2007 State of the News Media Report - Newspapers
Is the newspaper industry dying? Not now. On an average day, roughly 51 million people still buy a newspaper, and 124 million in all still read one.
The industry is recording pre-tax profit margins in the high teens, and online editions are adding readers and advertising revenues at a healthy pace. When online and print readers are combined, the audience for what newspapers produce is higher than ever.
But the print newspaper is unquestionably ailing. Circulation is declining. Advertising is flat. As Warren Buffett said at his annual investor’s meeting in May 2006 newspapers appear to have entered a period of “protracted decline.”
The search is on for new business models, but success is not guaranteed. And while the fundamentals might reverse, there is no compelling case that they will.
Newspapers are focusing more on improving their journalism online. But it is not clear if the Web will ever make enough money to support journalism as we know it in print. The worry is that newspapers may be stuck with a traditional manufacturing cost structure that cannot be reduced or shifted fast enough.
In 2006, the traditional indicators were all negative:
*Circulation fell even faster than in 2005 — down 2.8% daily and 3.4% Sunday for the six months ending in September compared to that period a year earlier.
*Industry revenues were flat, a poor showing in a non-recession year. On the print side, retail, national and automotive classified all showed weakness. Online growth left most companies roughly even in revenues for the year.
*Earnings fell. Wall Street responded by marking shares of publicly traded companies down by about 14%, after a tumble of 20% in 2005. 
*At big metro papers, such as the Dallas Morning News and the Philadelphia Inquirer, there were deep newsroom cuts. Together with some closings of national and international bureaus, the trend was to smaller, local papers with diminished ambitions.
The outline of what readers might be losing in coverage is still emerging. For now, metros have pulled way back from coverage of more remote areas. Unglamorous watchdog coverage of council and school board meetings appears to be suffering. Copy editing is being reduced. Already in 2007, several papers have collapsed business news and metro into a single department.
The industry looked for a more positive story by proposing some new audience measures. One of those is the much larger number that reads at least one edition of a paper in the course of a week (as distinct from those who buy it on newsstands or subscribe to it). The total reach of print, online and niche products combined is another. For a sales pitch, the Newspaper Association of America sponsored research showing that print newspapers remain a valued “destination” source for information on stores, products and comparative prices.
Another positive is that the growth in online revenue and readership continued. By the end of 2006, however, there was evidence that the rate was slowing and would slow some more in 2007.
The industry is taking the Web more seriously, and that will probably only intensify in 2007. Many sites are cluttered and due for a redesign that can promote interactivity and create more display space for advertisers. Online enhancements, in turn, are prompting rethinking of the print product — a tighter, more forward-looking and analytical approach on the model of the reworked Wall Street Journal, introduced in January 2007.
The Web clearly is both opportunity and threat to newspapers. It represents a chance to increase audience across new delivery systems and perhaps draw in young people and other readers who have proven elusive in print. Optimists hope that the online advertising will not only grow in revenue but expand in form to include things like local search and e-mail. Already newspaper companies are partnering with former rivals like Monster and HotJobs.
But something else could also happen. The competition online is even greater than in print. It is easier than ever for alternative news sources to start up and lure away audience. And the newspapers’ own online advertising, which increasingly seems unlikely to be sufficient by itself to sustain journalism at anything like current levels, could also further ebb in the face of options with no news content at all, like design-your-own-car company sites, Craigslist and more.
As of now, we find it too soon to side with either the optimists or the alarmists.
All those factors, both the problems and the long-term promise, seemed to manifest themselves in a flurry of ownership changes and the emergence of various private investors as a force in the transactions. But what does the arrival of the new private suitors portend? Are they investors for the long term and for the interest of the papers’ home communities? Or are they rich magnates looking for a plaything? Or will they prove liquidators looking to flip a property? It is simply not clear yet.
Near the end of 2006, groups of newspapers struck separate advertising deals with Google and Yahoo, holding out at least the promise of broader collaboration with the two Internet giants and a boost to online ad revenues.
Newspapers could gain momentum if they demonstrate success, rather than just good intentions, in inventing new lines of Internet revenue. Some strong initiatives that would reduce business-side costs over time would help, too.
More likely, the stage seems set in 2007 for more business turmoil, a negative industry image and further cuts in the newsroom’s capacity to do public-service reporting with distinction.
1. The circulation number 51 million is more current than the figure of 53 million offered by Editor & Publisher, which only accounts for circulation through September 2005. The 51 million is derived by taking the Newspaper Association of America’s “Daily Circulation 2004” and adjusting that for reported 2005 and 2006 circulation losses. http://www.naa.org/trends-and-numbers/market-databank/newspaper-circulation-volume-.aspx and NAA “Daily and Sunday Newspapers 2006 Readers Per Copy,” http://www.naa.org/trends-and-numbers/market-databank/2005-daily-and-sunday-readers-per-copy-.aspx
3. 2006 Editor & Publisher International Yearbook, 86 th Edition, and Newspaper Association of America, “NAA Analysis Shows Eight Percent Increase in Total Newspaper Audience Reach,” press release, October 30, 2006