MEDIA DAILY NEWS
(5/29/06)
Newspaper Outlook Dubbed
Deeply Depressing,
Ad Business Shifting To Online
by Joe
Mandese, Monday, May 29, 2006 7:00 AM ET
IN A REPORT ENTITLED "DEEP Depressing Dive," Merrill
Lynch analysts Friday said they are taking an "increasingly sober" outlook for
the newspaper industry, lowering estimates once again for newspaper ad spending.
"We remain concerned regarding the newspaper industry's outlook as the dual
impact of changing media consumption habits and the migration of highly
lucrative classified ads to the Internet are squeezing margins and hampering
growth," wrote Merrill Lynch analyst Lauren Rich Fine.
"In prior analyses, we mapped out the
long term economic impact of classifieds moving online; however, we failed to
acknowledge some likely loss of share."
Combined with a slightly lowered outlook for the U.S. economy in 2007, Fine
adjusted Merrill Lynch's newspaper ad revenue projection for next year down to
1.1 percent, from an earlier prediction of 1.4 percent.
The Wall Street securities firm now
expects 2006 newspaper ad spending to rise only 1.2 percent--down from an
earlier estimate of 1.8 percent.
As a result of the migration of classified advertising and readership online,
Merrill Lynch said newspaper publishers are changing their business models,
including a push toward greater online distribution.
However, the analysts expressed concern
that newspapers are "being too aggressive with their online pricing as these new
competitors are either not charging or charging lower prices as they seem more
motivated to use the traffic being generated by the listings to offer other
wraparound services."
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