Last year's 7.25% growth could be hard to duplicate this year. Some softening has already been detected. One forecast released earlier this month by Alex. Brown & Sons, San Francisco, predicted "slower ad revenue growth plus higher newsprint prices will result in significant margin pressure in 1995."
Those cost pressures have already taken a toll on newspapers in the first quarter. Last week, the 132-year-old Providence, R.I.-based Evening Bulletin said it will merge with The Providence Journal on June 5 to form the Providence Journal-Bulletin.
Earlier, The Milwaukee Journal and the Milwaukee Sentinel said it will merge into the Milwaukee Journal Sentinel next month, citing similar paper cost pressures.
And The New York Times said that it will next month tack 50 cents onto the price of its mammoth Sunday paper in the New York metropolitan region, bringing the price to $2.50. Home delivery price is also jumping 50 cents to $6.70 to reflect the change. Publisher Arthur Sulzberger Jr. blamed the hikes on newsprint costs.
Brown media analyst Peter Appert predicted paper costs ultimately will rise 35% to 40% this year, far outpacing ad revenue growth. "We believe that ad revenue growth peaked in fourth quarter 1994 and will continue to decelerate as we move through 1995," he said.
That contrasts with the far rosier view put forth by the NAA's own chief economist. In an interview last week, Miles Groves said "I expect the economy to weaken but not to the same degree as other pundits are predicting."
The NAA's prediction of ad growth in '95: up another 7% to nearly $36.5 billion, fueled by strong gains in retailing and national advertising even while classified cools off.
Retailing is the traditional strong suit of newspaper advertising, and though it was the No. 1 category in '94 in terms of revenue with $17.5 billion, that represents just a 4% gain from the previous year. In contrast, classified advertising surged 11.9% to $12.5 billion and national expenditures were up $7.9% to $4.2 billion.
The Newspaper National Network, formed last year by the NAA as a way to offer advertisers one invoice for advertisements running in multiple newspapers, pulled in about $20 million last year, with $50 million expected in 1995.