Tuesday, September 22, 2009

Has newspaper advertising reached rock bottom? Probably not.

During the last few months, as newspaper stock prices rebounded somewhat from their lowest points, and as newspaper execs suggested, in conjunction with second quarter results, that having made all the cuts they did, they would be in good shape “once advertising rebounds,” I found myself nevertheless thinking the same thoughts as the crystal ball-gazers consulted by the New York Times who said that the bottom, for newspaper advertising revenue, had not yet been reached.

The good news is that the third quarter of 2009 won’t be quite as bad as the second: the consensus is that revenue will drop just 25 percent, compared to about 30 percent in Q2. That means that even if the fourth quarter somehow manages to be dead even with last year’s Q4, revenue for the year will be down 20.4 percent. But dead even would be a big stretch, because the first three quarters of 2009 will average about $6.7 billion, while Q4 of last year was $10.1 billion. Typically, Q4 beats the average of the first three quarters of the year by about 22 percent in good years, less in bad years. Even with the benefit of the doubt at a 20 percent differential (Q4 vs. the average of Q1-3), that puts Q4 at $8.1 billion (down 20 percent from prior year) and the full year 2009 at $28.2 billion, down 25.5 percent from last year’s $37.8 billion. (My recent guess for the year stands at $27.5 billion.) For newspapers to get to around $28 billion for the year, however, advertisers would have to invest in newspapers in Q4 with the assumption that the recession is mainly over and that consumers will be loosening purse strings significantly during the holiday shopping period.
Continue reading this post at NiemanLab.