Newspaper Economics

Trying to get a fix on the size of the classified problem, the NAA commissioned a study by the McKinsey consulting firm in spring of 2005. The trade association got more than it bargained for. The study estimated that competitive pressure alone had cost the industry $2 billion in revenue between 1996 and 2004. Knight Ridder’s CEO, Tony Ridder, chairman of the image-conscious NAA at the time, dismissed McKinsey’s work as “a very shallow and superficial effort.”12

The episode seemed to capture the general sense of jitters. The industry wanted to know what the trouble was, but the leadership seemed put off when the findings were too negative .

It is probably fairest to say that the industry has hardly been complacent, but that the advertising problems really are enormous. The litany of trouble spots is so long that newspapers have been fairly adaptive just to keep advertising revenue headed up at all. Partly that has meant finding new categories over the last decade like pharmaceuticals or, more recently, branded online services, to replace fading lines of business.

Newspaper companies have also been aggressive with rate increases. Yet it is problematic how long that can be kept up if circulation losses continue and the alternative “readership” and “total audience” stories fail to impress the advertising community.

Heading into 2006, the problems on the revenue side of newspapers, in other words, are real and are not going way.