Wednesday, January 12, 2011

What Killed The Newspaper?

Some people believe that it was a lack of interest in reading a newspaper that is killing the newspaper industry.

While that is partially true, nearly every time I visit a coffee shop with my laptop, there is someone reading the newspaper.

But they are usually someone older than me. Mediapost has info on where we want to go to get our news. Click here for their report.

But it's not the lack of readers that is killing print, it's their source of income and business model.

From my email:

The Decade That Killed (Newspaper) Classifieds

The much-publicized woes of the newspaper industry are due, in large part, to the collapse of classified advertising revenues, and 2010 may well have been the year that buried them for good.

Wherever you looked -- real estate, the job market, the auto industry -- the news was bad, not to say disastrous. Combine that with the secular shift to online classifieds, and you have a perfect storm of adverse business conditions.

Classifieds used to be a mainstay of the newspaper business, reflecting their once-dominant position in local media markets. In 2000, classifieds contributed $19.6 billion or 40% of total newspaper ad revenues of $48.7 billion, according to the Newspaper Association of America.

But beginning in 2006, the market began softening noticeably, due to competition from free online classifieds offered by sites like Craigslist, compounded by the bursting of the real-estate bubble. From 2005-2007, total classified revenues slipped 18% from $17.3 billion to $14.2 billion, with real estate leading the way with a 22.6% drop in 2007.

And this was just the beginning.

The worldwide credit crisis and ensuing recession kicked the decline into high gear in 2008, when the real-estate category was joined in its pit of despair by employment and automotive -- a triple whammy that has delivered newspaper classifieds' coup-de-grace.

From 2007-2009, total classified revenues tumbled a remarkable 56% to just $6.2 billion -- less than one-third of their 2000 level. And they're still falling: In the first three quarters of 2010, total classified revenues came to just over $4 billion, down 10% from the same period last year.

The figures are even more incredible when you look at specific categories.

From $2.14 billion in the third quarter of 2000, employment classified revenue has fallen a breathtaking 91% to just $185 million in the third quarter of 2010. From a peak of $1.35 billion in the third quarter of 2006, real estate fell 78% to just $302 million in the same period this year. Meantime, automotive plunged from a peak of $1.22 billion in the third quarter of 2003 to $307 million this year -- a 75% decline.

What's more, the most recent economic data suggests there is no hope on the horizon for any of these beleaguered categories. The U.S. unemployment rate edged up 0.2% to 9.8% in November, after 112 out of 372 labor markets reported their highest unemployment rate in a decade in October. Residential real estate appears headed for a long-term stagnation or decline, reflected in a 1% decline in housing prices from September to October, and a 0.8% year-over-year decline as measured by the Case Shiller Composite-20 Index, leading many economists to predict a double dip in the housing market.

U.S. auto sales are the one relative bright spot, with Standard & Poor's forecasting a 12.9% increase in new car sales in 2011, to about 13 million vehicles -- but new auto sales don't necessarily benefit newspaper classifieds.

While new car buyers traditionally have used cars to sell, this potential source of demand for classifieds was almost certainly diminished by the "Cash for Clunkers" program, which encouraged potential used car sellers to simply take their old vehicles out of circulation for good, rather than try to resell them.

(Source: Media Daily News, 01/03/11)

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