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It Was A Very Bad Year: Old Media Suffers Long-Term Declines
by Erik Sass, Wednesday, April 1, 2009, 5:51 PM

The fixes are in for 2009, and it’s looking pretty bad for traditional media in America. Various forecasts have ad revenues for radio, magazines, and newspapers dropping by double digits across the board, compounding alarming declines for all three media in 2008 (see graph below).

The economic downturn was a popular culprit during fourth-quarter conference calls, and the bogeyman will doubtless make another appearance when first-quarter earnings results are announced. But don’t believe the hype: The general downward trend was in evidence well before the recession began, reflecting fundamental secular shifts in media consumption and advertising. If anything, the economic downturn is merely accelerating this process.

There’s no question that the falling fortunes of radio, magazines and newspapers are coinciding with recessionary trends. In the fourth quarter of 2008, as the economy went into freefall, radio revenues fell 11%, according to the Radio Advertising Bureaul; magazine revenues declined 14% according to the Publishers Information Bureau; and newspaper revenues dropped 20%, according to the Newspaper Association of America.

These declines accompanied a 3.8% drop in U.S. real GDP during the fourth quarter. Looking to the future, analysts are predicting a 3.1% drop in U.S. real GDP in 2009. SNL Kagan forecasts a drop of “at least 15%” in radio revenues, and American consumer magazines will see ad revenues tumble 16.2%, according to eMarketer, and Barclays Capital predicts that U.S. newspaper ad revenues will fall 17% in 2009.

But the fact remains: all three media sank long before the economy tanked.

According to a non-partisan government panel of economists, the recession began in November 2007, but traditional media were ahead of the curve. Radio’s last year of positive revenue growth was 2004, while newspaper revenues and magazine ad pages both stalled the year after. Historically, it’s true that ad spending in these media has anticipated recent economic downturns, but never by more than a year. For example, newspaper revenues went slightly negative with a 0.4% drop in 1990, anticipating a recession that gathered speed in 1991. This time around, however, the ad revenue declines came two to three years ahead of the economic meltdown.

Even more ominous — and indicative of the underlying secular shift in media consumption and spending — these media failed to grow substantially when the economy was relatively strong earlier this decade, failing to keep up with U.S. real GDP. This is a big change from their previous results. Surveying the 31-year period from 1970-2000, radio revenue grew faster than GDP 29 out of 31 times, magazine ad pages grew faster than GDP 19 out of 31 times, and newspapers beat GDP 28 out of 31 times.

In the eight years from 2001-2008, however, radio revenues beat GDP only once, while magazine ad pages and newspapers both beat GDP twice. Therefore, comparing the periods before and after 2000, radio went from beating GDP 94% of the time to 12%, magazines from 61% to 25%, and newspapers from 90% to 25%.