Recession Will Hit Newspapers Hardest

Implications: 2008 is already shaping up to be another tough year for newspapers.  Falling revenues have prompted big layoffs at New York Times and Tribune.  A recession only makes matters worse.

Analysis: When marketers want to reduce spending quickly, it’s easy to cut spending in newspapers.  Production cycles are much shorter than monthly magazines.  Advertisers are not locked into “upfront” commitments like they are on TV.  And advertisers are less wedded to their newspaper creative than they are to their expensively produced commercials.

That’s why newspapers have always been one of the categories hit hardest going into a recession.

Whatever label we give to the current economic slowdown, it’s already got all the hallmarks of a recession for the newspaper category.

We saw it last year when Classifieds tanked in all three major categories – Help Wanted, Real Estate and Automotive.

We’ve seen it in the end-of-year ad figures for 2007.

And we’ve seen it at Tribune this month where 500 jobs will be cut because, as Sam Zell put it in a widely publicized memo to employees: “significant declines in advertising at our newspapers are putting downward pressure on our cash flow.”

The New York Times, facing similar pressures, announced 100 job cuts of its own.

Newspapers usually do very well coming out of a recession.  That won’t happen this time.

When the economy improves, marketers traditionally rush back into newspapers to promote products, services and special offers.  Here’s when newspapers’ ability to take ads quickly, print more pages as needed – and deliver messages directly into consumers’ hands – come into play.  This time around, things will be different because:

1.  Classified advertising’s decline is, as I’ve said in other articles here, a case of the cyclical reinforcing the secular trend to the internet.  After the dot-com bust of 2000, Help Wanted ads in print never attained their previous levels.  This time around, do not expect to see Real Estate, Automotive or Help Wanted to get back to their ‘05-‘06 levels.  Newspapers will continue to try to sell the benefit of Classifieds that appear both in print and online.  But the future of Classified is predominately online, with print being relegated in future to a nice-but-non-essential “add-on.”

2.  Newspaper display advertising will also be challenged by new competitors for “post-recession” advertising spending.  All forms of online and mobile advertising are likely to hold up well during the current recession – and continue to do well in the upswing.  Plus new digital and video technologies in the out-of-home space will be competing very aggressively – as will radio – for every available media dollar.  Meanwhile, cable TV is staying strong and capturing TV revenue from the networks.  It all points to printed newspapers playing a smaller and smaller role in marketers' future media mix.

To sum up: 2008 will be another tough year for newspaper advertising.  And it’s hard to see 2009 being much better.