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27 September 2012

Newspaper ad revenue falls back to the 1950s

Downwards curve.

By New Statesman

Rumour has it the newspaper industry is not doing too well. How do you know when you’re not doing too well? According to this graph by economics professor Mark Perry, it’s when you regress 60 years.

The graph shows revenue from US newspaper advertising adjusted for inflation, and it’s in a bit of a downwards curve. In fact, it’s gone back to the ’50s:

It’s not a great place to be in, although the clothes are arguably better there. But perhaps the most interesting information on this graph is the online revenue line – after all, putting papers online for free has stolen ad revenue from print, right?

Jay Rosen seems to think so – pointing out that that newspaper advertising peaked the year blogging became an option. But Techdirt argues that the problem is not the fact that paper content became available for free. If this was the case online ad revenue would have increased over the last few years – and as we can see from the graph it declined almost from conception, and just as rapidly as print. Instead, it’s the thousands of online communities that have sprung up, replacing any role print newspapers had here. Techdirt says:

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The problem that newspapers came up against wasn’t that they were suddenly giving out content online for free, but that there were very, very quickly millions of other “communities” that people could join online, such that the community of folks reading the newspaper started to go down, and with it, the attention went away.

But the argument seems a little flawed. After all, newspapers have never been able to act as “community centres” in the same way online forums can: the readership don’t meet each other, and the only form of interaction is writing in to the paper itself – an effort not always rewarded in print. While they may have diverted some attention, online forums don’t provide direct competition with newspapers.

What’s the key cause of the decline? For the moment I’ll go with a quote from Perry:

It’s another one of those huge Schumpeterian gales of creative destruction.