Understanding the fall of Newspapers in revenue numbers

We reported yesterday that Newspaper revenue in the United States fell 19.26% for the 3rd quarter of 2008, a record decline off the back of a staggering 30.85% drop in classified advertising.

But what do the figures mean?

First it’s important to note that the drops aren’t quarter to quarter drops but year on year drops. Total revenue at newspapers in the third quarter dropped 6.87% from the second quarter, or $659.21 million. Still a big number, but not as big as 19.26%. The total revenue figure for the third quarter was $8.942 billion, still a significant figure.

Longer term numbers do offer a gloomier picture. The highest figure for total newspaper revenue (excluding online) in recent times as offered by the Newspaper Association of America was $27.869 billion for the fourth quarter of 2000, meaning that newspaper revenue is down 68% in the third quarter of this year compared to Q4 2000. The fourth quarter in traditionally higher due to Christmas advertising, so a better comparison might be Q3 2000 vs Q3 2008, which gives us a decline of 62% in 8 years, or $14.674 billion.

As much as the newspaper industry likes to trumpet growth during the good times, 2000 was not the peak for the industry when adjusting revenue for inflation, that honor goes to 1997, which delivered $24.147 billion in Q4 1993 or $32.58 billion in 2008 money (using the Bureau of Labor Statistics Inflation Calculator). In 2008 money, the newspaper industry Q4 1997 vs Q3 2008 has lost $23.641 billion in revenue or a drop of 72%. A comparison going back further shows similar results: in 2008 money revenue for the 4th quarter of 1988 was $31.194 billion.

Decline in Classified Advertising

The decline in classified advertising, driven by the switch to online classified advertising has seen a shift in where newspapers obtain their revenue. Classified advertising peaked as a percentage of newspaper revenue in the fourth quarter of 1997 at 41.64% vs 28.84% today. In raw numbers the decline for the same period went from $5.027 billion to $2.362 billion, or a 53% fall. In inflation adjusted numbers, the figures are $6.784 billion to $2.362 billion, or 65%. The biggest raw figure quarter for classified was Q4 2000 with $5.714 billion.

The problem going forward for classified ads in the acceleration of the decline. Q1 2002 aside which saw a 13.63% quarter on year before quarter drop, the real decline started in the second quarter of 2006, which saw 0% growth, followed by falls of 3% and 7.1% that year. In 2007 the drops accelerate with (Q1-Q4) 13.2%, 16.4%, 17% and 18.8% drops. Coming off the back of a bad year already, the falls on top of the bad quarters continued to accelerate: 24.91%, 27.17% and 30.85% for Q3 2008. The classified spend for Q3 2008 is down over 50% vs a recent high of $5.243 billion in Q4 2005.

The outstanding question is how far will classified advertising fall over the coming quarter and next year. If we take the average quarterly drop over the period Q1 2007 to Q3 2008 and space that over the next five quarters, we get declines in order of 34%, 37%, 40% and 42% for Q4 2009. Although the amount of the decline does vary quarter to quarter on actual figures, the downward trend so far in regular, so it’s not a stretch to average it and use it to calculate forward. In dollar terms, the classified advertising market for US Newspapers may drop below $1 billion in Q4 2009 to only $904.35 million, down 82.75% from Q4 2005.

Is there a base figure?

We know newspapers are in decline, but we don’t know yet how the market will react once newspapers start to cease publication. The immediate hit on revenue will see bigger declines, but market consolidation might be the one thing remaining newspapers have to increase revenues. Less competition is usually an economic factor in growth, but that doesn’t take into account internet substitution as a driving force behind the revenue drop.


Things aren’t looking great for newspapers, and although the quarter to quarter decline not year on year isn’t as bad as some of the headlines, the fundamentals are weak, and getting worse. The numbers show that newspapers will fold, and consolidation and market contraction are ahead for the sector, at least in the short to medium term. Whether enough newspapers get smart enough to drop their print editions and follow the lead of the Christian Science Monitor is yet to be seen, but nothing short of radical change can possibly save the industry now, at least in any substantive way.

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