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S&P BEARISH ON PRINT ADS: Add Standard & Poor’s to the growing list of industry watchers down on print advertising, at least for now. “High debt levels, migration of ad spending to the Internet, declining newsstand sales and mature industry growth prospects suggest a near-term decline in credit risk,” the ratings service said. S&P expects magazine ad pages to decline through the end of 2008, with “minimal benefit from election-year activity,” it said, adding, “The sector will face continued ad rate challenges, especially given pressure on circulation levels that publishers guarantee to advertisers.”
As for newspapers, S&P expects newspaper revenue and cash flow to continue to drop “at rates that accelerate each quarter.”
“The pullback in advertising dollars has been so dramatic that publishers have struggled to adjust their cost structures,” the agency said. Five out of the nine rated newspaper companies are “CCC,” “signaling a near-term liquidity threat.” The New York Times Co. was placed on CreditWatch in July after the company reported a drop in earnings before interest, taxes, appreciation and amortization of 36 percent for the second quarter, compared with the same period during the prior year.
S&P expects the economic downturn will bottom out in early- to mid-2009 — although it doesn’t expect a pickup in activity until late 2009. “As a result, we expect total ad spending to be minimally higher (0.9 percent) in 2009,” the report said.
— Amy Wicks