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See also Impact of Internet Advertising

Important Publishing Industry Variables

  • Circulation, which includes both newspapers sold on newsstands as well as subscriptions, remains an essential factor to newspapers’ profitability. Recently, circulation at most print publications has been falling; the internet is frequently cited as a culprit. However, circulation is not always a sign of the strength or adaptability of a news organization. Well-managed news organizations are expanding into multi-platform companies where print, online and broadcast are increasingly streamlined as strategy to survive.
  • Newsprint Prices are an important variable cost for newspapers. Recently, cheap paper from China has been one piece of good news for the publishing industry, as it has kept newprint prices down.
  • Advertising Revenue: The rise of the internet has been a double whammy for the publishing industry -- both stealing readers away to online sources of news but also cannibalizing ad revenue as advertisers favor the targeted ad placement of the web. Even so, online advertising revenue has failed to offset the loss of loss of advertising in print circulation. Newspapers struggle to compete with other online advertising networks. Evidence of such difficulty can be seen in statistics reported by the Newspaper Association of America. In 2007 the NAA reported that newspaper ad revenues were down 9.4% to $42 billion, the most significant percentage loss in the 50 years that the NAA has been reporting these figures.[1]

Only a little over 10 years ago, the newspaper business was one of the best in the world. Few cities in the U.S. could support more than a single daily newspaper, and even the large cities had one that dominated the others (such as the New York Times over the Post, and the Chicago Tribune over the Sun-Times). This created many mini-monopolies around the country, where local advertisers had to pay up to the city paper to present their products to the widest audience. Additionally, classified ads were a lucrative business. Before eBay (EBAY) and Monster Worldwide (MNST), local junk slingers and job recruiters relied on the main paper to hawk their wares or recruit new employees. Newspaper production costs are largely fixed expenses (printing 1000 copies costs little more than printing 1), so each additional paper sold over break even was almost pure profit.

Times have changed dramatically. The market value of the prominent publishers has collapsed. Newspaper publishers have seen the enemy, and it's name is the internet. The internet seems almost the perfect invention for decimating newspapers. For one, it's ubiquitous. No longer does the person selling a used camera have to sell just within his metropolitan area - now he can sell all over the world online. The internet has torn down sales barriers, allowing people from anywhere to easily buy products from any vendor, eliminating the localized markets that used to exist. With the news online, and for free, newspapers have seen their subscription rates plummet, wiping out circulation revenues. The worst for newspapers is the significant competitive advantages internet advertising has over print. When advertising online, vendors can directly target any set of characteristics to target ads to, and immediately get feedback on how successful those ads are from a return-on-investment standpoint, something that is nearly impossible to do accurately through print ads. While newspapers do, arguably, provide a better medium for consuming information, this is not nearly enough to save them from continuing decline as the internet becomes increasingly available through handheld electronic devices like Apple's (AAPL) iPhone or Amazon's (AMZN) Kindle.

I do not even know how I ended up here, but I thugoht this post was good. I do not know who you are but definitely you're going to a famous blogger if you aren't already Cheers!

Upstream

I've realized I need to difirsevy more internationally I honestly don't understand inflation and deflation, but I realize that investing entirely in the US (or mostly) is a bad idea. I didn't realize that you could automatically pull in the updated stock price with google finance. That's pretty awesome. I'm going to have to try that out.

References

  1. NAA Reveals Biggest Ad Revenue Plunge in More Than 50 Years, www.editorandpublisher.com, retrieved March 29, 2008.
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