Paper Prices Continue to Undermine Future of Newspapers

The harm that tariffs on newsprint can bring to the newspaper industry was an obscure subject several weeks ago. It is now front and center of the conversations about the industry’s ability to even partially recover from a multi-decade decline in revenue.

As newspapers moved much of their business online, there was hope that the industry could escape from a drop in print and advertising revenue. Online advertising growth has slowed, which makes the newsprint problem all the more painful.

At almost all publicly traded newspaper companies, digital advertising revenue is still below that of print. Although digital ad revenue is closing that gap, in most cases, it has not made up for the breakneck speed of the drop in print ads. That leaves online subscription revenue as the last source of potential growth. This revenue has to fill in for a falloff in print subscriptions. And online subscription revenue remains very modest, as most newspaper groups find it hard to get people to pay for news online. Given reader habits, digital subscription revenue may remain a tiny part of overall sales as the total number of digital subscribers are a very small percentage of print subscribers. The newspaper industry could run out of sources for growth very quickly.

As an offset to revenue problems, newspapers have turned to “efficiencies” that involve layoffs and combinations of some local newspaper operations into hubs that serve several properties at a time. However, cuts will, or have, reached the level at which it is no longer possible to shed employees and operate at all. One daily newspaper in Michigan has cut editorial staff from 100 in the late 1980s to 17 recently.

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The alarm about newsprint prices was first set off at the Tampa Bay Times. Its publisher said that tariffs on newsprint imported from Canada will cost it $3 million this year. The company laid off 50 people in anticipation of the higher cost. If the paper’s revenue keeps falling, those layoffs are not over.

Second-quarter results for the publicly traded newspaper companies will be released over the next several weeks. They will show a drop in overall revenue, almost certainly, and perhaps the early effects of rising newsprint prices. Very likely, as these companies make forecasts for the balance of 2018, they will identify newsprint prices as a problem, and they may need to announce more job cuts at the same time.

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