U. S. Newspaper Ad Revenue Shows Consistent Growth
Picard, Robert G., Newspaper Research Journal
This study explores the revenue developments of American newspapers during the second half of the twentieth century. It explores how revenues changed during the period, how they changed in relation to the general economy and how the revenue model changed during the five decades.
This business history approach is useful to understanding changes in the newspaper business over time and has been used in previous studies. Udell, for example, found that newspaper ad spending and employment expanded more rapidly between 1946-1970 than did the general economy (1) and that changes in the industry were affected by both economic and consumption trends. (2) Those studies, however, examined shorter periods and did not cover the last quarter of the century when substantial changes in patterns and behavior occurred.
As a business development study, this article focuses on identifying and exploring trends, developments, their implications, rather than hypothesis testing. Its purpose is to develop knowledge that describes how, when and why the newspaper industry's finances changed and to develop understanding of how the existing conditions came about.
A body of literature researching the relative constancy hypothesis approach has also focused on media finances overall. (3) Those studies have touched upon issues of advertising and consumer spending to explore the extent to which expenditures have remained a constant percentage of gross national product (later gross domestic product). These studies have produced conflicting results.
This study is not intended to reexamine the relative constancy argument. Instead it draws on some data methods and analyses to determine what was happening to the national newspaper industry.
This covers developments in the newspaper industry over the second half of the twentieth century and attempts to answer several research questions:
What was the growth or decline of newspaper advertising in real terms?
How did income from various types of advertising change?
What was the growth or decline of newspaper circulation income during the period?
How did income from daily and Sunday circulation change?
How has the revenue model of newspapers been affected by the trends? (4)
Data on advertising were obtained from the Newspaper Association of America. Data for advertising expenditures were available across the entire period. This article uses the term "expenditures" when referring to advertising because national data from both the Newspaper Association of America and the U.S. Department of Commerce are based on advertiser expenditure data rather than newspaper income data. Thus, it is more accurate to refer to the advertising financial stream as expenditures rather than revenue or income. The data include expenditures for advertisements included on the pages of newspapers and as preprints or inserts.
Data on circulation and circulation revenue were obtained from the Newspaper Association of America and both were available beginning in 1956.
Because the purpose of this study is to study change over time and the data involve expenditures, it was necessary to adjust the data to reflect changes in the economy and thus make them comparable. The author used an adjustment based on the consumer price index (CPI) for this study.
The CPI deflator is regularly used to measure changes in the value of money over time and is preferable to the gross domestic product (GDP) deflator because newspaper advertising expenditures are directly related to household consumption of retail goods and services, which is more specifically reflected in CPI changes than GDP changes. The difference between the two is that CPI excludes non-household consumption (such as government spending and exports) and "covers changes in the prices of expenditures by households which represent around 60 percent of total economic activity as defined by GDP. …