If the newspaper industry had theme music in 2013, it might use “Been down so long it looks like up to me,” the much-recycled line from a 1920s blues song. For the first time since the deep recession that began in 2007, newspaper organizations have grounds for a modicum of optimism:
Companies have started to experiment in a big way with a variety of new revenue streams and major organizational changes. Some of the bright opportunities – such as offering social marketing services to local businesses – are ventures too new to be measured yet industry-wide. They show signs of stabilizing revenue.
Digital pay plans are being adopted at 450 of the country’s 1,380 dailies and appear to be working not just at The New York Times but also at small and mid-sized papers.1 Twinned with print subscription and single-copy price increases, the digital paywall movement has circulation revenues holding steady or rising. Together with the other new revenue streams, these added circulation revenues are rebalancing the industry’s portfolio from its historic over-dependence on advertising.
From a much-reduced base compared to the mid-2000s, publicly traded newspaper companies saw their share prices rise in 2012, with several up 30% or more.
Although the sale prices are low, newspapers coming onto the market are finding buyers. Most notably, influential value investor Warren Buffett’s Berkshire Hathaway bought his hometown Omaha paper, all of Media General’s 63 dailies and weeklies (except for The Tampa Tribune and its weeklies) and, in early 2013, several more. Buffett and other investors have decided that print editions have legs, particularly at small and mid-sized papers, and that the organizations can stay profitable.
Even halting improvement in the general economy helps the industry. The double whammy of cyclical ad losses on top of secular shift to new media has considerably eased from the worst of the recession from 2007 to 2010. Auto advertising has come back, and some markets, like Miami, are beginning to see recovery in real estate and employment ads as well.
All those positives, however, are for the time being mostly promise rather than performance. The most basic indicators have not turned around. The industry is little more than half the size it once was. Considerable dangers persist:
Print advertising fell for a sixth consecutive year in 2012, and not by just a little – it dropped $1.8 billion, or 8.5%, in a slowly improving economy.2 National advertising is a particular weakness, suggesting that corporations are shifting their advertising dollars to other platforms.
Digital advertising, now up to 15% of total newspaper ad revenue, has grown anemically the past two years and does not come close to covering print ad losses. (The 2012 ratio was 15 print ad dollars lost for every digital ad dollar gained.) Even as volume improves, prices are depressed because of the huge range of places to advertise, now including social sites like Facebook and Twitter.
While newspaper organizations have been successful at attracting readers who read news on mobile devices, particularly smartphones, advertising has not yet materialized. Mobile advertising could be just as disappointing as online advertising has been — with the growth centered on shopping and search applications rather than ads that run alongside news.
Though the great majority of newspaper organizations are profitable on an operating basis, many companies continue to struggle with debt and pension obligations assumed in better times.
Papers continue to reduce traditional newsroom staff with smaller expansion on the digital side. A few have also cut print frequency to three times a week.
In a symbolic indicator of decline, newspapers are abandoning the grand headquarters buildings that used to help anchor downtowns in favor of smaller, less expensive offices. Those that stay are starting to rent excess space to other businesses.
So the industry entered 2013 with some positive signs but still dealing with difficult economic realities. The two biggest newspaper developments of the last year – digital paywalls and reduced print frequency – capture that odd mix of expansion and contraction now typical within the industry.
By Rick Edmonds of the Poynter Institute and Emily Guskin, Amy Mitchell and Mark Jurkowitz of the Pew Research Center