Not a Good Week for Publishers

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  ̶  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,

Bloomberg reported

that “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) “Irrational Exuberance.” I call it Irrational Pessimism.


As I pointed out in my blog entry “Is

the Internet Really Destroying Newspapers?”, quoting from a PEW report, “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.”


Yesterday I received the executive summary of PWC’s “Global

Entertainment and Media Outlook: 2008-2012” (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, “Intrigue

at Hearst’s Castle,” 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.