June 20th, 2008
It’s not as if the last few months have been exactly
perky and upbeat around publishing offices across the U.S. But the last week seems
to have been completely inundated with a dismal torrent of bad news. Both Hearst
(3rd largest magazine publishing in the U.S.) and Hachette (dropped
out of the #10 spot in 2006, but presumably still in the top 15) lost their
chief executives ÃŒÂ¶ whatever language the companies used in
making the announcements, these guys got the boot.
Meanwhile the big newspaper companies were reporting
horrible financial results: Gannett Co., which publishes more than eighty U.S.
newspapers, acknowledged that publishing ad revenue fell 14.3% in May. Its smaller
rival McClatchy Co. reported a 15% drop in newspaper ad revenue for the first
five months of the year and announced a 10% cut of its work force. New York
Times Co. said last Wednesday that ad revenue dropped 12%. And on June 17,
that Ã¢â‚¬Å“Los Angeles Times and Chicago Tribune controlling investor Sam
Zell may be unable to stop the loss of advertising revenue leading him and
other U.S. newspaper publishers closer to default on billions of dollars in
My take on all of this is the opposite of Robert Schiller’s
well-known phrase (and book title) Ã¢â‚¬Å“Irrational Exuberance.Ã¢â‚¬Â I call it Irrational Pessimism.
As I pointed out in my blog entry Ã¢â‚¬Å“Is
the Internet Really Destroying Newspapers?Ã¢â‚¬Â, quoting from a PEW report, Ã¢â‚¬Å“Even with so
many new sources, more people now consume what old media newsrooms produce,
particularly from print, than before. Online, for instance, the top 10 news Web
sites, drawing mostly from old brands, are more of an oligarchy, commanding a
larger share of audience than in the legacy media.Ã¢â‚¬Â
Yesterday I received the executive summary of PWC’s Ã¢â‚¬Å“Global
Entertainment and Media Outlook: 2008-2012Ã¢â‚¬Â (at 112 pages, it’s a little more
than the average executive might expect in a summary!). The full report would
take me offline for weeks, but the executive summary represents a marvelous
chunk of research. Notable is PWC’s prognosis for the newspaper industry:
continuing declines through 2009, followed by a return to modest growth.
As this chart from PEW illustrates, Hearst is not
suffering in terms of revenue growth. The two firings, as suggested in several
media reports, may have much more to do with internal company politics than with
failed strategies. (A fascinating article in Fortune, Ã¢â‚¬Å“Intrigue
at Hearst’s Castle,Ã¢â‚¬Â examines the intricacies of Hearst’s corporate
These days it’s very easy to get on the newspapers-are-dying
bandwagon. I think that the conclusion to this story is still to be written.