In Russia they say that pessimism is when things can only get worse.

Optimism? That's when things can't get any worse.

Is it just me? Or is there a sense of Russian optimism in the air? Certainly the Q3 financial results on both sides of the Atlantic, while not reporting uplifting revenues, are showing signs of stabilization. Cost reductions are delivering strong and sustainable profits.

I've just updated my ongoing forecast of the U.S. newspaper industry. Interestingly enough, when comparing the 2000 downturn with the current situation, the results suggest that the industry is performing similarly this time around - keeping in mind, of course, that the Great Recession is a far more challenging economic and structural environment.

Class ad segments changing

The big difference is the structure of the advertising economics that governs our industry's fortunes.

Consider classified ad segments. Automobile ad revenues today represent but 2.8 percent of a newspaper's total ad sales, down from the peak of 7.8 percent. Recruitment ad revenues have declined even more drastically, from 9.3 percent to 1.1 percent.

Real estate's share has increased, but only because the other segments have declined.

By 2014 these three categories will account for 5 percent of a paper's overall ad revenue, compared with 20 percent in 2000. But the growth in digital ad sales is filling in some of that gap, with digital revs up some 14 percent in the second quarter of this year. More important is the fact that newspapers are beginning to carve additional digital revenue streams from the advent of tablets, e-readers and smart phones.

There are other, more subjective signs that an optimism contagion is breaking out.

At the recent Ifra Expo in Hamburg, Germany, for example, numbers were encouraging. Attendance, for one thing, was up 50 percent, with 10,000 showing up for the annual show.

Meantime, participants at the World Editors Forum numbered 500: Not bad compared with the low hundreds who attended just a few years ago.

I write this after speaking at the annual conference of the Inland Press Association in Chicago, where attendance also grew.

Since the mood at U.S. conferences has been all but suicidal over the past 24 months, this year's IPA - along with favorable reviews of the 2010 Graph Expo and ING conferences - is heartening indeed.

Key strength

And here's another indication of vitality. While many people understandably worry that the industry's zeal to cut costs have also cut journalistic quality, a report published by OfCom, the U.K. media regulator, indicated that more than twice as many people agreed that "local newspaper journalism had improved" over the last two years than those who disagreed.

And why not?

One of the greatest advantages the digital world provides is localization.

And no medium other than newspapers is better placed to deliver on the local platform, either in terms of content, or revenue generation. Hence Google's romancing of newspaper companies (and its recent commitment of $5 million toward "journalism innovation"). While the world may be globalizing, we continue to live locationally based lives. This is a major opportunity for newspapers that we must win.

My estimate is that a coherent community strategy could attract as much as 7 percent to 8 percent more top-line revenue and as much as 5 percent more profit.

Other thoughts:

- I'm finding a strong reaction to my repeated assertion that we will not be able to charge for online content. One example that was thrown in my face at the Chicago conference was an excellent presentation by the (Little Rock) Arkansas Democrat-Gazette, which has been charging consumers to read ArkansasOnline for years. The company's strategy is novel and multi-layered and the site contains aggregated content from a range of sources (see related story, page 8).

For once I hope I'm wrong about the viability of paywalls.

-Then there is the emerging impact of mobile and e-readers. The gadgets have been hyped everywhere, including this comment by Keith Weed, Unilever's global chief marketing officer. "iPads will save newspapers, they really will."

"The sort of guys I hang out with, the iPad idiots, we're all on them... I used to have a pile of newspapers in the morning but now I flick through my iPad."

As I've said before, it's been my experience, in France at least, that consumers with e-readers spend the same amount of time and interaction with newspaper's websites as they do with the printed product.

Newspaper websites attract visitors. Page views and frequency remain challenging, but the metrics are improving.

So let's put a line in the sand.

This year, 2010, was the year when things could not get any worse.

From now on, they can only get better.

 

Jim Chisholm is a France-based media consultant. He can be reached at jim@jimchisholm.net.

 

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