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Friday, March 13, 2009

Epilogue to Great Disconnect

The Rocky Mountain News, the oldest newspaper of Denver, Colorado closed down on 27th February after unsuccessfully hunting for a buyer for several months. The cause of the closure - a protracted and severe slump in advertising and classified revenues, declining circulation and deteriorating financial numbers, the economic downturn, falling stock prices and, of course, the Internet.
Newspapers across the US - and particularly larger publications in big cities - are scrambling to adapt to rapidly changing business conditions. That's resulted in mass layoffs, employee buyouts, closures and a heavy dose of uncertainty.
Newspaper advertising nationwide dipped 7 percent in 2007 and has gotten progressively worse this year, climaxing with an 18 percent plunge in the third quarter. That decline represents the biggest drop in at least 40 years, according to the Newspaper Association of America. A report issued in October by a Goldman Sachs analyst estimates that newspaper ad revenue will fall 11 percent next year - more than the firm's previous prediction of a 7.5 percent dip.
The economy is certainly a big factor. But advertisers also are simply finding new ways to reach customers, while consumers are increasingly using sites like Craigslist to place classified ads. At the same time, more people are now getting their news on the Internet, where most content is free. Newspapers have been able to increase online ad sales, but not enough to supplant the print product. And even that growth is slowing: Online newspaper ad revenue rose 19 percent last year vs. a 31 percent spike in 2006.
Prices for newsprint, which represent about 10 percent to 15 percent of the industry's cost structure, also have been rising - adding even more pressure. Most analysts don't expect a recovery for years, and many believe the industry will change significantly in that time.
Given the current environment, analysts and observers said they aren't necessarily surprised that one of Denver's newspapers is for sale and could be shut down if a buyer isn't found. Perhaps the bigger surprise is that Denver has managed to remain a two-newspaper town for this long.

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