Newspaper Ad Revenues Across All Platforms Will Decline for the Next Decade

It's a total judgment call. But in my best judgment based on a two-year outreach process to many of the nation's largest (and some of the smallest) newspaper publishers, it's my conclusion that the industry will continue to lose share of ad spending for the remainder of this decade at least. In December, I will be releasing long-term forecasts for 2020 along with my new forecasts for 2011 and 2012, including details for 30 media and marketing categories.

Newspapers are reporting a healthier ad market; The New York Times has promised to pay back Carlos Slim Helúthe $250 million they borrowed (at 14% interest) three years ahead of schedule. Local newspaper companies are more aggressively developing and acquiring digital assets and shifting their focus to digital enterprises. But it is too little, too late. USA Today saw the writing on the wall.

According to preliminary data from Myers 2020 Vision Forecast for Media and Marketing Expenditures, the newspaper industry will lose another 30% of revenues by 2020, generating only $19 billion in ad related revenues across all traditional and digital platforms.

In 2020, the newspaper industry, again across all platforms, will capture only 2.2% of marketers' advertising and marketing expenditures.

In 2000, newspaper advertising represented 7.3% of marketers' total spending, and in 2010 it had declined to a 3.9% share.

You are receiving this e-mail as a corporate subscriber to Jack Myers Media Business Report. Re-distribution in any form, except among approved individuals within your company, is prohibited. As a subscriber you have full access to all archives and reports at www.jackmyers.com. If you require your ID and password, contact maryann@jackmyers.com

Overall, the albatross of printing plants, real estate, union deals, debt, paper costs, mailing and distribution costs, plus overall editorial malaise and lack of unique identity is dooming newspapers. While we cannot doubt their local market connections and loyal subscriber bases, these outdated costs are the equivalent of aol's declining dial-up business. While many newspaper companies could have responded aggressively to these underlying industry weaknesses by more quickly embracing digital enterprises, the sad reality is that available digital revenues are not now nor will they be sufficient to drive forward the newspaper business. The industry can point to many small successes and a handful of growth businesses. But overall the industry has failed to establish any clear path to digital dominance or a sustainable business model built around print.

$19 billion dollars remains a lot of money that will be handed to newspapers in 2020. Marketers are calibrating their investments across all media. Newspapers were the dominant form of advertising for almost the whole of the 20^th Century. Even after losing 44% of ad revenues between 2000 and 2010, newspapers still capture more annual ad revenues than any other form of marketing except trade promotion, consumer sales promotion and direct marketing.

By 2020, a few newspaper companies will be thriving, but we can expect far more consolidation, more newspaper closings, radical restructuring of the editorial model, rapid escalation of video content in association with local broadcasters, tough love for newspaper unions, and a steady stream of write-downs for printing plants and pulp factories.

Newspapers are facing the compounded whammy of declining subscriber revenue streams. I don't expect micro-payments to be a successful revenue model for publishers. The challenge confronting newspapers is that their core editorial content has fleeting value and is of limited consumer interest. Unless specialized highly valuable content can be created that justifies significant multi-thousand dollar subscriptions for companies doing business in the local community, there will not be a sufficient stream of lower valued editorial nuggets. Free is out of the barn except for the select few. Even The Wall Street Journal will struggle to achieve its goal of 650,000 digital subscriptions at $150 each. The company might have had a better chance by following the Bloomberg model of distributing basic content for free while charging seven figure fees for corporate subscriptions to exclusive insights, data and competitive information. One hundred corporate subscribers at $1 million each would generate the same $100 million in annual revenues with lower costs. (It's not too late, but it soon will be.)

The New York Timesas a stand-alone could be a survivor, but the regional papers will continue to drag down total company profits. And the parent has yet to demonstrate a true understanding of the emerging market and how the Grey Lady could be polished up to look new and shiny. In the meantime, New York, The New Yorker and hundreds of emerging local, regional, national and global sites are eroding audiences, brand equity and advertising dollars.

Newspapers are a national treasure. However, as a medium for advertisers, their value is waning. Their brand equity is not sufficient to overcome competitors' overwhelming economic advantages. As a general observation, the management leading most major newspaper companies, based on my personal interviews, are not up to the task of turning around their huge hundred thousand ton tankers that are rapidly taking on water. And it's too late for new captains to right the ship. Newspapers have passed the negative tipping point.

Again, newspapers, across all platforms, will generate more than $19 billion in advertising and marketing revenues in 2020. But for an industry that generated nearly $50 billion in 2000, that's not good news.