The State of Newspapers

And What It Means for Retail Advertisers

The State of Newspapers

And what it means for retail advertisers
© 2009 Ivie & Associates, Inc. All rights reserved
Introduction
For decades, newspapers have served as the cornerstone advertising medium for retail
companies.

Today, the newspaper industry is experiencing its most turbulent time in its history, and some are
questioning whether or not newspapers will be able to survive.

This document reviews Ivie’s assessment of this issue, and provides our clients with guidance
based on what we see happening with the newspaper medium.

Within this report, we will review

 The key challenges facing newspapers
 Ivie’s overall outlook for the medium
 The marketing game plan for retail newspaper advertisers

Two Key Challenges

The newspaper industry faces two threatening challenges—one immediate and one more long
term.

The first immediate challenge is a significant loss of ad revenue.

 For 2008, total ad revenue dropped by 18% compared to 2007.
 By far, the largest decline was in classified advertising incorporating real estate,
employment, and automotive. Classified revenue was down nearly 30% for the year.
 In comparison, retail ad revenue dropped by only 11%, which does not seem that drastic
given (a) the state of the economy and (b) the fact that a number of newspaper retail
advertisers (Circuit City, Linens ‘n Things, CompUSA) went out of business.
 Even newspaper online ad revenues declined by 2% during 2008, reversing double digit
increases over the previous five years.

The State of Newspapers

And what it means for retail advertisers
P a g e |1
© 2009 Ivie & Associates, Inc. All rights reserved
In order to survive this financial challenge, newspapers are implementing a variety of game-
changing maneuvers to ward off extinction.

Those include:

1. Bankruptcy restructuring
The Tribune Company, owners of the Los Angeles Times, Chicago Tribune, Baltimore
Sun and other media properties, has filed for Chapter 11. The owners of the Philadelphia
Inquirer and the Minneapolis Star-Tribune are also negotiating restructuring with the
cooperation of their lenders.
2. Acquisition
The San Diego Union Tribune, owned by the Copley family since 1928, was acquired by
private investment firm Platinum Equity. Platinum specializes in acquiring companies
faced with complex problems in declining markets.
3. Layoffs
During the first three months of 2009, layoffs have impacted 7,500 workers in the
newspaper industry. Those include workers in editorial, advertising and production, and
represent newspapers of all sizes.
4. Reductions in publishing
The Detroit News & Free Press has announced that it will only offer home delivery on
the three days each week that typically carry the most advertising—Thursday, Friday, and
Sunday. On other days, the publication will only be available on the newsstand.

The State of Newspapers

And what it means for retail advertisers
P a g e |2
© 2009 Ivie & Associates, Inc. All rights reserved
It is also important to mention that in the past few months, there have been a few notable
newspaper closures, due no doubt to the loss of substantial ad revenue. Those are:

1. The Ann Arbor (Michigan) News has announced that it will stop publishing a daily
edition this July. In its place, a new company, AnnArbor.com LLC, will offer a
continuous online edition, plus a printed edition twice a week.
2. The Seattle Post-Intelligencer published its last printed edition in March of this year. It
continues to offer an online edition. The smaller circulation simply could not remain
financially viable given the dominance of the much larger Seattle Times.
3. In Denver, The Rocky Mountain News and The Denver Post established a joint operating
agreement in 2001 in order to reduce cost. While that plan was successful in keeping
Denver a two-newspaper market for nearly eight years, loss of ad revenue forced The
Rocky Mountain News to close this past February, and now the Denver Post remains the
sole newspaper in that market.

The Second Challenge

While the recent and significant loss of ad revenue is a very serious issue, the long term, and
eventually more serious challenge for newspapers will be the continuing erosion of audience and
circulation.

Consider the following:

 Over the past 10 years, the US population has increased by 9%.
 During the same period, total newspaper circulation has decreased by 11%. Many
individual newspapers have had much steeper declines.
 Today, 61% of newspaper readers are over the age of 45; 40% of readers are over the age
of 55; and 23% are over the age of 65.
 Only 21% of readers are under the age of 35.

The State of Newspapers

And what it means for retail advertisers
P a g e |3
© 2009 Ivie & Associates, Inc. All rights reserved
So, over the next 15-20 years, a large number of newspaper will begin to see even sharper
declines in readership, which may not be supplemented by a younger demographic. And a very
large segment of the population that has come of age during the internet era is not now, and will
likely never become, avid newspaper readers.

The conclusion—the audience and circulation declines that we have seen over the past decade
will not just continue, but they are likely to accelerate in the years ahead.

Ivie’s Prognosis
Assuming the economy begins to recover, and advertising revenues begin to rebound, the vast
majority of newspapers should be able to weather the immediate storm and survive over the next
five to ten years. The industry won’t be anywhere near as profitable as it was in past decades, but
newspapers will not disappear completely.

Beyond the next decade, even if the economy rebounds and remains relatively healthy, it is Ivie’s
opinion that many newspapers may be forced to go out of business. They’ll be caught in a
downward spiral of declining readership plus an aging audience, leading to lower advertising
effectiveness, and a loss of loyal advertisers and ad revenue.

The State of Newspapers

And what it means for retail advertisers
P a g e |4
© 2009 Ivie & Associates, Inc. All rights reserved
The Game Plan For Retail Advertisers
In a white paper like this, we obviously cannot cover exact recommendations that would apply to
every retailer. But we do have some specific and actionable guidelines that retail advertisers
should begin considering right away.

1. Reduce dependence on the newspaper medium, especially for retailers that focus much of
their marketing efforts on weekly newspaper advertising. How? Begin to reduce circular
page counts; trim distribution back to core trade areas; and even reduce frequency
2. Reinvest those savings in other types of marketing communications such as
a. Additional broadcast (TV, cable, radio)
b. Out-of-home (billboards, transit, mobile billboards)
c. One-to-one communications via direct mail, email
d. Increased online marketing such as couponing, digital circulars, banner
advertising
e. Database marketing, direct response and customer reward programs

Some Closing Thoughts

Most changes in major media tend to happen gradually over a period of years. In television, the
transition from three major networks to scores of broadcast and cable channels took a couple of
decades. The huge growth in the number of magazines available through subscription and on the
newsstand spanned many years. Even the growth of the internet as a marketing resource has
taken the better part of a decade.

Likewise, the demise of newspapers as the dominant medium for many retail advertisers will
also take some time.

Rather than waiting until the newspaper medium loses much more of its effectiveness, the retail
advertisers that begin now to diversify into new types of media will be the ones that benefit the
most over the long term.

The State of Newspapers

And what it means for retail advertisers
P a g e |5
© 2009 Ivie & Associates, Inc. All rights reserved
Ivie & Associates, Inc. is a full-service retail marketing company that was
established in 1993. We provide project management, print procurement, media,
creative, production, and IT solutions for our Clients.

601 Silveron Blvd. Suite 200 | Flower Mound, TX 75028

Call us at: 972-899-5000
Visit us online: www.ivieinc.com

“Ivie” and the Ivie circle leaf logo are registered trademarks of Ivie & Associates, Inc.