Tuesday, October 31, 2006

30 Years...

... Till Online Represent 50% of Total Newspaper Revenues

Merrill Lynch analyst Lauren Fine's report on the state of the newspaper industry says that even as online rises in importance, the proportion is still small overall. “Even if we assume double-digit growth for online ad revenues through 2012 and then 5% thereafter, while print ad revenues drop by 1.5% annually, we do not see online representing over 50% of total newspaper ad revenues until more than 30 years from now. (Of course, we can get there sooner if print declines faster.) In terms of EBITDA, even if we assume 50% margins for online ad revenues and 25% for print (but declining slightly every year), a back-of-the-envelope calculation suggests that industry EBITDA will be flattish for the next 20 years, supporting our assumption of flat to slightly declining perpetual free cash flow for the industry.”

This study has fueled much debate. You can read the unedited article and comments on the report here