Friday, January 9, 2009

Thanks to a huge drop in fourth quarter retail sales, look for revenue from newspaper advertising to fall another 17% or more

Alan Mutter says advertising revenue for newspapers this year could be far worse than anybody expected, based on a meltdown in fourth quarter retail sales.
The unprecedented meltdown in retail sales in the fourth quarter of last year all but assures that newspaper advertising sales in 2009 will fall another 17% – or more – on top of a similar plunge in 2008.

Assuming the projection detailed below proves to be correct, print and online sales for the industry would amount to no better than $31 billion this year after diving to something like $38 billion in 2008.

The last time industry sales were as low as $31 billion was in 1993. In 2007 dollars, $31 billion would be worth $43 billion.

Hopes were dashed today for a reprieve in the fierce decline in newspaper ad sales when a wide spectrum of retailers reported dismal sales in December in what the New York Times called “one the worst holiday shopping seasons in decades.”

The holiday period generates a third or more of the annual profits for most retailers. Deep discounting to clear inventories in the fourth quarter almost certainly put even more pressure on retailer profits than the anemic sales numbers would suggest.

The pain for merchants translates directly into pain for newspapers, because retailing is by far the largest advertising category, producing no less than half of industry revenues. With employment, automotive and real estate classified advertising already severely depressed by the worst economy in generations, the collapse of retailing will put further pressure on already-battered newspaper sales.



Archer05 said...

Last September, Alan Mutter wrote about former Knight Ridder boss Tony Ridder.
-How the shrewder CEO cashed out at MNI-

…Before he [Ridder] departed, however, Tony demonstrated his superior wisdom by dumping at least 87% of his MNI stock, according to filings at the Securities and Exchange Commission. In transactions completed as of Nov. 30, 2007, he netted $3.6 million at an average price of $39.61 per share…..

After being paid some $20.6 million for engineering the sale of KRI to McClatchy in the summer of 2006, Tony probably wasn’t hard up for cash. So, his decision to liquidate nearly all of his McClatchy holdings suggests that [he suspected things were not going swimmingly in Sacramento.]

Or, was Tony simply concerned that McClatchy’s [senior managers were too inbred] and too self-absorbed to objectively face up to the company’s growing problems?

Anonymous said...

Truth be known Mr Archer, the impression of being the shrewder CEO is not entirely justified in Mr Ridder's case. Tony actually resisted the deal. Knight Ridder had a much more independent board and shareholders actually pressured him severely, for many months to unload the company before it was too late.

Under the structure of the deal, all Knight Ridder shareholders were compensated almost entirely in cash, except for a tiny fractional Class A share of MNI.

In hindsight, it could be said that Ridder was the shrewder of the two, but this perception was not of his own doing, even though he benefited in the end.

The real shrewed Knight/Ridder shareholders were the one's that sold their fractional shares and then shorted MNI with their entire payoff immediately. There were actually a lot of us that did exactly that, but, you will never read about them.

Anonymous said...

Too bad the newspaper business has ruined a very important service to our country. They just care about advertising and making money.

What if there was no journalism when Walter Reed was reported on. Our vets would still be in that hell hole. That article will change the thinking of our country about corruption of our Government.

As long as the Newspaper Executives get a Belks or Dillards ad they are happy to copy and paste the local news stories off of the Internet. Some of the local news is being reported by people in India and Southeast Asia, They just look it up on the Internet and there you go.

This is a sad day in our country when the "Watch Dogs" are put on the street because "Macy's" might not run an ad.

There is money being made, it is all a big hoax. It is being mismanaged by upper and middle managers. They have a manager for every few employees. They could do with 50% less, so called managers.

They just sit around and surf the internet all day. It is "Cronyism" at the highest level. If you went to high school with someone and really liked to hang with them, they might be a manager three months after being hired. Upper management is clueless to this practice.

Too Bad!