Borrell Associates: Newspapers on road to recovery

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A memo released today by research firm Borrell Associates Inc. indicates that newspapers may soon pull out of their current slump.

Colby Atwood, president of Borrell Associates and author of the memo, expects the decline in the newspaper industry to end this year, followed by a 2.4% increase in advertising revenue in 2010 alone. The increase is expected to continue over the next 5 years, for a total increase in newspaper income of 8.7% by 2014. Total newspaper income, estimated to hit $39 billion by 2014, will still be below 2008 levels.

“If you take a look at history, there's never been a one-for-one exchange of media,” said Gordon Borrell, CEO of Borrell Associates. “Take radio, for instance, everyone was listening to it and thought it was really going to kill newspapers, but it didn't. The same thing happened when TV came along, so looking at historical trends, we know that no medium in the history of electronic media dies, but it does go through a severe transformation period.”

The memo gives five reasons for why newspapers will thrive in the coming years. The first is the idea of “first in, first out.” Because newspapers were one of the first media to be adversely affected by the Internet, they are now almost done with their adjustment stage and ready to move on. Second, Atwood attributes much of the overall decline in revenue to the steep decline at the country's largest newspapers. He expects smaller papers to rebound faster and provide much of the industry's growth in the future.

Newspapers will also recover because they are adapting and selling smarter and using the Web to generate revenue and profit. As the overall economy improves, Atwood concludes, the rising tide will help lift newspapers' boats.

“They're not going to come back gangbusters, but if you apply that logic to it, there's good news on the horizon,” Borrell said. “I sincerely doubt that we will see any more significant layoffs or closures. We may see several newspapers go to publishing three days a week, but those three days tend to be strongest and do not have a big effect on how much advertisers spend.”

Borrell added that now is the time for publishers to invest — particularly in salespeople — and grow their market share.

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