US Newspaper Ad Rates to Rise - but at What Cost?

29 December 2005

US newspapers are hoping a rise in advertising rates in 2006 will lift sagging revenues.

But analysts warn advertisers may resist the increases as they migrate to other print media and, more significantly, the internet.

The nation's largest newspaper publisher, the Gannett Company, expects to hike ad rates on its flagship title USA Today by around 6%, less than the 8% increases of the last two years. Circulation at the title fell slightly during the most recent six month period.

The New York Times predicts ad rates will rise by around 5% and by 3% at its sister publication, the Boston Globe.

Meanwhile on the West coast, the Los Angles Times, published by the Tribune Company, is expects ad rates to increase by up to 6%, despite significant circulation falls.

However, it is declining readership which will make it difficult to persuade marketers that newspapers are a good investment for their advertising dollars.

According to the Audit Bureau of Circulations' latest six monthly figures, sales of daily papers fell by an average of 2.6%. Many younger people never pick up a newspaper, while older readers are switching to online information sources and 24-hour TV news.

Comments Lee Doyle, of media agency Mediaedge:cia: "I don't think newspapers are dead, but they're slowly and surely losing their relevance." He adds that increases in ad rates are "just going to give us more reason to look elsewhere to spend those dollars".

'Elsewhere' is most likely to include the internet. While newspapers might see a 3% or 4% increase in print ad revenue for the year, their online editions are expected to post gains of about 30%.

Industry analyst Craig Huber, of Lehman Brothers, believes newspaper ad revenue will decline 1.5% next year, battered by competition and circulation declines. The industry remains bullish, however, and forecasts a 4% rise in income.

Data sourced from Wall Street Journal Online; additional content by WARC staff