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Wednesday, July 16, 2014

The newspaper crisis, by the numbers

Roughly a decade after the commercial debut of the Internet, America’s newspapers posted record high advertising sales of $49.4 billion in 2005, leading many publishers to think their businesses would not be seriously affected by the digital revolution. But they were wrong.  

Since hitting that high note in 2005, the industry has undergone a dramatic and traumatic contraction, losing nearly half of its print readership and more than a third of its revenues. With the pre-tax profits of the publicly held publishers cut by 39% since 2003, newsroom staffing has dropped to a historically low level. In spite of the declared determination of most publishers to pivot from print to pixels, the industry's share of the digital advertising market has plunged by more than 50%.   

As illustrated in the following roundup of key performance indicators, it is clear that publishers have failed for the better part of a decade to adequately respond to the new ways that consumers get information and that advertisers want to reach them. 

Because it is easy to become inured to the drip, drip, drip of bad news about newspapers, this quick compendium is offered as a reminder that one of our most valuable journalistic institutions is engaged in a grave, ongoing and so far unresolved crisis. Brace yourself. 

Combined print and digital advertising revenues at the 1,300-plus newspapers in the nation tumbled 55% from $46.2 billion in 2003 to $20.7 billion in 2013, according to the Newspaper Association of America (NAA). Classified print advertising was hit the worst in the 10-year period, plunging by 74% to $4.1 billion in 2013. National print advertising dropped 61% in the decade to not quite $3.1 billion in 2013 and retail print advertising fell 53% to $10.1 billion in 2013. 

Notwithstanding the professed embrace of digital publishing at most newspapers, the industry’s share of the interactive advertising market dropped by 52% in the last decade. While the industry’s collective digital ad revenues rose 181% from $1.2 billion in 2003 to $3.4 billion in 2013, the total digital ad sales in the United States soared 494% from $7.3 billion in 2003 to $42.8 billion in 2013. Accordingly, the newspaper share of the digital advertising market dropped from 16.4% in 2003 to 7.9% in 2013. Newspaper sales figures were provided by the NAA and over-all digital data are from the Interactive Advertising Bureau. 

While newspaper publishers are continuing to gain audience at their web and mobile sites, their interactive efforts typically trail the level of engagement achieved by many native digital media. Here is an example: The NAA reported that a collective 161 million unique individuals visited the digital media of all the newspapers in the land in March, a number equal to two-thirds of American adults. By contrast, Facebook alone attracts 166.5 million uniques per month. Here is the big difference: While the typical visitor spends 1.1 minutes at a newspaper site, the average dwell time at Facebook, the super-sticky social network, is nearly half an hour. 
Weekday print circulation dropped 47% from an average of 54.6 million papers a day in 2004 to an average of 29.1 million papers per day in 2014, according to my analysis of a random sample of data from the Alliance for Audited Media. Sunday circulation in the same period fared somewhat better, sliding 40% to an average of 34.7 million papers per week in the period ended in March, 2014. The circulation decline means that only a quarter of the nation’s 115.2 million households today consume a weekday paper and only 30% of households take Sunday papers. Ten years ago, household penetration was more than 1.6 times higher than it is today. 

NAA data show that the industry’s total advertising and audience revenues across all categories shrank 35% in the last decade, wilting from $57.4 billion in 2003 to $37.6 billion in 2013. The drop occurred even though many publishers sought to offset declines in print advertising and circulation volume by boosting prices for their print products and/or putting paywalls on their digital media. Despite the heavy emphasis most publishers have put on increasing audience revenues, even this category slipped by 3% from $11.2 billion in 2003 to $10.9 billion in 2013.

In spite of effusive efforts by the industry to reduce expenses in the face of plummeting revenues, pre-tax profits of the publicly held newspaper companies fell by 37% in the last 10 years. Earnings before interest, taxes, depreciation and amortization slid from an average of 25.8% in 2003 to 16.3% in the last 12 months, which still compares favorably to the pre-tax margins of 4.9% at Amazon and 9.4% at Walmart. The International News Marketing Association provided the historical data and I compiled the current data at Yahoo Finance. 

One major consequence of the industry-wide contraction is that newsroom staffing dived by 31% from 54,700 journalists in 2002 to 38,000 in 2012, the lowest number since the American Society of News Editors conducted its first newsroom census in 1978. Given additional newsroom reductions at many publications since the ASNE survey, it is fair to assume that staffing is even lower today. In a measure of how coverage has diminished, the number of newspaper reporters covering the nation’s statehouses fell 35% to 470 individuals between 2003 and 2014, according to a survey released last week by the Pew Research Center. 

A newspaper executive told me a few days ago that some people in the industry hate my continuing coverage of the challenges facing newspapers. For the record, I don’t enjoy writing this stuff any more than newspaper people like reading it. But I do it because I am trying to remind them of the urgent and formidable challenges they face in not just protecting their individual businesses but also in preserving the irreplaceable public trust that newspapers represent.  

11 comments:

  1. Yes it's depressing, but you do it because you care about the outcome and the profession. There's no shame in that. Thank you. It's what we all need to hear. VJ, Maryland

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  2. A huge problem: Newspaper organizations are terrible at separating and reporting new revenue streams. Data, events, books, whatever -- those and many more will be what takes the place of traditional "advertising." If we don't plan for it, measure it, report on it and focus on it, we're signaling it's not important. And if we really believe that, we deserve the fate that awaits us.

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  3. Let's see if I can net this out to make business sense: Reduce print and distribution costs by 70%, cut editorial costs by 90%, eliminate pensions by declaring bankruptcy, convert employee positions to independent contractors thus passing risk and liability to the creators and producers, increase resulting digital revenues multifold and maintain ownership? Someone is laughing all the way to the bank while the rest are reading doomsday reviews with wrong and outdated assumptions and measurements. THINK.

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  4. Could you please explain why, amidst all of this doom and gloom, newspapers continue to publish? Could it possibly be because they are all making money? Lots of it, actually.

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  6. Remarkably, the newspaper industry barely offers its products online. if you think its product is news, you'd be wrong. It's advertising, and while the content of the paper is given away, customers are virtually unable to buy an ad. Maybe a classified liner, but that's it. Publishers simple won;t offer display ads for sale on their sites. Weird. Very weird.

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  7. This doesn't account for the overall decline in business following the subprime crash in 2008. Wonder if there's a way to adjust for that, compare to other industries...

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  8. Doesn't account for overall business decline as a result of the subprime crash in 2008. Wonder if there's a way to overlay those numbers, compared to other industries...

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  9. Greed you fools killed newspapers........I have been on the business side for 25 years and I assure you they are dead but don't know it. This halo you wear is old.

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  10. The saddest part is that metro newspapers are in even worse shape. And they are the backbone of American journalism, providing much of the basis for all other reporting from broadcast to bloggers.

    Eventually we will come to realize that the news media are the most important civic educational institution, bar none. As such they are as important to a democracy as public schools. Like public schools we need to find a way to use public dollars to support them, but in a way that does not offer control over content.

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  11. I think it is important to note that while there may be 1,300+ metro dailies (many driven by nothing more than quarterly EPS) -- which is really the group whose death is often reported -- there are more than 12,000 newspapers in this country, most of which still have strong print readership and advertising bases and are, for the most part, not included in the surveys.

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