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Newspapers make advertising gains, but profits shrink
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Inland’s analysis of financial data sheds light on more than 180 papers across the country
By Adolfo Mendez | Associate Editor
Both display and classified advertising have been on an upward trend over the past five years at more than 166 U.S. dailies with less than 75,000 circulation, according to a report by the Inland Press Association.
For the five-year period ending in 2006, classified advertising has outpaced display advertising at small to medium-sized newspapers, with smaller papers reporting the biggest gains in advertising.
At the same time, however, the average circulation for this group of papers is slipping. Worse still, their operating profit is steadily declining.
“There are reasons for pessimism and there are reasons for optimism,” said Donald Kron, Inland’s financial studies manager, who helped prepare the 2002-2006 Trend Analysis. The report provides raw data for newspapers by circulation size in seven categories: circulation, staffing, advertising revenue, gross newspaper revenue, newspaper operating profit, news and editorial department expense, and classified revenue.
Executive Director Ray Carlsen said the report is a mixed bag. “Smaller papers’ revenues have held up, absorbing smaller declines in profits, over this time frame,” he said. “But the larger papers, despite expense reductions, have lost substantial profits.”
Consider:
The impact on the bottom line is even more striking when comparing operating profits by circulation size. For instance, while profits were down 7.1 percent, on average, for papers with less than 15,000 circulation, papers with more than 75,000 circulation posted a double-digit percentage decline of nearly 38 percent.
“If you’re a smaller paper, you are better off because you’re not losing as much of your profit,” Kron explained. “Larger papers have more infrastructure costs — building, trucks, etc. — and if your advertising is down, you still have to pay for those.”
Results at individual papers vary widely, according to the data in the report. “The current trend is downward,” Kron said. “But there are some top performers, too, so it’s possible that the other newspapers can bounce back. It’s only been in the last five years that we’ve seen a downward trend.”
The Trend Analysis ranks the individual papers from “best performing” to “worst performing.” For example, one of the top performing newspapers in the report is a 50,001 to 75,000 circulation range paper located in the South that registered a 25.5 percent increase in gross revenue over the five years studied (more than any other in this circulation range). At the same time, its advertising revenue increased 35.5 percent and, more significantly, its operating profit was up 25.6 percent.
The information is based on newspaper’s confidential financial data as reported in the Inland Cost and Revenue Study, which for more than 90 years has served as a benchmark for newspapers.
“We say it’s the industry standard and for good reason,” Kron said. “Newspapers entrust us alone with their sensitive financial data, because they know that we, as their trade association, have an absolute commitment to protecting their confidentiality.”
The Trend Analysis serves as a benchmark for newspapers. “The report helps financial people to explain budget variance,” Kron said. Papers can take corrective action based on the information.
A newspaper might know that it is outperforming competitors only through the Trend Analysis, which has multiple, practical business applications, Kron said. “If you’re a newspaper company trying to get a loan, this could help you,” he said. “If you want to sell your paper, it could help you sell your paper. If you’re bucking the downward trend, you might get a premium on the sale price.”
For a full copy of the report, “2002-2006 Trend Analysis: From the National Cost & Revenue Study for Daily Newspapers,” contact Donald Kron at (847) 795-0380.
For the five-year period ending in 2006, classified advertising has outpaced display advertising at small to medium-sized newspapers, with smaller papers reporting the biggest gains in advertising.
At the same time, however, the average circulation for this group of papers is slipping. Worse still, their operating profit is steadily declining.
“There are reasons for pessimism and there are reasons for optimism,” said Donald Kron, Inland’s financial studies manager, who helped prepare the 2002-2006 Trend Analysis. The report provides raw data for newspapers by circulation size in seven categories: circulation, staffing, advertising revenue, gross newspaper revenue, newspaper operating profit, news and editorial department expense, and classified revenue.
Executive Director Ray Carlsen said the report is a mixed bag. “Smaller papers’ revenues have held up, absorbing smaller declines in profits, over this time frame,” he said. “But the larger papers, despite expense reductions, have lost substantial profits.”
Consider:
- Advertising revenue at papers with less than 15,000 circulation: up 17.6 percent.
- Advertising revenue at papers with more than 75,000 circulation: down 0.5 percent.
The impact on the bottom line is even more striking when comparing operating profits by circulation size. For instance, while profits were down 7.1 percent, on average, for papers with less than 15,000 circulation, papers with more than 75,000 circulation posted a double-digit percentage decline of nearly 38 percent.
“If you’re a smaller paper, you are better off because you’re not losing as much of your profit,” Kron explained. “Larger papers have more infrastructure costs — building, trucks, etc. — and if your advertising is down, you still have to pay for those.”
Results at individual papers vary widely, according to the data in the report. “The current trend is downward,” Kron said. “But there are some top performers, too, so it’s possible that the other newspapers can bounce back. It’s only been in the last five years that we’ve seen a downward trend.”
The Trend Analysis ranks the individual papers from “best performing” to “worst performing.” For example, one of the top performing newspapers in the report is a 50,001 to 75,000 circulation range paper located in the South that registered a 25.5 percent increase in gross revenue over the five years studied (more than any other in this circulation range). At the same time, its advertising revenue increased 35.5 percent and, more significantly, its operating profit was up 25.6 percent.
The information is based on newspaper’s confidential financial data as reported in the Inland Cost and Revenue Study, which for more than 90 years has served as a benchmark for newspapers.
“We say it’s the industry standard and for good reason,” Kron said. “Newspapers entrust us alone with their sensitive financial data, because they know that we, as their trade association, have an absolute commitment to protecting their confidentiality.”
The Trend Analysis serves as a benchmark for newspapers. “The report helps financial people to explain budget variance,” Kron said. Papers can take corrective action based on the information.
A newspaper might know that it is outperforming competitors only through the Trend Analysis, which has multiple, practical business applications, Kron said. “If you’re a newspaper company trying to get a loan, this could help you,” he said. “If you want to sell your paper, it could help you sell your paper. If you’re bucking the downward trend, you might get a premium on the sale price.”
For a full copy of the report, “2002-2006 Trend Analysis: From the National Cost & Revenue Study for Daily Newspapers,” contact Donald Kron at (847) 795-0380.
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