Comments on: Has newspaper advertising reached rock bottom? Probably not.

By: NAA chief on Q4: “Velocity of ad decline is moderating” » Nieman Journalism Lab

Thu, 25 Mar 2010 13:40:31 +0000

[...] (For the full year, total revenue came in at $27.564 billion, which is a mere $64 million over my prediction made back on September [...]

By: Lien

Lien — Tue, 20 Oct 2009 17:57:25 +0000

In my opinion, the decline in ad revenue is the effect of ads not working no matter where they shows up. More specifically, it has to do with messages being the same, one brand saying the same thing as the other. For example, a preference for “natural” potatoe chips results in many choices at the supermarket. The chances are you will not have any particular brand in mind when you go out to make your purchase. Clearly this points out the need to develop something different that conveys “natural” to the consumer. Or you could look at it like this, when was the last time you heard someone say they were going out to buy some Mr. Clean.

On the lighter side, I am sure DVR’s have absolutely no impact on advertisers. How much “Joey” can you watch?

If Britney Spears can’s sell Coca-Cola and Michael Jackson couldn’t sell Pepsi, I believe all forms of media are in jeopardy. I would look for other ways publishers can make the numbers.

By: This week in media musings: Shirky speaks, and three new projects to watch | Mark Coddington

Mon, 28 Sep 2009 16:31:18 +0000

[...] week in depressing statistics: Newspaper advertising is way down, but probably hasn’t reached bottom, courtesy of the Nieman Journalism Lab’s Martin [...]

By: Martin Langeveld

Martin Langeveld — Sat, 26 Sep 2009 00:06:35 +0000

Brad:
In my experience, $1 per print reader (not subscriber) per day would be on the high end by a factor of at about 3. Thirty-five cents would be more like it. That pays for the bricks, mortar, iron and steel of the printed product.

The trap, in analyzing the transition to an online-first model, is to assume that it’s online-only. It’s not. Print isn’t really dead, except maybe on a daily basis, and an online-first news operation can spin off weekly and occasional printed products that bring in a nice income stream.

By: Brad

Brad — Fri, 25 Sep 2009 21:50:11 +0000

Seems to me there’s a component missing in this discussion. In print, newspapers or a combination of competing newspapers set the ad rate. Profits were high because the barrier of entry and especially competitive capital investment requirements were also high.

In the Internet age, Google and Yahoo set ad rates, and they do not have editors and reporters, press operators and distribution managers to feed.

The simple fact is that local publishers cannot possibly attract enough online audience to pay for the cost of a fraction of the news resource required to properly cover a local market if they are using the ad cost model established by Google, Yahoo, etc.

A local newspaper publisher needs to generate something like $1 per print reader per publishing day in order to stay profitable. The printing part of that is about 10 cents. That leaves a need to generate 90 cents per reader if you were able to remove the printing part of the equation. Online pays about 1/2 a cent per reader.

If you said to Starbucks “You have to stop selling premium coffee drinks at local shops and instead distribute coffee to individual customers at their homes and businesses, and do it for 1/100th the price of a current cup of coffee”, you’d stll have choices for good, hot coffee, but not from Starbucks.

The answer isn’t to do things that hurts faster, it’s to rethink what’s being done.

By: links for 2009-09-23 | Joanna Geary

links for 2009-09-23 | Joanna Geary — Wed, 23 Sep 2009 21:05:58 +0000

[...] Has newspaper advertising reached rock bottom? Probably not. "When the rebound comes, what will drive advertising growth, and which of these media will rebound to their prior-year levels? That depends the size of ad budgets relative to retail sales, and how media buyers choose to allocate the dollars. Neither of these factors is likely to favor newspapers." (tags: advertising journalism newspapers business) [...]

By: Martin Langeveld

Martin Langeveld — Wed, 23 Sep 2009 19:25:24 +0000

K Wilson:
Two times annual revenue is a stretch these days. It’s not so much the value of the assets (you can’t buy much printing press for $35K) as the value of the cash flow. Newspapers used to sell routinely for 8-12 times operating cash flow. Prudent buyers, including some who did very well over the last 20 years building newspaper groups, stayed on the low end and bought at 6-7 times anticipated (not historical) cash flow, which allowed them to service the needed debt and sustain growth. (With healthy margins, this actually equated to twice annual revenue.) Today, a smart buyer would purchase just the business, not the bricks, mortar, iron and trucks, would focus on the digital side of the business and outsource all of the industrial functions of printing and paper delivery. And a smart owner looking at the future would restructure the business in that direction.

By: K Wilson

K Wilson — Wed, 23 Sep 2009 19:02:03 +0000

Newspaper brokers continue to tell owners of small daily newspapers in the Plains states their newspapers are worth 2 times annual revenue. People continue to buy small rural plains states daily newspaper businesses at prices which cannot support debt repayments. A small daily in a rural plains state market with declining population grossing $500,000 to $750,000 is worth maybe $150,000 at most if you could even get a banker to lend some money. You can buy a printing press for $35,000; a small town building goes for $50,000 and then add other items and the total adds up to maybe $150,000 when you factor in debt payments.
Owners want the most for their businesses but the sad fact is businesses are worth considerably less than they were 2 years ago.

By: Martin Langeveld

Martin Langeveld — Wed, 23 Sep 2009 14:45:28 +0000

Dave:
There’s actually an economic rationale for charging as much as the market will bear, if you are the dominant player in the market as newspaper were for so long: as long as you are the only or principal game in town (and as long as the ads actually worked at least part of the time, which they did), the rational strategy for the newspaper was to raise prices often and aggressively.

The smaller independents who drank the skim milk and kept prices “reasonable” actually left money on the table, and created opportunities for others, like shoppers, to enter the market and share the wealth. Basically, it was monopoly pricing behavior and it worked for a long time.

But as you say, it also inhibited innovation and real strategic thinking, especially when something as disruptive as the internet came along to challenge their position. (And they ignored or failed to recognize previous disruptions like offset printing and personal computers which lowered barriers to entry into the print field and created more competition.)

Most newspapers continued their practice of regular annual rate increases right through the last two decades of increasing Web usage, declining readership, demographic shifts in news consumption away from newspapers among each new younger age cohort, and the economic upheavals of 2001-2002 and 2008-?. And now, having perhaps passed a tipping point both in terms of reader attention and advertising market share, they are retrenching into a mode of “protecting print” by charging readers, rather than moving aggressively to migrate toward the new audience that’s online.

By: WesternDave

WesternDave — Wed, 23 Sep 2009 13:58:53 +0000

As a longtime newspaper ad seller, it was always difficult to fully describe the value of ads compared to the price. How many times did we have to say to clients “half of all advertising works – and you never know which half” ?
So here’s the real issue: for the longest time, newspapers had a virtual monopoly on local markets, esp dailies. And ads were priced as such. Along came the more accountable internet, and that simply shone a truer light on the actual value of the ads. So printed ad sales declined.
Let’s just suppose that newspapers hadn’t acted like fat cats – the corporate side hadn’t milked the market and controlled expenses. They could have kept costs in line ( especially executive, accounting and other ‘corporate’ costs), and held their market share. But no, they continued on the ‘corporate path’ and that is really what is causing the suffering. Note that at non-big-corporate papers, ad rates are much lower, they never had the luxury of the 3 martini lunch, exec golf, expensive junkets, etc. And many of them are doing okay.
It also meant that they did not retain and promote innovative staff – instead they went with the same old, same old, and when change was forced upon them, they had no talent to respond.
So, when milking the market in the ‘good days’, had they drank a little skim and left the cream alone, they might not have the health problems of today.
They are the authors of their own destruction.

By: Aaron Miller

Aaron Miller — Wed, 23 Sep 2009 01:55:00 +0000

Newspaper advertising will never fully recover. Online print, while not being the main source of news for people, still comands most of the advertising dollars. What needs to be developed are better standards for charging companies that purchase advertising space. It needs to be comparable to what the past prices where in print ads consisting of inches and color schemes. It has to consider hyperlink pricing and so forth. I am concerned about this as a recent journalism graduate. So many writers are displaced from their jobs because of the loss of revenue. In order for the jobs to come back there is going to have to be a solution to this problem. Newspaper advertising revenue has been declining since the early to mid 1990′s. The economy plays a big factor in what is going on right now, but there needs to be focus on what occured prior to the “Great Recession”.