In quarterly earnings conference calls, the bosses of publishers and broadcasters like to blame the economic downturn--but the truth is that all three media were slipping before the economy hit the skids. The culprit is not short-term economic cycles, but a long-term structural transition to the way that media is consumed. As consumers move from print and broadcast to the Internet, a sound digital strategy is essential to survival.
The economic downturn, however, is merely accelerating a process that began years ago.
A comparison of current figures with those from the two most recent recessions shows that the declines experienced by traditional media are breaking precedent in several important ways. (These comparisons rely on ad revenue numbers for newspapers and radio--culled from the Newspaper Association of America and the Radio Advertising Bureau, respectively--and ad pages for magazines from the Publishers Information Bureau, since rate-card revenue figures do not necessarily reflect discounts.)
Historically, advertising dropoffs in these three media have anticipated actual recessions by about a year, and quickly rebounded as the economy recovered. In the late 1980s, newspapers and magazines saw their percentage year-over-year growth rates begin to slow in 1988-1989, and were joined in 1989-1990 by radio. Then newspapers and magazines saw growth rates go negative in 1990, and radio joined them again a year later, as the recession bottomed out. All three quickly returned to positive growth rates in 1992, leading to a long period of sustained growth through the rest of the 1990s.
About a decade later, two of the three traditional media again seem to have anticipated the next recession by about a year, as both radio and newspapers both saw percentage growth in ad revenue slow in 2000. However, this is where the similarity ends.
The recession from 2001-2002 was shorter and less severe than the recession at the beginning of the previous decade--but print and radio did not enjoy the kind of rebound that followed the sharper recession a decade before. Radio had a brief comeback, posting a 6% growth rate in 2002--but then slumped again, with 1% growth in 2003. Magazines and newspapers remained negative through 2002, and managed anemic growth of just 0.6% and 1.9% in 2003. The culprit was not hard to find, as they were clearly losing dollars to the Internet, where advertising growth returned to the double digits after a brief downturn following the dot-com bust.
Significantly, all three media were flailing during a period of renewed growth in American gross domestic product. In previous eras of sustained GDP growth--for example, 1992-1999--magazines, newspapers and radio had grown at a rate that matched or exceeded percent increases in GDP practically every year. However, from 2002-2007, they struggled to keep up: Radio managed to beat GDP once, in 2002, while magazines and newspapers barely matched it in 2004.
Then came the latest round of declines. The growth rate of all three media began to slow in 2005--before the U.S. real estate market started to collapse--and newspapers went negative in 2006, followed by magazines and radio in 2007. This was an ominous warning, since the overall GDP growth rate remained basically even at 3.2% in 2006-2007.
In other words, while softening ad revenue anticipated the two previous economic downturns by about a year, in the most recent case, the slowdown for magazines, newspapers and radio began about three years before. In addition, the declines have already proven to be steeper in this pre-recession period than at the height of the previous ones. This suggests that all three traditional media, suffering from both secular and macroeconomic trends, are poised to suffer unprecedented losses in the economic downturn that is now unfolding.