11%, employment 8.4%, and automotive 11.7%. The overall weakness in the real-estate classifieds market is worsened by especially steep downturns in the Sunbelt states, including Florida and California. Altogether, classifieds slid 7.7% in the third quarter.

Like other newspaper companies, Gannett is now also suffering from losses in local and national advertising--two previously stable categories--with local advertising down 3.9% and national 4.1%. The decline in national advertising revenue is taking a toll at flagship USA Today, where total ad revenues declined 6.6%.

As in previous quarters, growth in online revenues provided one bright spot in an otherwise gloomy situation. Gannett's overall online revenues grew 16%. Its community newspapers posted a somewhat smaller gain of 7.5%, while USA Today grew 18%.

It's worth noting that all three online areas are now posting lower rates of growth than they did one year ago. In the third quarter of 2006, company-wide online revenues were up 25%, community newspapers rose 21%, and USA Today was up 24%.