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Newspapers in Major Cities to Begin Disappearing Next Year: Fitch

Fitch Ratings issued a report filled with yet more gloom for the newspaper industry, predicting that several cities could be left with no daily newspapers at all after next year.

Fitch says that newspapers and newspaper groups are likely to default on their debt and go out of business, according to Editor & Publisher.

“Fitch expects newspaper industry revenue growth will be negative for the foreseeable future as both ad pricing and linage will be under pressure within each of the four main components of newspaper companies’ revenue streams: circulation and local, classified and national advertising.” As newsprint costs rise, it could be difficult for newspapers to offset revenue declines with cost cuts, the report states.

Fitch is predicting a severe global recession in 2009, with the “contraction in output among the major advanced economies in aggregate [representing] the steepest decline since the Second World War at about (negative) 1%.”

Local as well as national advertisers will be affected, and five of the top 10 categories - auto, financial services, general services, airlines, and hotels and car rentals - will be down.

The advertising environment next year will be its weakest since the 2001 downturn, which was the worst ad recession since 1970, Fitch predicts (via AdAge).

Fitch’s predictions are harsher than some of the others the industry has seen, though none of the predictions are cheery. In October, Zenith lowered its global ad growth estimates, from its June predictions of 6.6% in 2008 and 6.0% in 2009 to 4.3% and 4.0%, respectively. Veteran media industry analyst Jack Myers warns that ZenithOptimedia’s forecast may be too optimistic. He sees no potential for growth, saying that the ad industry cannot assume that this recession will see advertisers increasing their budgets in the hopes of gaining market share, as they have in the past. He predicts that over the next three years, “names in our business as legendary as Lehman Brothers was in the financial industry will be declaring bankruptcy and closing their doors.”