This is an interesting graphic from the Newspaper Association of America that I came across while reading a blog post at ReflectionsofaNewsosaur.com
First you can see how newspaper print sales have fallen from $9.8 billion in the first quarter of 2007 to $4.4 billion in the first quarter of 2012. Ouch!
Secondly, preprinted inserts have grown in importance for newspapers as classifieds have fallen away; as local and national have fallen in equal measure to their importance in 2007.
Preprint advertising has a significant impact on the industry’s profitability. “Preprint advertising accounts for 70% of the Sunday revenues at the average newspaper,” said one industry leader who declined to be named because he is not authorized to speak for his organization. With the Sunday paper producing “most of the profitability” for many publishers, he added, the health of the preprint business has a direct bearing on the bottom line of almost every publisher.
The real bad news is that the preprint business is now in serious trouble for a variety of good reasons.
∷ The digital revolution, which is (a) unraveling the business models of many of the big-box retailers who historically have been the biggest buyers of preprint advertising and (b) encouraging even healthy bricks-and-mortar retailers to shift from high-priced print advertising to targeted and inexpensive digital formats.
∷ A favorable rate cut granted last week by the U.S. Postal Service to Valassis Communications, which will enable the direct-marketing company to mail certain types of national retail preprints for 42% less than newspapers are required to pay for the same product. The NAA says the Valassis deal could divert no less than $1 billion in advertising revenues from newspapers to the direct-mail company, which generated more than $2 billion in sales in the last 12 months by mailing its Red Plum ad circulars to consumers.
This is real bad news for printed newspapers and therefore has a major impact on the way you should be thinking about retail advertising and your co-op program for your independent dealers. If you’re going to encourage your retailers to be in the newspaper (it is still valuable) make sure you help them with preprinted inserts to an equal measure of the way you help them with ads.
Final sobering note: Although the nation’s publishers collectively sold a bit less that $24 billion in advertising in 2011, they are unlikely to do as well this year. The NAA reported that industry revenues fell nearly 6.9% in the first three months of 2012 and reports from individual companies indicate that the decline continued at about the same level in the second quarter, too.
Most importantly, make sure your ad builder and your co-op rules help and encourage retailers to go digital. That’ where the smart money is heading.