The US newspaper industry failed to live up to expectations in 2005, with Merrill Lynch reporting a 2% rise in advertising revenue among the 11 major newspaper holding companies, falling short of the expected 4% increase.
According to the analyst, average earnings per share (EPS) dropped by 5-6% in 2006, with the downward trend accelerating towards the end of the year, declining by 7-8% in the fourth quarter. Merrill had previously projected a rise of 4% in EPS for 2005.
Looking towards 2006, Merrill Lynch analysts have issued a less optimistic growth of 2% EPS, with the report claiming the newspaper industry is “likely to remain challenging” in the coming year.
Merrill also asserts that retail advertising will continue to shift its adspend from newspapers to direct mail and television.
Newspaper advertising revenues look set to suffer from the desertion of automotive advertising revenue to new platforms, with the internet forecast to be a major player in revenue decline.
Responding to the internet’s increasing encroachment on traditional media adspend, newspapers are investing significantly in their online portals in an attempt to salvage lost adspend. However, the disparity in cost to consumers between free online content and paid paper editions looks likely to mean further deterioration in the advertising saleability of the print editions.
The depressed newspaper market in the US is mirrored in the UK, with Initiative Media projecting the UK press market as a whole to remain static in 2006, with a downward trend in sales of national newspapers resulting in advertisers cutting adspend by 1.2% (see UK Adspend To Rise By 3.7% In 2006).
These forecasts echo those of OPera Media, with the agency expecting 2006 to be a turbulent year for national newspapers in the UK (see UK Adspend To Hit £15 Billion By 2010).
OPera predicts sales for the quality papers to rise by between 2% and 3% during 2006, but expects mid-market papers The Express and Daily Mail to suffer a 2% to 3% decline, while red top papers will be hit hardest with a 3.5% decline in circulation across the year.
Meanwhile, the online newspaper market continues to thrive, with news websites in the US attracting an average of 53.6 million visitors a month during the fourth quarter of 2005, enjoying a rise of 30% from 41.1 million in Q4 2004 (see Online Newspapers Continue Strong Growth).
According to the latest figures from the Newspaper Association of America (NAA), users are spending more time on the websites. Users averaged 42 minutes a month in Q4, up 16% from 37 minutes in the fourth quarter of 2004.
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