Saturday, September 03, 2005

Why Newspapers Don't Want Pop

People who think that newspapers are reveling in the idea of a housing bubble pop just don't understand the business. All you really need to know is that newspapers live on advertising. Once you grasp that concept, it's not too long a journey to understanding why publishers from coast to coast want to see housing sales continue their upward climb.

It's been a tough 15 years for newspapers. Not only did Wall Street get it's greedy little fingers on the purse strings, but millions of dollars in in classified advertising got sucked into the Internet — Can you say E-Bay? Help Wanted ads have been down too — Hello Monster! The result has been very little good news, except for the real estate advertising numbers, which have been up, up, up.

The Newspaper Association of America says real estate advertising has been the only good thing going for newspapers in the past few years. As the housing market has boomed, all those real estate agents and their clients have been more than willing to spring for print advertising in the hopes of drawing in more business. When you consider the number of agents out there, you'll understand why newspapers have been real winners in this fight, until recently.

For the first quarter since 2000, real estate advertising recently had its first decline, according to NAA data.

But that's not all.

Auto classified sales are down too, the combined cause of the ease of selling cars on the Internet, competition from specialty publications (Auto Trader, etc...) and the slowing of auto sales. It's time for a reality check — all that refinancing money has been spent and no matter how many employee discounts the auto makers throw onto the showroom floor, consumers are just plain tapped out. They've bought homes they can't afford, mortgaged themselves to the eyeballs, and are about to enter a long, dry period where they take no vacations, buy no new vehicles, and stop their daily trips to Starbucks.

Newspapers are going to get hurt just like a lot of other businesses when this bubble pops.

— The Boy in the Big Housing Bubble