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Wednesday, June 10, 2009
Newspapers face ad revenue hit

Already reeling from a steep drop in advertisements, newspapers will have to deal with even more lost ad revenue when nearly 3,200 dealerships across the country close their doors as bankrupt Chrysler LLC and General Motors Corp. cut costs.

Chrysler plans to unload 25 percent of its dealers -- or 789 of its nearly 3,200 dealers -- and GM is slated to shutter at least 2,400 dealers this year and next.

The closings will have a "significant impact" on Michigan newspapers, said Mike MacLaren, executive director of the Michigan Press Association, which represents more than 300 newspapers in the state.

"Automobile dealers have played an integral part of newspapers' revenue stream," he said. "It won't be the demise of any one newspaper, but it could be a factor in several papers rethinking their publishing strategy moving forward."

Nationwide, new car franchises spent $6.8 billion on advertising in 2008, down from $7.9 billion the previous year, according to the National Automobile Dealers Association. About one-quarter of all advertising money is spent on newspaper ads.

Newspapers were 51.6 percent of dealers' advertising spending in 1998 and only 23.3 percent of ad spending in 2008.

Dealership closings have already affected ad spending, said Paul Taylor, chief economist for NADA. The industry lost 960 dealerships last year as a result of a slow economy and tighter lending.

But, NADA expects ad spending to pick up during the second half of this year, as the national economy bottoms out.

An improvement in new car sales is very important to recovery of classified advertising in newspapers, Taylor said. It's "critical" for new car sales to recover next year, he said.

Many times, dealerships will pool their money to buy ads, said Dave Regan, an advertising and public relations instructor at Michigan State University. Fewer dealerships, therefore, will mean fewer advertising dollars.

"Will it be monumental? Catastrophic? No. But it will make a difference," Regan said. "(Ads) may decrease a little bit, but I still believe they are still going to advertise."

U.S. newspaper print advertising sales plunged 30 percent during the first three months of the year, the biggest quarterly decline in at least 38 years, Newspaper Association of America data show. Ad revenue fell $2.5 billion to $5.92 billion from the year-ago period, according to figures posted to the trade group's Web site. It's the largest percentage drop since at least 1971, the earliest date for which quarterly data are available.

Falling ad revenue and circulation has forced newspaper publishers to raise newsstand prices, trim jobs, combine sections and seek to sell assets to help preserve cash.

Newspaper online ad revenue fell 13 percent to $696.3 million, according to the Arlington, Va.-based group.

Michigan newspapers are facing similar difficulties.

• The Observer & Eccentric Newspapers were to stop publishing five semi-weeklies May 31, ending circulation in Birmingham, Troy, West Bloomfield, Rochester and Southfield and ceasing publication on their Web sites.

A grassroots effort led by Birmingham resident David Bloom has delayed the stoppage in that community, according to their Web site.

The newspaper group, owned by Gannett Co. Inc., consolidated the Southfield edition and its Mirror Newspaper into one newspaper, called the South Oakland Eccentric, which began publication Sunday.

• Advance Publications Newspaper Group, which owns the Booth Michigan newspaper chain of several of the state's mid-sized cities, will shutter the print publication of the 174-year-old Ann Arbor News in July and replace it with a new, Advance-owned online media company called LLC.

The Flint Journal, the Saginaw News and the Bay City Times began publishing Thursdays, Fridays and Sundays on June 1. Booth's properties in Western Michigan -- the Grand Rapids Press, Jackson Citizen Patriot, Kalamazoo Gazette and Muskegon Chronicle -- are consolidating operations but continue to publish seven days a week.

• Detroit-based Crain Communications Inc. closed four titles -- Automotive News Europe, Business Insurance Europe, Wireless News and -- in March.

• The Detroit News and Detroit Free Press cut home delivery to three days a week. The newspapers are still available at stores, newsstands and online every day.

LINK:Newspapers face ad revenue hit | | The Detroit News
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