Credit Agency Paints Gloomy Ad Picture for US Newspapers

03 September 2007

NEW YORK: The latest survey from US credit assessment agency Fitch Ratings delivers a bleak prognostication for the nation's newspaper industry, summarizing its findings thus: "The outlook for the print sector remains negative."

The study finds that newspapers are performing worse than it forecast at the beginning of this year. At the time, Fitch warned that weakness in high-margin classified advertising would result in soft revenues and pressure on profits.

Analysts Michael Simonton's and James Rizzo's July report highlights concerns about publicly traded companies.

It cites Gannet's flagship title USA Today where ad pages slumped 17% compared with last year. In addition, the publisher's local newspapers experienced a 20% fall in real estate ads.

At the Tribune Company, which owns the Los Angeles Times among others, recruitment ads slid 19% and real estate plunged 24%. The drop was even more dramatic at titles owned by McClatchy. Real estate advertising fell 26% and automotive 20% compared with last year.

Nor has the implosion of homes-for-sale ad revenues come as a surprise to anyone in the newspaper industry, given the dramatic downturn in the market and the increasing panic over sub-prime mortgages.

However, Fitch suggests the malaise runs deeper than the real estate market and could signal a "secular" or permanent loss of classified ad revenues from other sectors.

Data sourced from Adweek (USA); additional content by WARC staff