NEWSPAPER advertising, already in its worst slump since the Depression, suffered by far the sharpest drop in generations during the first quarter of 2009, down 30 percent for some papers, industry executives and analysts say.
Publishers will start to report first-quarter results this week, but people who follow the industry and have had a glimpse of the 2009 numbers say it is clear that once again, even the most pessimistic predictions were not dark enough. They are expecting declines sharp enough to wipe out profit margins at many papers that, despite two years of battering, had stayed comfortably in the black, and to push already-weak publishers closer to bankruptcy, perhaps even closure. “I think over all we’re going to see a decline somewhere in the mid-20s” compared to the first quarter of last year, said Edward Atorino, a media analyst at the Benchmark Company, a research firm. “There have been a lot of signals that things have gotten much worse in the last couple of months — the furloughs, the pay cuts, the layoffs.”
John Morton, an independent newspaper analyst, agreed with that assessment, adding “from what I’m hearing, I suspect 30 percent won’t be too unusual for the bigger papers.”
One of the few publishers to make a public statement is the Gannett Company, owner of the largest and most profitable newspaper chain in the country. At a conference with analysts last month, Gracia Martore, the company’s executive vice president and chief financial officer, indicated that so far, 2009 newspaper ad revenue was down roughly 30 percent, and more than that at its flagship paper, USA Today.
In filing for bankruptcy recently, Sun-Times Media Group, publisher of The Chicago Sun-Times and several smaller papers, disclosed in court papers that it had drawn up its original 2009 budget based on an expected 18 percent slide in ad revenue for the entire year, but had revised that to 30 percent.
More recently, some publishing executives, insisting on anonymity because they are prohibited from discussing figures that have not been made public yet, say they know of some other large newspapers that had a first-quarter drop in the 30 percent range. Declines above 20 percent, they said, were commonplace.
“This is far worse than anything any of us has seen,” said an executive at a major newspaper company. “We can keep cutting, but we need this to start to bottom out.”
Small papers generally fared better than large ones, though they also saw a sharp loss of revenue, experts say. In markets like Michigan and Florida, even some smaller papers have fared as poorly as the big papers, Mr. Morton said.
Offering at least a glimmer of hope, several executives and analysts said there were signs that the year-over-year decline in March was not as steep as those for January and February, even though the traditional pre-Easter advertising bump fell in March last year. (This year, it fell in April.) That and other factors, they said, could signal that losses for the rest of 2009 would not be as steep as the first quarter’s.
Lauren Rich Fine, research director at ContentNext Media, said that in all media, “as the economy grew much worse in the fall, companies really started to pull back hard on advertising” to save money. In particular, automakers, among the biggest advertisers, cut back as it became clear that their own futures were in jeopardy.
Ms. Fine said it was hard to predict when companies would readjust their ad spending limits, which depended in part on when the recession bottomed out.
Broadcast advertising has dropped, too, but not to the same degree. Gannett said the decline for its television stations was about half as steep as for its newspapers. In a report released Monday, ZenithOptimedia predicted that ad spending this year in all United States media would fall 8.7 percent.
The worsening crisis has prompted many newspapers, including The New York Times and the Hearst newspapers, to begin developing plans for new revenue sources like charging readers online — an idea that most of the industry had rejected until recently — but it is unclear whether they will put those plans into action, or when.
Newspapers count on advertising for the bulk of their revenue, and for a decade they have been losing ads to the Internet, where advertising is much cheaper and there is far more competition for it. But until 2006, papers held their own.
Then in 2007, ad revenue for newspapers and their Web sites dropped 7.9 percent, according to figures compiled by the Newspaper Association of America. That was the first significant decline in a nonrecession year on record, and came as a surprise to most analysts and executives.
In 2008, the downturn in the overall economy magnified the long-term trend in the newspapers, and ad revenue fell 16.6 percent — again, far more than publishers and analysts predicted. The real estate bubble burst, financial firms tottered and fell, recession took hold and unemployment spiked. Some of the biggest categories of advertising, like real estate and help wanted, all but evaporated.
Nearly every large paper has made significant budget cuts in the last year, including laying off staff and reducing the number and size of pages they print. Recently, a number of publishers, including Gannett and The New York Times Company, have asked employees to take a pay cut — sometimes in the form of mandatory furloughs — and have raised the prices they charge readers.
In December, Tribune Company, publisher of The Los Angeles Times, The Chicago Tribune and other major papers, filed for bankruptcy. Since then, Sun-Times Media, the Star Tribune of Minneapolis, and Philadelphia Newspapers, owner of that city’s Inquirer and Daily News, have also filed for bankruptcy.
A handful of papers have folded or stopped publishing, becoming much smaller online operations. And companies have threatened to close other papers without major labor concessions, including The San Francisco Chronicle, owned by Hearst, and The Boston Globe, owned by the Times Company.