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Newspapers fighting for survival as COVID-19 ravages ad spending

As a centuries-old business with underlying advertising conditions, it is hardly surprising that the newspaper industry is acutely suffering amid the coronavirus pandemic.

Newspapers are once again bleeding revenues and cutting workers as local businesses pull back on advertising. Interpublic Group of Cos. Inc.'s research unit MAGNA expects 2020 print ad revenue to be down more than 25% year over year, versus a pre-pandemic projection for a 17% decline. With many publishers already on shaky financial footing ahead of the outbreak, analysts warn that some papers, especially those focused on local news, will not survive an economic downturn. While the industry is looking to the U.S. Congress for relief, it remains unclear how soon or how much aid might be forthcoming.

"The newspaper companies are unfortunately in very, very tough shape from an advertising standpoint with revenues falling apart," said Craig Huber, CEO and founder of Huber Research Partners, an independent equity research firm specializing in media, internet and information services stocks. He estimated that publishers are currently facing 35%-plus declines in advertising revenues.

"I long have said that during the next economic recession, there's going to be a big shakeout in the newspaper industry. A lot of them could very well go belly up," Huber said in an interview.

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Over the past two weeks, dozens of local publications across the country have furloughed or laid off reporters, reduced the frequency of their publishing or dropped their print editions altogether, according to the nonprofit group PEN America, which works to protect freedom of expression. The group noted that the affected papers range from those owned as part of big, publicly traded chains to nonprofit and community outlets.

Gannett Co. Inc., the largest newspaper chain in the U.S. with 261 newspapers in 46 states, warned in April that it expected its revenues to be "significantly impacted by the COVID-19 pandemic" due to declines in advertising and events. In an effort to preserve liquidity, the company said it was enacting cost-saving measures totaling $100 million to $125 million, including layoffs and furloughs, significant pay reductions for senior management, as well as the cancellation of nonessential travel and spending.

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"The problem is the industry was in weak financial shape before COVID-19," David Chavern, president and CEO of News Media Alliance, the news industry's largest trade organization, said in an interview.

He noted that unlike other businesses that have been hard hit by the coronavirus, such as restaurants and cruise ships, news publishing entered the pandemic already feeling financially stressed. Between 2005 and 2018, newspapers lost more than 70% of their advertising revenue.

"Then you add on this massive contraction in the ad markets, and there really are a large number of local publishers at risk of not making it," Chavern said.

According to data from the Hussman School of Journalism and Media at the University of North Carolina-Chapel Hill, the U.S. has already lost 2,100 newspapers since 2004, or one-fourth of the newspapers that existed 15 years ago.

Huber noted that some newspapers — specifically those that focus on local news — are more at risk than major national names like New York Times Co.'s flagship paper, News Corp.'s The Wall Street Journal or Jeff Bezos' The Washington Post. He explained those larger publications have managed to eke out revenues from online subscriptions and paywalls.

For smaller papers, Huber said the revenues from paywalls or online subscriptions "don't amount to a hill of beans relative to their costs."

New York Times Co. CEO Mark Thompson told investors in March that while the company was seeing a slowdown in international and domestic ads, Times Co. "is heavily skewed towards subscriptions rather than advertising."

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Both Chavern and Huber stressed the importance of preserving local news outlets. The News Media Alliance is hoping Congress agrees.

The alliance has partnered with other industry groups, including the National Association of Broadcasters, to ask Congress to provide support to local news media in the next stimulus bill by allowing local media outlets to seek relief under the Paycheck Protection Program, the federal COVID-19 relief loan package designed to help small businesses. PPP loans, administered by the U.S. Small Business Administration, are generally only available to businesses with fewer than 500 employees, though exceptions were made for restaurant and hotel chains.

The alliance would like an exception to also be made for newspapers and stations that operate within larger chains, saying eligibility for PPP should be determined at a local level.

Chavern said although the local media groups had been getting a significant amount of support for their efforts on Capitol Hill, momentum for the proposal stopped after reports of multimillion-dollar loans to large businesses caused a public outcry.

"The fact that the news reports about some of the public companies who had gotten SBA loans broke just as this was being debated kind of put a pause on all of that," Chavern said.

Still, he is optimistic newspaper chains might eventually qualify for the program.

"I don't think the issue is dead at all," he said. "We have a lot of support, and we're going to keep pushing."