Probably cost a few bucks in those days
Posted on 08/19/2009 4:21:46 PM PDT by abb
Inflation-adjusted numbers show papers are even worse off than you think
Martin Peers had a smart Heard on the Street in yesterday’s Wall Street Journal on the critical question of how much of the recent plunge in media companies’ fortunes has been a cyclical decline versus a secular one.
It’s obviously some of both, but the mix will decide what the next five years look like for magazines and newspapers, the critical providers of original reporting in the country. Alas, I’ve crunched some numbers on the industry and they’re beyond ugly.
First, some definitions. A cyclical decline is one due to the inevitable ups and downs of the broad economy. Most businesses get hurt in the recession part of a cycle but do well in the expansionary part and their fortunes more or less move up or down with the economy at large.
But structural changes in the economy or a specific industry can result in secular changes for a business. Think for instance, the classified-ads business of newspapers, which has been walloped by eBay and craigslist (with a final indignity provided by the cyclical collapse of the housing bubble). Most of those revenues aren’t coming back. That’s a secular decline.
Overall daily newspaper-industry ad revenue just flat-out crashed last year, plunging 16.7 percent to $37.8 billion from $45.4 billion in 2007, which itself was a bad year with ads down 7.9 percent from $49.3 billion in 2006.
It gets worse. So far 2009 has been more dismal than 2008. Alan Mutter predicted in January that newspaper revenue would tumble 17.3 percent this year to $31.6 billion, or just below 1993 levels. If anything, his numbers may be optimistic. Several major newspaper companies have reported declines of about 30 percent so far this year.
But even that $31.6 billion understates just how awful the numbers are. Remember $31.6 billion in 1993 bought a whole heckuva lot more than $31.6 billion does today—49 percent more to be exact.
So I went back through the Newspaper Association of America’s data on newspaper-industry revenue, which goes back to 1950, to see what year we’re actually even with now. It’s ugly: You have to go back to 1965 to find a year with revenue lower in 2009 dollars than what this year is projected to be. That year, the industry took in $4.42 billion, which works out to $30.22 billion in current dollars. The industry can only hope this year hits 1966 levels, which work out to $32.4 billion in real dollars. (A caveat: there are fewer papers now than there were in 1965 and production is more efficient.)
Here’s a chart I cobbled together that illustrates the disparity between nominal and real (inflation-adjusted) numbers. Note: the 2009 number is Mutter’s $31.6 billion estimate. Click the chart for a bigger image:
What stands out immediately to me looking at real dollars (which are all that really matter), is that the peak of the last recovery, in 2004, with $55 billion, never got close to the peak of the previous recovery, 2000—when real ad revenues hit $60.9 billion. To make matters worse, the 2002-2004 recovery never reached the peak of two recoveries ago, in 1988, when real ad dollars hit $56.8 billion. Recall, this year ads are projected at just $31.6 billion—if they’re lucky—a 44 percent decline from twenty-one years ago.
That folks, is secular decline, and the vast majority of those dollars are not coming back.
You’ll see, as well, if you trace a line across the chart, that the last time ad revenues were lower than the estimated 2009 total was forty-four years ago (they tied it in the recession of 1970), when they were $30.1 billion.
This is the state of the business today. One recent study by Borrell Associates (see chart below) predicts that newspaper ads have hit bottom and will edge up in the next few years. That would be great, but nobody can predict a bottom in any market, especially one with as many unknowns as the newspaper industry—and in an economy as uncertain as this one.
Newspapers need a rip-roaring recovery to recover a small portion of the ground they’ve lost, and I doubt they’re going to get it. Barring that, they have to staunch circulation declines to try to manage the longer-term decline of the print business, which, after all still has 42.8 million readers paying for the newspaper every day. Certainly, the devastated economy has been a significant factor in pushing down newspaper ads far below what the secular changes would have alone, but it’s clear the secular changes have been dominant.
As for the Journal’s Peers, his larger point is that the collapse has been so shocking it has forced media companies to own up to the fact that ad-only strategies aren’t going to cut it for many of them:
For investors, the positive development of the recession is how much it has changed attitudes about the Internet’s potential as a business model. After several years of acting like lemmings, offering some of their best content free online, both TV and print media executives are rethinking. It is now clear that Google’s spectacular success at building a highly lucrative business from its heavy Internet traffic was something of a one-off. Amassing a big audience online doesn’t yet guarantee enough ad revenues to sustain a big business.
That’s right. The industry got just $3.1 billion from online ads last year, a number that is on pace to decline significantly in 2009. Even that 2008 number was only about 5 percent of the industry’s peak ad revenues in 2000. Again, I’ll note that circulation revenues are the only part of the pie growing right now.
Tough business, no?
ADDING: If you want to look at the precise numbers I used and calculated, here’s my Excel spreadsheet (converted from OpenOffice, so hopefully it will work on Excel).
They could produce e-editions customized for particular audiences, heavy on news in user-selected categories. That could work very well. I would also like to see a short edition that would format correctly for laser printout on 8.5x14 paper. I already spend too much time looking at computer monitors, I want to hold my newspaper in my hands. For the moment I can still do that, but in the future? A 20 page user-printable edition with news and other features from the categories I selected would be about right, maybe 30 pages on the weekends.
Or is that the Wash Examiner?
The Washington Examiner has certainly signed on a lot of great columnists. Unfortunately I can't buy it here, but I can usually buy the Washington Times. Both papers have e-editions.
They already have a machine that prints on plain paper and staples them together that puts out 20 page papers for around a buck at some colleges and stuff... or just being tested... let me see if I can google it... there was also a machine that prints books on demand
http://www.aardvarknet.info/access/number67/othernews.cfm?othernews=09
here is a book version I found
Probably cost a few bucks in those days
Better than looking at a Kindle. At least I would like the choice.
Those kiosk things were around that did that but I don’t know if their still in business. Did you see the flikr image of the kiosk I posted a link to?
It does exactly what you are asking but its dollars per copy from that source.
Maybe we should think about software.
What if we could get a program that could download news. opinion and stuff you’re interested in and print it for you before you wake up?
for example:
Things from the Wash Times, NY Post, UK Telegaph, maybe your favorite blogs and put them together and print them each morning. I think a desktop machine that could do that as well as be your regular printer/copier/fax would sell like hotcakes.
I don’t think I’d want to pay to see a newspaper online. I foten check out the front pages, which is free there though
Here is a Jet Aviation service that does it for their customers.
http://www.jetaviation.com/index.php/latestnews/618
The technology to do this at home exists, somebody just has to be able to get it to market and make it happen.
Yes, and it would be better than nothing, but probably fairly expensive.
Maybe we should think about software.
Of course you are right, this is all about software. The subscriber checks boxes next to keywords describing which types of news he wants to receive, or enters his own keywords. All news content is scanned and perhaps tagged with keywords. The software then chooses the content that best matches the subscriber's priorities, selects an amount of content that can be printed in the desired printout space, formats the content attractively in a PDF file, and emails or otherwise makes the PDF available to the subscriber.
I think a desktop machine that could do that as well as be your regular printer/copier/fax would sell like hotcakes.
I suppose this could work with a specialized large format printer. I was thinking more of using existing printers, but if many people started printing their own papers, they would demand specialized printers.
I suspect that most users might actually prefer to use Kindles or something similar, to save on printing costs. However if the news can be specially packaged and formatted for a Kindle, it can also be packaged and formatted for a printer.
This has been interesting, but I have to call it a night.
Yes, I bet someone who is smart could do that too. does a Kindle have a USB port? wait its wireless, lol!
I was also thinking its probably possible on existing printers too. The one sitting next to me has fax/copy capabilities
Still delusional.
Well they're repeating original Democrat talking points, that's almost the same as original reporting.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.