newspaper earnings season begins, some predictions

Tomorrow begins the Q3 newspaper earnings reporting. Those, such as Gannett, that still report monthly data have set the stage for what most believe will be a dreadful report. Media General begins the parade when they report. The monthly info has already shown their July and August declines to be on the order of 20%. One can only expect that September will be worse.

Lots of prior advocates of the industry have begun to completely sour. Peter Appert was predicting in June that some newspaper could quickly swing to a loss. He recently cut his estimates for the sector, saying that even the currently low valuations could drop by another 12 to 50%. The outlook is quite grim.

To my eye, here are some things to look for:

1. The outlook for the online portion of the business. Some companies reported declines in the online portion of the business over the past quarter. I predict that more will follow suit. Online CPMs appear to be falling, and pure play classified players continue to grow in strength. Neither is good news for newspaper companies.
2. Big drops in automotive advertising, perhaps to the degree encountered in real estate beginning around 9-12 months ago. The softness in the sector shouldn't surprise anyone, but newspapers are likely to be disproportionally weak. GM for one had already planned a 50% reduction for the year according to adage.
3. Further reductions in force. Sadly, even for companies that just finished one round, another one might be on the way. McClatchy showed they are more than willing to announce layoffs one quarter after another. I wouldn't want to predict the degree or companies likely to be affected, but it's going to hurt.
4. A move to unlock assets. It might be sales of real estate, or minority stakes in investments. These companies are in survival mode, and need to sell anything they can to survive.
5. Round after round of depressing news. With a jittery economy heading into the consumer shopping season, the outlook isn't good for ANY advertising business.