Gray Days for Newspapers

For those investors arguing that the traditional newspaper industry has no future on Wall Street in the digital age, February reports provided more ammunition.

Major newspaper publishers reported sharp revenue declines across the board for the month. Classified ads, the industry's cash cow, took a beating as economic conditions worsened where newspapers are particularly vulnerable.

"We really have a perfect storm developing in the classified categories," says Edward Atorino, analyst with Benchmark & Co. "The real estate bubble is collapsing and it's driving down real estate ads more than expected, which is also affecting jobs and help-wanted ads in areas that were once growth markets, like Florida and California. The U.S. auto industry is also in free fall, so there are severe conditions driving down classifieds."

Atorino believes the overall tough market conditions will extend well into the year. "Earnings numbers for 2007 are under a cloud," he says.

Late Tuesday, New York Times (NYT Quote) reported that February revenue declined 3.6% from a year earlier.

The company, which publishes its namesake newspaper as well as The Boston Globe and a number of other dailies, said its overall ad sales from continuing operations dropped 6% for the month to $158.6 million. Its classified ad revenue was down 15% to $40.9 million.

New York Times said retail advertising decreased as softness in mass market and home furnishing store ads was partly offset by gains in fine arts and department store advertising.