While the American Daily Independent sites thrive, Moody’s outlook for US newspaper and magazine industry remains negative. The outlook for the US newspaper and magazine industry continues to be negative, Moody’s Investors Service says in a new report.
The outlook was changed to negative in October 2010 and will remain so at least through mid-2015, according to the report.
Newspapers no longer reflect the still center-right views held by a majority if the American public. As reporters push their ideological agendas as “news,” readership is eroding and “pricing power as the shift from traditional print to free and low-cost content on the Internet continues,” according to the report.
“Despite a slight improvement due to cost-cutting and less steep revenue declines, industry EBITDA will decrease in the mid-to-high single-digit percentages over the next 12 to 18 months,” says Vice President — Senior Credit Officer, Carl Salas. “And though circulation revenue will remain stable as price increases and premium services offset declining sales, restricting access to online content through tiered paywalls will not offer the gains publishers enjoyed upon paywall launches.”
Digital business is the fastest-growing category for US newspaper and magazine publishers, and paywalls do help them expand their subscriber bases, Salas says in “Digital Revenue Provides Only Partial Relief for Beleaguered Print Media.” But digital subscriptions plateau quickly. The New York Times’ 13% increase in circulation revenue in 2012 due to growth in digital subscriptions, for example, narrowed to 4% last year.
While efforts to grow digital revenue and reduce costs partially offset the ongoing drop in EBITDA over the next year or so, stepped-up investments in new digital products will exacerbate revenue declines for publishers. Overall, Moody’s sees little evidence that the US newspaper and magazine industry will generate sufficient income from digital subscriber fees, non-print advertising or marketing services over the next year to offset stress on print volumes and pricing.
Revenue from print advertising also will decline in the mid-to-high single digits in the next 12 to 18 months. The share of total US advertising sold by newspapers and magazines will drop even further, as consumers keep moving away from traditional print media.
The recent wave of publishing spin-offs and divestitures sets the stage for more consolidation.
“Larger publishers will continue to acquire smaller targets, and they will be able to do so at attractive EBITDA multiples,” Salas says. “Publishers will also continue to shut down less profitable operations and look at merger opportunities, as we saw last month when E. W. Scripps and Journal Communications agreed to spin off and then merge their respective newspaper operations.”