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Newspapers Spiking Ad Rates in 2006, Although Strategy Could Lead to Further Cost Cutting

Newspapers are seeking blacker ink next year by raising advertising rates. But with growing competition from new media for both advertisers and readers, it will be a tough sell, reported Dow Jones Newswire (12/30).

Industry observers and ad buyers predict many newspapers won't get the ad-rate increases they want, or if they do it will come at the expense of demand. Either possibility could mean another year of lackluster ad-revenue growth for the industry or perhaps even a decline next year, which could lead to further cost cutting.

Until three or four years ago, "Newspapers could raise their rates greater than inflation and therefore make up for any shortfalls in volume, but that doesn't work anymore," said John Morton, an independent newspaper consultant in Silver Spring, Md. Now, he says, newspapers face competition "not just from traditional print media, such as weeklies and direct mail, but also from the Internet,” reported Dow Jones’ Janet Whitman.

USA Today, the nation's largest-circulation newspaper, expects to raise advertising rates by about 6% going into 2006, on top of increases of 8% in each of the previous two years. The paper, which reported a slight decline in circulation for the most recent six-month period, has reported flat ad revenue for the year through November, despite a nearly 6% decline in paid advertising pages.

The New York Times Co. projects ad rates will rise about 5% at its flagship New York Times newspaper, which eked out a slight gain in circulation for the most recent reporting period. The New York publisher is looking for a 3% increase at its Boston Globe, where circulation recently fell about 8%.

The Los Angeles Times, which has been battling steep circulation declines and sluggish advertising demand in recent years, is expecting to raise ad rates 3% to 6%.