The newspaper industry, which had thought that the worst was behind it, started showing signs of strain again in the first half of 2011.

According to the National Newspaper Association, advertising, which fell 4.7 percent year-to-year in the fourth quarter of 2010, dropped 7 percent in the first quarter of 2011, resulting in the lowest quarterly ad revenues in 27 years.

While the results for the second quarter are still being tabulated it doesn’t look like the newspaper business will show much improvement, based on Gannett’s announcement two weeks ago that they were laying off an additional 700 employees and MediaNews’ decision to consolidate their Bay Area newspapers under one news management team.

The stock market, after bidding up the stock prices of newspaper companies in 2010, has reversed course with all but one company and that positive change was minimal at 2.4%.

Midyear Newspaper Stock Prices, 2011
Company name	6/30/11 Price per share	12/31/10 Price per share	Percent Change
A.H. Belo	$7.44	$8.70	-14.5%
Gannett	$14.32	$15.09	-5.1%
Journal Communications	$5.17	$5.05	+2.4%
Lee Enterprises	$.89	$2.46	-63.8%
McClatchy	$2.81	$4.67	-39.8%
Media General	$3.82	$5.78	-51.3%
New York Times	$8.72	$9.80	-11.0%
E.W. Scripps	$9.67	$10.15	-4.7%
Washington Post	$418.95	$439.50	-4.7%
Source:  Yahoo Finance

Lee Enterprises and Media General are two of the most troubled companies, as they are carrying heavy debt load and must refinance the debt at higher rates by 2012. But at this point the market isn’t confident that they will succeed. Media General, for example, was selling for $34 a share just four years ago and may be headed for penny-stock land at the rate they are going.

The advertising slump which had dramatically affected newspaper profits in 2008-09 rebounded somewhat, buoyed by political ads in the 2010 campaign. But in an off-election year they have once again resumed their downward trek.

McClatchy was one of the hardest hit as many of its papers are in smaller regional markets and it saw its advertising revenue drop 29%, underscoring the weak nature of the economic recovery and the challenges the industry faces for the remainder of the year.

Newspapers continue to fiddle with their digital strategy by erecting paywalls and developing electronic editions for e-readers, with modest success at best, which help staunch the losses from their print editions but lack the advertising component that fuels their profits.

If the newspapers can make it to the end of the year then they should be positioned to take advantage of a healthy political ad market for 2012, which would buy them a little more time to plot their future in a digital world.

h/t Poynter

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