Sunday, March 30, 2008

BoSacks Speaks Out: Ad Revenues Plunge of 50%

BoSacks Speaks Out: Ad Revenues Plunge of 50%

I am about to dive into an old rant. I do it because it is an important concept and because I have almost a thousand new subscribers since I last vented about this subject. Everybody who reads this newsletter knows or should know that I am a magazine guy through and through. So, it's not unusual that I am continually barraged with questions like; "Bo, why do you keep such a strong focus on the newspaper industry?"

I have a dozen reasons why I think it is an important industry to track, not the least of which is my canary in the mine shaft theory. I used to explain this more often to my readership than I do now, and I believe that it has been at least a year since I have done so. I will now attempt to correct that oversight, because I still deem it a very important industry for magazine professionals to track.

Simply put, the newspaper industry has been a forecaster of magazine trends for over 60 years. I believe that the newspaper industry still acts for the magazine industry just like the vulnerable little canaries that coal miners carried into the coal mines in times past. When there was little clean air, the canaries "fainted" first, warning the miners of pending trouble. A similar process could/should be said for newspapers being more sensitive and vulnerable in the publishing world in these times of economic stress and business model upheavals. It is the newspapers who are "fainting" first, months, perhaps years, before the same conditions hit the magazine industry. But make no mistake, it is a very similar mineshaft that we are in. If they are fainting and croaking, we had best pay close attention and know the reasons why.

We all know that many of the old business models have changed. Newspapers and magazines have changed dramatically. Surely, the advertising community has changed in, if nothing else, the many different and new venues to spend advertising dollars in. Not to mention their obsessive search for accountability. Add into that volatile mixture the apparently unstoppable oncoming recession and you have a tsunami media/magazine advertising event.

So, yes, I track the newspaper industry pretty damn closely and only send out a fraction of what I read and know about it.

The newspaper industry is a media brother or sister. We have almost the same genetic code. They are us in different clothing. When they get mugged, we are next in line in the alley. We are in the same boat riding on a very similar platform.

Today's news about the ad revenue plunge is very important. Because newspapers are dailies, they more closely reflect the economy and the insights and wisdom, or lack thereof, of advertising spending. Whatever the trend is going to be, up or down, it is reflected first in newspapers and second in magazines.

With all this off my chest, I still think we are headed for a great second golden age of publishing (information distribution). Yes, it will be different. Yes, our business models will have to change. But if we are smart we will notice that what we can and do still provide is exactly what people have always wanted. They want information. They want information in the form of news or entertainment, or crafts or fashion, or culture or any of a thousand niche subjects. That is what we do best and will continue to do. We just need to be where the information seekers are and provide great content worth reading.

"We cannot live only for ourselves. A thousand fibers connect us with our fellow men; and among those fibers, as sympathetic threads, our actions run as causes, and they come back to us as effects."

Herman Melville (American short-story Writer, Novelist and Poet. Best known for his novels of the sea, including his masterpiece, Moby Dick. 1819-1891)

NAA Reveals Biggest Ad Revenue Plunge in More Than 50 Years By Jennifer Saba Published: March 28, 2008 12:55 PM ET
NEW YORK The newspaper industry has experienced the worst drop in advertising revenue in more than 50 years. According to new data released by the Newspaper Association of America, total print advertising revenue in 2007 plunged 9.4% to $42 billion compared to 2006 -- the most severe percent decline since the association started measuring advertising expenditures in 1950. The drop-off points to an economic slowdown on top of the secular challenges faced by the industry. The second worst decline in advertising revenue occurred in 2001 when it fell 9.0%.Total advertising revenue in 2007 -- including online revenue -- decreased 7.9% to $45.3 billion compared to the prior year. There are signs that online revenue is beginning to slow as well. Internet ad revenue in 2007 grew 18.8% to $3.2 billion compared to 2006. In 2006, online ad revenue had soared 31.4% to $2.6 billion. In 2005, it jumped 31.4% to $2 billion. As newspaper Web sites generate more advertising revenue, the growth rate naturally slows. The NAA reported that online revenue now represents 7.5% of total newspaper ad revenue in 2007 compared to 5.7% in 2006.That growth could not stave off the losses in the print however. National print advertising revenue dropped 6.7% to $7 billion last year. Retail slipped 5% to $21 billion. Classified plunged 16.5% to $14.1 billion."Even with the near-term challenges posed to print media by a more fragmented information environment and the economic headwinds facing all advertising media, newspapers publishers are continuing to drive strong revenue growth from their increasingly robust Web platforms," John Sturm, president and CEO of the NAA, said in a statement.

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