Implosion: Newspapers Down 12.8% In 1Q

Total newspaper revenues tumbled 12.85% in the first quarter of 2008 to $9.23 billion, compared to the same period last year, according to the Newspaper Association of America's Web site, which posted the numbers quietly last Friday. That number combines print and online advertising; considered separately, print ad revenues fell 14.4% to $8.43 billion, while online revenues grew 7.2% to just over $800 million.

The first-quarter figures confirm that the newspaper business is in a state of crisis, as all the major ad categories took big hits. Classified advertising, traditionally the mainstay of newspaper revenues, fell almost 25% to $2.54 billion. The downward trend, due in large part to Internet competition, has been aggravated by a weak economy, with real estate plummeting 35% to $619 million and recruitment 35.4% to $630 million. Automotive fell 22% in the first quarter, to $588 million.

According to Ken Doctor, an analyst with Outsell Inc., classified revenues "fell off the table" in the first quarter because of the way they've been sold. Most online classifieds are still offered as "upsells" to people placing print listings, so when the print listings evaporate, the losses double.

The losses in classifieds were joined by national advertising--which fell 9.5% to $1.53 billion--and retail, down 8.6% to $4.36 billion. Here, again, newspapers were hit with a one-two punch of Internet competition and a slowing economy, according to Doctor--who noted that "national advertisers have been experimenting with all kinds of ways to reach more targeted audiences online," while "local retailers are shifting more of their budget to search marketing with Google and Yahoo, because it gives them better measurement on the returns."

There is also a big slowdown from newspapers' 22.3% growth rate in the first quarter of 2007--adding just $54 million, versus last year's addition of $137 million. Meanwhile, even with the double-digit declines in total newspaper ad revenues, online still contributes less than 9% of that total.

In perhaps the starkest illustration of the problem, Internet revenues of $800 million were dwarfed by the loss in total revenues, which fell $1.36 billion.

With revenues continuing to tumble in April and May, newspaper companies are running for cover, instituting big staff cuts and "restructuring." Earlier, McClatchy announced it was cutting 1,400 positions--or about 10% of its workforce--through a mix of layoffs, voluntary buyouts and leaving vacant positions unfilled.

Last week, Gannett said it would freeze the employee pension program in favor of more 401(k) contributions--a move criticized by many employees, according to Editor & Publisher, which first reported the news. And the Tribune Co.'s new management, led by Sam Zell and Randy Michaels, said they would begin "right-sizing" newspapers to ensure they contain no less than 50% advertising versus editorial content, allowing the company to make substantial staff reductions.

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