With the New York Times Laying Off Employees, Including Journalists, You Begin To Understand Just How Dismal the Financial Prognosis Is For Newspapers In 2005

Philip M. Stone May 26, 2005

When New York Times staff saw an internal folksy note from “Arthur” and “Janet” they knew something was up. This time the “up” is the loss of 190 jobs, mostly at the Times, but some at the Times-owned Boston Globe. And the reason: “Given the current challenges in the advertising at the Times and the Globe and the cloudy economic outlook for the remainder of the year, we believed it was prudent to accelerate ongoing cost control efforts.”

In other words, the future for print is looking bleaker and bleaker for 2005.

“Arthur” is Arthur Sulzberger Jr, chairman of the New York Times Company and publisher of the New York Times, and “Janet” is Janet Robinson, president and ceo.  When they speak, the industry as a whole tends to listen.

Their announcement came a few weeks after the company reported a year-on-year Q1 decline in earnings of 26%, primarily due to weakness in telecommunications and banking advertising, but also the Boston Globe suffered a 6% circulation decline in the past six months.

If there is any silver lining in the announcement it is that it affects less than 2% of the workforce. The last time the company used the knife, in April 2001 after the Internet bubble burst, some nine per cent of staff (about 1200 jobs) were eliminated.

The job cuts cross over many departments including some 20 in editorial, but management makes all the right noises about not allowing such cuts to denigrate the editorial product.  But the very fact the Times is retrenching in its print operations and actually speeded up the job cuts indicates it does not expect to see advertising pick up near-term to any great degree, and nor does it see a quick end to the continuous negative stream of headlines about how newspapers are sinking into one decline after another.

The only good news for newspapers this year came from the Newspaper Association of America (NAA) that reported newspaper web sites are becoming ever more popular, increasing their unique visitors by 3.1% over 12 months whereas other information sites saw declines of up to four per cent.

But otherwise it is all gloom and doom. The NAA also reported that overall circulation has dropped in the past six months at the fastest pace for 10 years.  Only 29% of US daily newspapers reported circulation increases over the past six months and they were mostly in small and mid-sized markets. Of newspapers with more than 500,000 circulation only three saw increases.

Various consultants are forecasting that job ads and real estate ads, the lifeblood of many newspapers, are increasingly finding their way onto the Internet and within two years this will cost newspapers in the billions of dollars in lost revenues. .

And just this week Goldman Sachs entered the fray repeating that the Internet’s advertising gain is going to be print’s loss. It reiterated buy recommendations for EBay, Yahoo and Google.

Goldman analyst Anthony Noto sees the increased take-up in broadband as a direct catalyst for continued Internet growth. And he forecast that Internet media companies would do particularly well this year (let us not forget the New York Times this year paid $410 million for about.com which it operates in addition to its own very successful web site) because “a growing number of companies are shifting more of their advertising budgets towards the Internet.”

And whereas newspaper advertising is stagnant at best, Internet advertising in 2005 is forecast to grow by some 30% in 2005 to some $12.5 billion, although that still represents only some 10% of the total US media spend. 

And even more bad news for print (but good news for a newspaper’s web site) is that some 30% of Internet ad spending is coming from Fortune 500 companies, according to adRelevance, and those companies are already beginning to divert some of their advertising spend away from print to where they think they get the best value – the Internet.

And meanwhile Advertising Age reports that Renetta McCann, CEO of Starcom MediaVest Group told a meeting of magazine executives this week that they had to be thinking continually about how they are going to  supply information to screens, for screens – whether it is the pc, a hand-held device, or mobile phone -- are where the future action will be.  Although it was a magazine audience much of what she said applies to newspapers, too.

With broadband now installed in about half the homes in the US having Internet access a newspaper or magazine’s web site is going to have to make the best use of local video.

As McCann asked the executives, “Can your food editors present one-minute recipes or cooking tips?  Can your health experts create one-minute relaxation or exercise programs?”

As print retrenches, and web sites grow, those are the new challenges for newsrooms.