Newspaper ad revenues in the US plunged 27.2% last year to levels not seen since 1986, according to the Newspaper Association of America (NAA). The figures show total ad revenue fell from USD37.8bn in 2008 to USD27.2bn a year later. Even online ad revenue, which has typically fared better than the market as a whole, fell 11.8% last year to USD2.7bn. Newspaper print ad revenue slumped by almost a third to USD24.8bn.
The market improved slightly towards the end of the year. Figures from Q4 show the print ad decline slowed from a 29% year-on-year fall in Q3 to 26% the following quarter. Online ad revenues were down just 1% year-on-year in Q4, a massive improvement on the 17% drop seen in the previous quarter. In total, newspaper ad revenues were down 24% in the fourth quarter to USD6.91bn.
This is the 14th straight quarter of ad sales declines in the US newspaper market, with revenue down by a massive 44% since 2006 – the last year the newspapers posted growth. Though the global recession and corresponding ad slump are partly to blame, another key problem is the audience shift from print to the web. Online revenue is up 125% since the NAA started measuring the market in 2004, but still has a long way to go before it matches the golden days of print.
“Newspapers clearly overestimated the potential of advertising online as a whole,” says eMarketer senior analyst Paul Verna, talking to StrategyEye. “It seems clear now they should have adopted a hybrid model. This reliance on one revenue stream was extremely weak.”
While initial figures point to a turnaround in ad revenues this year, segments such as classified ads may never recover. Revenue from these was down 38% year-on-year to USD6.2bn and now makes up just 22% of total ad revenue, down from 40% in 2000. It is unlikely that newspapers will be able to lure those advertisers back as competition from cheap or free websites such as Craigslist continues to intensify.
Newspapers have started to recognise the problem with a number now turning to other revenue streams to make up the loss in ad sales. Papers such as the New York Times and The Times are looking to put their content behind paywalls while others, such as the Daily Telegraph, are selling online services such as financial guidance and holidays. Some papers are starting to see a return to profit, with the Telegraph Media Group posting income of USD79.8m last year.
But Verna believes publishers which adopt paywalls will meet resistance from their readers. “If they go down the paywall route newspapers are going to struggle to recoup the losses in print,” he says. “Readers have just got too used to getting online content for free.”
March 25, 2010
source: digitalmedia.strategyeye.com