Technology

Newspaper nightmares

Penury for print? Economics and changing demographics are sinking newspapers, and it isn't clear whether the cavalry of online advertising can arrive in time to save them.

It’s not an ideal time to own a newspaper. The Tribune Co., owner of industry bellwethers the Los Angeles Times and Chicago Tribune, among others, filed in December 2008 for bankruptcy protection because of mounting debt and falling ad revenue. In a court filing, the Tribune said it had US$13 billion in debt compared to US$7.6 billion in assets. Almost across the board, print revenues at North American papers have been dismal: in the U.S., print ad revenue plummeted 9% in 2007 compared to 2006 figures. In Canada, print ad revenue was down 2.4%.

And as increasing numbers of readers turn to the Internet for their news fix, circulation numbers have also dropped, according to the Audit Bureau of Circulations, which reported in October 2008 that the combined weekday circulation of 507 newspapers across the U.S. fell 4.6% from a year earlier. In Canada, daily circulation of all weekday newspapers stood at 4,674,900 copies, down 1.5% from 2007.

But if the audience is moving online, can digital ad revenue save newspapers?

The numbers are at least mildly heartening, if not conclusive. In 2007 online ad revenue for newspapers totalled $196 million, a 29% increase over the previous year, according to figures from the Canadian Newspaper Association. The Interactive Advertising Bureau of Canada in 2008 forecast robust sales growth of 15%, but has since sobered and now predicts online ad spend will see only high single or low double-digit growth in 2009. By comparison, Internet advertising revenues in the U.S. for the first six months of 2008 reached US$11.5 billion, a 15.2% increase over the first half of 2007.

“The economic downturn is largely in the U.S., so we’ll wait and see how it will affect Canadian online ad spend figures,” says Paula Gignac, president of the IABC.

Fred Forster, president of media buyer PHD Canada, takes a similarly optimistic view. “The slowdown will mean smaller ad budgets, but we’ll still see growth in digital ad spending,” he says.

Newspapers have some opportunities to make up lackluster print ad numbers, but it won’t be as simple as copying print articles to websites. Leveraging Web 2.0 is at least one answer.

In 2006, Austin, Tex.-based Pluck created a news wire service called BlogBurst a database of more than 5,000 blogs that feed content to paying clients including newspaper websites. Publishers pay monthly subscription fees to access articles from high-quality blogs, often on niche topics beat reporters wouldn’t normally cover. In this way publishers add more variety and quality content to their site, according to Adam Weinroth, director of product at Pluck.

“Newspapers need to give readers more reasons to return to their site,” Weinroth says. He recognizes that a newspaper needs to prioritize what stories it publishes — staffers will be too busy covering crime, for instance, to spend time writing about gardening. But that’s where BlogBurst fits because “it deepens a paper’s site and bloggers can cover many areas of expertise.”

Another related practice that could energize ad sales is the creation of in-house, digital ad networks. The Houston Chronicle has been operating one for more than a year. The Chronicle’s ad sales team develops relationships with local bloggers, explains Stephen Weis, VP and GM of HoustonChronicle.com. Partner bloggers agree to allow media buyers who advertise on the Chronicle site to also place an ad on their site. “We want to expand beyond Chronicle.com,” Weiss says. “This extends an ad network to become a local player, while also giving our clients more exposure.”

Analysts are encouraging of the idea. “Additional advertising means an expanded portfolio,” says Barry Parr, media analyst at Jupiter Research. He cites the example of a paper’s travel section, which has limited utility for travel-related advertisers because such sections typically offer few pages. But a blogger dedicated to touring global hotspots and publishing daily updates can benefit an advertiser hoping to lure more attention to their placements.

Strategic partnerships and acquisitions are a third growth area for publishers. The New York Times Co. (NYSE: NYT) has become a leader in increasing ROI with new media acquisitions. In 2005 it acquired consumer help site About.com for US$140 million. About.com’s operating profit has since grown at a compound annual growth rate of 41%, says Catherine Mathis, SVP of corporate communications at The New York Times Co. She points to other key acquisitions that diversity its online offerings, including Calorie-Count.com and ConsumerSearch.com, an aggregator and publisher of product reviews.

According to October 2008 figures, Internet businesses accounted for 12.1% of the Company’s total revenues, up from 8% in 2007.

“The New York Times has a Bible full of data, and it’s doing extremely well compared to other papers in terms of luring eyeballs,” says Ed Atorino at Benchmark & Co., a media consultant firm based in Austin, Tex.

However, the ongoing trend is unmistakable — it’s not just revenue but also ad volume that is down in print (off 6% from 2006 to 2007), suggesting that lost sales aren’t being made up in margins either. Online advertising will grow, though at a much reduced clip given the current economic recession, but it’s not clear that it will grow quickly enough to offset the massive gutting newspapers are facing. After all, online revenue remains a sliver of the total ad pie for U.S. newspapers — 8%, according to 2007 data from the American Newspaper Association.

A closer look into the Times’ Q3 2008 provides more insight: Total ad revenues declined by US$66.8 million while online ad revenues increased by about US$5.4 million. That shortfall is the dilemma many newspapers face as classifieds and print ads plummet in the deepest economic downturn in 80 years.

But they will have to hope they can snatch enough of the online pie because demographic trends are not in their favour. According to a survey from the Pew Center for People & the Press, the percentage of those who say they had read a newspaper on a given day has dropped from 50% in 1998 to 34% in 2008. Also, respondents who have visited the Web for news at least three days per week jumped from 31% to 37%.

Some papers aren’t — or can’t — going to wait. Connecticut newspaper publisher Journal Register Co. threatened to close 13 papers it owns if a buyer isn’t found by Jan. 12. And the venerable Christian Science Monitor announced in October 2008 that come April 2009, just past its 100th birthday, its daily edition goes online only.