INDUSTRY SEGMENT PERFORMANCE
Notably, expenditures in national newspaper advertising jumped an unprecedented 17.7% in 1999, sparked by increased automotive spending, the success of national buying services like the National Newspaper Network (NNN), and Internet company spending.
Internet sites, like Monster.com have siphoned some classified advertising, particularly classified employment advertising, from newspapers. However, a bounce-back is expected over the next several years as the tight labor market compels employers to recruit through both online and offline channels.
Over the next five years, growth in employment classified advertising will moderate from the double-digit increases of recent years, holding down overall classified advertising expansion despite a strong economy. A stabilization in the rate of job creation, even at high rates, will lead to a stabilization in the rate of growth in employment classifieds. Internet classified services could also cut into print classified spending. National advertising in daily papers, however, will accelerate, stimulated by national buying services that facilitate national purchases and by increased spending on the part of Internet companies. The emergence of new advertisers, particularly in the computer and electronics field related to growth in the use of the Internet and the rising popularity of wireless communications devices, will lead to a healthier picture for retail advertising. We project an upswing in circulation, reflecting growth in the demographic segments that read newspapers. Spending on daily newspapers will advance at an estimated 5.8 percent compound annual rate through 2003, comparable with the 5.7 percent annual rate achieved during the 1993-1998 period.
With respect to weekly papers, advertisers are spending more to reach the audience served by weeklies. A vibrant economy and the impetus to target weekly readers will propel advertising, while population increases in suburban and rural areas will contribute to circulation gains. Spending on weeklies will rise at a 7.8 percent compound annual rate, continuing the 7.7 percent annual pace of the last five years.
Over all, daily and weekly newspaper advertising over the 1998-2003 period will expand at a 6.7 percent compound annual rate compared with the 6.8 percent annual increase of the last five years, and overall circulation spending will rise 2.6 percent compounded annually, up from 2.2 percent annual growth of the last five years.
Advertising spending will total an estimated $68.1 billion in 2003 compared with $49.3 billion in 1998, and circulation spending will go up from $10.7 billion in 1998 to $12.1 billion in 2003. Total spending on all newspapers will expand by 6.0 percent compounded annually, growing at about the same rate as over the 1993-1998 period. By 2003, total spending on newspapers will reach $80.2 billion-$71.8 billion for dailies and $8.5 billion for weeklies.
Rising advertising revenues and declining newsprint costs accounted for the improvement in operating performance. In 1997, average newsprint costs fell 13.6% to $546 per metric ton. At the same time, continued strength in classified advertising, surging national advertising and revitalized retail advertising contributed to the large increase in revenues.
Four companies generated newspaper revenues of $2 billion or more in 1997, accounting for nearly half of the adjusted segment total. Largest was Gannett, whose revenues increased 7.7% to $3.8 billion, followed by Knight Ridder, with an increase of 21.3% to $2.9 billion, boosted by acquisitions of the Kansas City Star and the Fort Worth Star-Telegram; The New York Times Company, whose revenues rose 8.9% to $2.6 billion; and The Times Mirror Company, which saw a 5.6% revenue increase to $2.2 billion.
1997 was a year of robust growth for daily newspapers, with an 8.6% spending increase in advertising, led by double-digit upswings in both classified and national advertising. Circulation spending edged up 1.0%. The long-standing decline in daily newspaper circulation is forecasted to turn around, with the expectation that fewer consolidations will occur over the next five years than during the previous five: other drivers are increases in older population groups; increases in core circulation that are beginning to overtake decreases in fringe circulation; along with improvements such as better staffing, promotion, zoned editions, greater use of color, and higher-quality editorial products.
Advertising spending on weekly newspapers grew 8.6% to $5.0 billion in 1997 and is forecasted to grow at an 8.6% CAGR over the 5-year period, reaching $7.5 billion in 2002. Circulation spending grew 1.5% to $400 million in 1997 and is forecasted to rise at a 1.9% CAGR to $439 million in 2002. Factors fueling weeklies' growth include decreasing fringe circulation by metropolitan dailies, increases in rural/exurban population, and a trend toward free circulation.
Alternative weeklies, appealing chiefly to young urban professionals, are growing particularly rapidly, with advertising spending increasing at a 16.5% CAGR to $374 million and unit circulation at a 9.7% CAGR to 6.9 million in the five years 1992-1997.
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