The Impact of Recessions on Publishing Industries, Part I

December 16, 2018

The upside of predicting a downturn in the economy is that eventually you’ll be right. The downside is that while the party’s still in full swing you’re just the grouchy guy in the corner, scowling at the other guests.

I’ve been calling for the current stock market sell-off for a couple of years now, and if you’d listened to me you would have missed out on at least a 20% plus gain in your investment portfolio. But this market “correction” is surely overdue: there’s only so long that people are willing to pay $225/share for a company that makes overpriced cameras masking as smartphones (or is it overpriced smartphones pretending to be cameras?) before somebody blinks, or some bad news pops. Apple shares are down 30% from their recent October peak; the much-lauded trillion-dollar-plus company is now worth roughly $800 billion.

So are stocks a bargain right now, or, if you sell this week could you be protecting yourself from a further drop of 10 or 20 or 30 per cent? It’s your call.

The stock market isn’t necessarily a proxy for the broader economy. Stock markets often move independently of other economic trends. It just that the current market swings are the broadest we’ve seen in a while, which got me thinking about where the economy is headed. At what point does the economy blink the way the stock market is blinking? In other words, when does the broader economy return to a recessionary state, last seen a decade ago, and how will that impact the publishing industries that I follow on this blog.

Yesterday Today?

I’ve been re-reading Frederick Lewis Allen’s excellent Only Yesterday: An Informal History of the 1920s. Published in 1931, just after the events described, Allen’s insightful book reads as if he had the benefit of  years of highsight in preparing his account of a decade “when dizzying highs were quickly succeeded by heartbreaking lows.” In this decade some 90 years later we’ve been enjoying the dizzying highs. How much heartbreak are we facing in the next round of lows? Or maybe things will be OK; it could be just a blip. Maybe this time it’s different.

Warning Signs

Call me a contrarian: I collect bad reviews of the economy. I’ve got a folder called “Next Recession” nested in a broader basket I call “Current Economics.” Fifty clippings are contained within, with titles like “Another Economic Downturn is Just a Matter of Time” and “Here’s What Could Make the Next Global Recession Even Worse.” Many date back to mid-2017. Those are nearly all optimistic, stating that a recession is nowhere in sight. In early 2018 the forecasts remained sanguine, most predicting that we’re in the clear at least into 2020. In a May economist roundup by the Wall Street Journal the consensus was also 2020, with nearly a quarter of the group looking out to 2021. John Mauldin’s May survey of “seven smart market thinkers” suggested less optimism, with an average prediction for recession in the second half of 2019. But an October article on CNN puts the recession two years out, to the summer of 2020.

The Duke University/CFO Global Business Outlook December survey of the folks holding the corporate purse-strings tallied half of CFOs expecting a recession by end of next year. Of course predictions like this can be self-fulfilling: as Peter Boockvar points out, “While the CFO’s surveyed could be very wrong in their predictions, for the sole reason that they think there is a good chance of recession coming, they will act accordingly, aka, more conservatively.”

A FoxBusiness story published yesterday is headlined “Why the US economy will likely fall into a recession next year.” It features an interview with the chief investment strategist at Charles Schwab who actually doesn’t think we face an economic recession next year.

So there you have it. The next recession is due some time next year or the year after that or maybe in 2021.

It’s your call.

•  •  •  •  •  •  •  •

Why am I bothering with this exercise in recession-mongering? Here’s my use case: even if the next downturn is two years away, publishers should be putting contingency plans in place now. Things could get ugly.

In the next blog entry I’ll look at the historic impact of recessions on the varied publishing industries. Recession-proof? We’ll see.

 

Some additional recession-related predictions/analysis published after this blog post:

  • The chance of recession in the next 12 months rose to 23 percent in the CNBC Fed Survey (CNBC).
  • How Close are We to The Start of the Next Recession? (Seeking Alpha)
  • Next US recession will be ‘much worse’ than the last: Euro Pacific Capital CEO Peter Schiff (FOXBusiness).
  • Why are markets falling, and are we heading for global recession? (The Guardian).
  • As Markets Tumble, Tech Stocks Hit a Rare and Ominous Milestone (New York Times)
    • Several important points in this article:
      1. “The tech-heavy Nasdaq… has officially entered a bear market.”
      2. “Bear markets in stocks are rare but have the power to spread gloom through the economy.”
      3. “The stock market is still well above where it was even at the start of 2017.”
  • Bloomberg, December 30: “U.S. Stocks End Worst Year Since Financial Crisis.” But there’s been a solid bounceback in the last week. Could this be (using my all-time favorite stock market term) a Dead Cat Bounce?
  • January 3: Apple shares slide after iPhone maker issues rare revenue warning (Reuters).
  • January 3: Chinese Consumers’ Confidence Sags, Casting a Pall Over the Global Economy (NYT)
  • January 3: Delta Spurs Plunge Among Airlines After Cut to Revenue Forecast (Bloomberg).
  • January 4: A generally optimistic forecast from the World Economic Forum.
  • January 5: A very good overview from The EconomistWhoosh: What the market turmoil means for 2019
  • January 7: The Wall Street Journal thinks “Signs Point to Strong January for Stocks”  while
  • January 8: The Guardian reports “Analysts: Recession risks have increased” with one analyst suggesting that “The German economy has likely hit a (technical) recession.”
  • January 10: The Wall Street Journal again: Economists See U.S. Recession Risk Rising.

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Book Publishing Employment Down by One-Quarter in 10 Years

June 9, 2016

The latest data from the U.S. Bureau of Labor Statistics (BLS) shows that employment in the book publishing industry dropped by over a quarter (25.7%) since spring 2006 and nearly a third (32.5%) from its peak 20 years ago. (more…)

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Netflix CEO Describes Publishing’s Dilemma

April 18, 2016

Netflix released its latest quarter earnings report today. In a Letter to Shareholders (PDF), Netflix CEO Reed Hastings described the competitive landscape the company faces. In doing so he framed the challenge faced today by all publishers, certainly all book, newspaper and magazine publishers. I’ll quote directly: (more…)

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Another Online Publishing Breakthrough from the New York Times

September 23, 2014

At the end of 2012 I published a post called “Read & Watch the Future of Publishing at the New York Times.” That post considered John Branch’s award-winning “Snow Fall: The Avalanche at Tunnel Creek.” The New York Times continues to innovate, this time in the travel section. The short title is “Norway the Slow Way.” (more…)

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Newspapers and the Decline in the Use of Traveller’s Cheques

September 18, 2014

I’m thinking about two very different products each apparently well on the road to oblivion.

Here’s a graph (roughly) illustrating the decline in the use of traveller’s cheques (aka “travelers checks” and several other spellings). There was tremendous growth through the mid-1990s. The drop-off is severe. Wikipedia details that “travelers cheques are no longer widely accepted and cannot easily be cashed, even at the banks that issue the cheques.”

(more…)

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