Newspaper stocks face ugly, wide chasm

Posted by: Aaron Pressman on November 06, 2007

Bad news about the newspaper industry comes out in dribs and drabs usually. Two months ago, we were considering the summer’s advertising declines. This week, there’s news that circulation and ad revenue are down further. But investors need to sort out what is a temporary decline — and perhaps a buying opportunity — and what is a more permanent drop. Former journalist and newspaper exec Mark Potts has taken the data to produce this depressing chart on his blog:

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Right now, newspapers’ mainstay print ad revenues are falling fast while still-tiny online revenues are growing rapidly. The great hope is that the growth in “click here if you’re worried about hair loss” will eventually bring in enough money to offset the loss of Macy’s coupons and Chrysler deals. Potts takes both rates of change, applies them to current levels and projects into the future. That’s where h sees the wide, ugly chasm. Newspaper industry ad revenue looks to keep falling for four or five more years, level off and then pick up in about 2015. That is a very long time for the stock market. And that’s if online growth rates hold at 20%. In some cases, they’re already slowing.

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Businessweek’s Emily Thornton, Amy Feldman, Ben Levisohn, and Ben Steverman focus on matters great and small for investors, from the views of a hot fund manager to an explanation of the latest products devised by Wall Street’s rocket scientists. Exploring trends in any area, from bonds and stocks to closed-end funds and futures, always with an eye towards giving investors a better understanding of the sometimes confusing and often chaotic world of finance. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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