Working in Media is Its Own Reward...

In December, the Tribune Co,, publisher of the Chicago Tribune, Los Angeles Times and Baltimore Sun, filed for bankruptcy protection.

In January, the Star-Tribune, publisher of Minneapolis' largest newspaper also filed for Chapter 11 protection.

This week, the Rocky Mountain News announced it was shutting down a few weeks shy of its 150th birthday, the Philadelphia Inquirer filed for Chapter 11 in its 180th year and the Journal-Register, publisher of 20 daily newspapers, also filed for bankruptcy.

Hearst Corp. has threatened to shut down the Chronicle in San Francisco if it cannot get concessions from its employees and has said it will shut down the print edition of the Seattle Post-Intelligencer if it cannot find a buyer within 60 days.

Meanwhile, the New York Times Company, publisher of the New York Times and the Boston Globe, is trying to sell off assets and has suspended its dividend to conserve cash.

So, in the last three months, the publishers of leading newspapers in eight of the biggest 23 markets have entered bankruptcy proceedings or threatened to shut down. I sense a trend.

To be fair, a number of the bankruptcy filings are related to bad capital structures (too much debt) rather than loss-making businesses. (See related article at Ad Age) But the businesses are surely weakening as websites cut into classified advertising and the slow economy reduces ad spending generally. And newspapers have historically relied on local ad spending from the automotive, real estate and retail sectors, all of which struggle with their well-documented challenges.

Today, Ad Age reports that local ad spending may continue to decline through 2013, according to BIA Advisory Services. Could ad spending be declining on a long-term trend beyond the current recession?

It could.

I remember - during the Web 1.0 era as it's now called -- listening politely as budding internet entrepreneurs quoted the line attributed to John Wanamaker, the Philadelphia-based merchandiser who founded the eponymous department store chain. Wanamaker is reputed to have said, "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

The marketing pitch from the internet entrepreneurs was that the targetability and interactivity of internet advertising would make advertising so much more efficient by allowing advertisers to reach their target audience with a high degree of precision.

The question I always posed was, "If interactive capabilities can make advertising twice as effective, won't advertisers be able to cut their budgets in half to eliminate the "wasted" half? The usual answer was... silence.

Nobody's predicting a 50% reduction in local advertising spend just yet, and BIA's forecast does predict continued double-digit annual growth in online spending. But this just makes the picture worse for "traditional" media like newspapers and cable TV as they are expected to bear more than 100% of the overall decline in local ad spending.

The current recession, especially if it is prolonged, may be the catalyst for the profound change in media economics that those internet entrepreneurs predicted a decade ago.