Cloudy Forecast for Newspapers Is Disputed

Article excerpt

AS IF THREE years of an advertising slump, plummeting profits and newspaper failures weren't enough, a consultant forecasts hard times for the newspaper industry.

Finding the industry's mood "troubled," consulting firm Clark, Martire & Bartolomeo Inc. of Englewood Cliffs, N.J., says newspapers are "embattled on three fronts"--struggling to maintain readers, pressured by advertisers and squeezed by competing advertising media.

The market study, commissioned by manufacturers of graphic arts materials and equipment, forecasts that total U.S. circulation will decline by the year 2000, and newspapers can expect lower profits, even after investing in new products and services.

The study offers rays of hope amid the gloom but says too few newspapers are willing to do what is necessary to build for the future.

While most papers have begun experimenting with product improvements and new lines of business, the report says, few have demonstrated a willingness to bite the bullet--investing more in promotion and product development, and accepting lower ad prices and profits-as the cost of reversing long-term market erosion.

The newspaper industry "is aware of the magnitude of the challenges facing it and has confidence, although sometimes muted, in its ability to meet these challenges," it says.

"Nevertheless, the implications of the study are clear. The industry will have to work harder, continue to invest and, in the end, receive less of a return for its efforts."

The 130-page study was commissioned for the Graphic Arts Marketing Information Service, the market research arm of the trade group Printing Industries of America in Alexandria, Va. Based on over 100 interviews and secondary research, the five-year forecast is available only to GAMIS members, but a 16-page summary was made available to the press.

Most newspaper executives interviewed agreed that trends--including growth of advertising alternatives such as direct mail and weeklies, restructuring of the retail industry that provided up to 50% of newspaper advertising and continued declines in household penetration-are "structural rather than cyclical."

Other conclusions in the study:

* Daily circulation "is likely to drop below the 60 million level for the first time in 25 years and be in the 55-59 million range by the turn of the century."

The reasons include declines in the number of newspapers, household penetration and young readers. Nevertheless, the authors say, "few newspaper executives appear willing to make the really tough decisions -- such as cutting prices and cutting margins to hold on to share-- to buck these forces."

* Projections are "ill-rounded" that aging baby boomers will revive newspaper readership. "The evidence indicates that newspaper reading habits are well entrenched by the age of 30. In fact, as younger age cohorts--who tend to read papers infrequently--replace older cohorts, readership will actually decline."

* Newspapers "will have to go beyond one core product and... deliver whatever editorial/advertising vehicle will be necessary to meet reader and advertiser needs." Newspapers will remain a mass medium, but will increasingly rely on targeted sections and publications, database marketing, electronic services and alternate delivery.

* Newspaper companies have 10 to 15 years of "breathing space" in which to position themselves before significant competition emerges in interactive video systems, where would-be competitors are now unable to deliver an information product as cheap as a newspaper.

Based on the high satisfaction with newspapers reported by consumers in 25,000 interviews a year, the consultants emphasize that newspapers "have not been lethargic" in the past decade. The report portrays best- and worst-case scenarios, but predicts that newspapers will come closer to the best case by increasing targeting and stanching circulation declines. …