Newspaper Earnings Sink with Housing Market

Posted by The Tim on July 20th, 2007 at 9:34 AM · 26 Comments

Some of you may recall the Rhodes / Gardner real estate Q & A a few months ago in which the following question was asked by a Seattle Bubble reader:

I can’t help but notice that the Times’ take on local real-estate prices is often excessively optimistic. For example, during the last NWMLS report, we saw double-digit gains in inventory in many parts of King County (nearly 100% in some places!), but the Times’ article largely ignored these facts to focus on (slowing) gains in price. This is just one example; I can think of many others.

My question is this: how much money does the Times derive from real-estate advertising, and why should it be trusted as an unbiased source of information in the face of this rather blatant conflict of interest?

Will the Times’ take a pledge to disclose these conflicts of interest in future articles about real-estate?

Rhodes’ response:

As for how much money The Times derives from real-estate advertising, I can’t tell you because I don’t know. The advertising and news departments are totally separate - so much so that they’re even in different buildings. There is no conflict of interest because the ad department doesn’t influence our stories. That would be a violation of our ethics policy and basic good journalism - things we take very seriously.

Uh-huh… right. Well, maybe Ms. Rhodes is truly completely ignorant regarding the extent to which real estate advertising is keeping the S.S. Times afloat. However, as anyone who is paying even a little bit of attention can deduce, real estate advertising is a huge portion of most newspapers’ revenue.

Unfortunately for the Times and other papers, despite the best efforts of the “unbiased” real estate “reporters,” those advertising dollars are beginning to dry up…

Earnings: Newspapers see big declines in advertising

Publishers blame real estate slump

Newspaper publishers reported sharply lower advertising revenue for the second quarter Thursday, and two of them laid part of the blame on a drop-off in real estate advertising in key markets.

McClatchy Co. and Media General Inc. both reported steep advertising declines and lower profits…

…

McClatchy, which owns The Miami Herald and several newspapers in California, including The Sacramento Bee and The Fresno Bee, had a 9.8 percent decline in advertising revenue across its 31 newspapers, with the biggest drops coming in Florida and California.

McClatchy is the country’s third-largest newspaper company, behind Gannett Co. and Tribune Co. McClatchy owns a 49.5 percent stake in The Seattle Times Co.

McClatchy attributed much of the weakness in those markets to economic factors including the slowdown in the formerly hot housing sector. With real estate playing a key part of the local economies, other ad categories such as automobiles and employment also sagged, McClatchy Chief Executive Gary Pruitt said.

There are some doubts about how much real estate advertising would come back to newspapers even after the housing market recovers, given that classified advertising for jobs, cars and real estate — a very profitable business for newspapers — is increasingly migrating to the Internet.

Expect the real estate cheerleading to kick up a notch. “Best selection in years! Now is a great time to buy!” “Check out these sad people that didn’t buy and now they’re priced out forever! Don’t let this happen to you, buy now!” “Sales declining, but from record highs, so they’re still really high!”

(Seth Sutel, Associated Press, 07.19.2007)

Categories: Uncategorized
Tags: advertising, Seattle_PI, Seattle_Times, truth in advertising

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26 responses so far ↓

1 Alan // Jul 20, 2007 at 10:02 am

Advertising money is quickly leaving traditional mediums and moving to online mediums like Google search. All of the old ad agencies and publishers are feeling pain.

On an off topic note. I pulled SFHLog.txt into Excel, added a graph of inventory, extended the time out to the end of the year, and added a trendline to the inventory graph.

Using a linear model, at the current rate of increase we will have just over 15k SFH’s on the market at the end of December 2007.

Using an exponential model, inventory will hit 16750.

Those numbers are probably grossly inaccurate. The data portion is barely visible on the trendline. It does give an idea of how quickly inventory is increasing.

My brother said the Phoenix area has added 5000 properties to inventory since he visited me a month ago. That comes out to around 11 months of sales. He thinks the local media will start talking about it when it hits 50k and then the market there will really start to drop.

We are still just in the beginning of this thing.
2 plymster // Jul 20, 2007 at 10:06 am

Keep in mind that Lizzie Rhodes and the other local RE “journalists” are not investigative reporters. They are in the habit of taking press releases and repackaging them into “news articles”. This is hardly due diligence, but when they get both sides of the story (the RE Agent and the mortgage broker), they feel like they’re doing their jobs.

Essentially, reporters are the same as most workers. They’ll do the bare minimum to get by. They don’t get paid by the truth, they get paid by the word. Editors are the same way. They’re paid to keep stuff that will upset their advertisers out and make sure that the style book is followed.

That said, some journalists and editors genuinely try to get at the truth, and they get awards and recognition for it, but as with most professions, these people are in the minority. You’ll rarely find actual reporting in local papers since these people move on to bigger and better things.

I guess what I’m saying is: there isn’t an RE industry bias in the local news, there’s a lazy bias in the local news.
3 deejayoh // Jul 20, 2007 at 10:14 am

Using a linear model, at the current rate of increase we will have just over 15k SFH’s on the market at the end of December 2007.

Using an exponential model, inventory will hit 16750.

Alan -
you probably need to add a seasonality factor to your spreadsheet. Inventory always drops in Oct/Nov/Dec.
Based on 00-07 data here are the factors (versus average for the year)
January 87.1%
February 89.5%
March 94.0%
April 100.8%
May 107.2%
June 107.8%
July 108.7%
August 105.8%
September 109.1%
October 106.7%
November 99.8%
December 83.6%
4 David McManus // Jul 20, 2007 at 10:56 am

Off topic:

Miami Condo Glut Pushes Florida’s Economy to Brink of Recession

But Seattle is special, that will never happen here! Ridin my pink pony into the sunset……
5 softwarengineer // Jul 20, 2007 at 11:33 am

MSM’S STATISTICAL FAR RIGHT CONSERVATIVE GLOBALIST WHORES

I’ve read many interesting blogs backed up with written evidence that clearly documents MSM real estate statistics are like the ghost unemployment rate in America. It excludes those who’s home won’t sell (unemployment runs out), adds re-listed same home data as brand new ones (temporary worker that can’t stay off unemployment) and is listed in a [purposely?] convoluted RE Seattle data base that requires “time consuming” piece by piece data detective work to get even a vague real world trend (under the table and illegal alien workers are omitted from the employment data plus or minus, so don’t show up as lay-offs, i.e.).
6 Grivetti // Jul 20, 2007 at 11:46 am

Lizzie Rhodester is not the sharpest tool in the shed… obviously the S.Times has not had ‘ethics’ training beat into them over and over and over again, like we have here at the B’…

The Journalists and Advertisers are in seperate buildings, so there’s no conflict of interest?

Ever hear of the “appearance of impropriety”, Rhodester?

Well as far as PR goes, its basically the same thing, and the fact that the RE section is half-ads, I seriously doubt if they work independantly…
7 geon // Jul 20, 2007 at 12:15 pm

I noticed one weekend that Sound Ford, in Renton, only had a half page ad in the Sunday paper. I don’t know when they cut their long-running, full-page ad, or if it was just that weekend, but it was surprising.
8 Finance // Jul 20, 2007 at 1:12 pm

softwarengineer - Im sorry if the economy is doing better than you expected, lol. Being on unemployment & the unemployment rate are diffferent. The better indicator is a % of the workforce with a job (which is the inverse calc of the unemployment rate).

For business professionals the unemployment rate is ~ 1% to 2% (in the Seattle region), as several different recruiters told me this when I was searching for a new job…which I ended up with a great one I start next month!

Also, why are your posts always angry and whats with the constant name calling?
9 deejayoh // Jul 20, 2007 at 1:51 pm

Im sorry if the economy is doing better than you expected, lol. Being on unemployment & the unemployment rate are diffferent. The better indicator is a % of the workforce with a job (which is the inverse calc of the unemployment rate).

Finance, It’s nice to see that it’s always sunny on your side of the street, but you would probably do well to add some skepticism to your outlook when it comes to government stats. For instance, the employment rate has been rising for a few months - even though the number of new jobs hasn’t kept up with growth in population. How does that magic act work? Who knows - but it should make you question the validity of what you read.
10 Matthew // Jul 20, 2007 at 2:53 pm

Government unemployment numbers are a freakin joke. Give me a break.
11 biliruben // Jul 20, 2007 at 3:06 pm

Finance - to contribute to your continuing education, I recommend taking a look at the trends in the workforce participation rate and how it’s decline might be skewing the standard unemployment number.
12 Steve // Jul 20, 2007 at 3:15 pm

I don’t think the inverse of the % unemployed = the % employed; it doesn’t count those who have “dropped out” of the workforce.
13 plymster // Jul 20, 2007 at 3:17 pm

For anyone who’s interested, here’s how they calculate unemployment. Of particular interest is this quote:

These persons are counted among the employed and tabulated separately as “with a job but not at work,” because they have a specific job to which they will return.

But what about the two following cases? George Lewis is 16 years old, and he has no job from which he receives any pay or profit. However, George does help with the regular chores around his father’s farm about 20 hours each week.

Lisa Fox spends most of her time taking care of her home and children, but, all day Friday and Saturday, she helps in her husband’s computer software store.

Under the Government’s definition of employment, both George and Lisa are considered employed. They fall into a group called “unpaid family workers,” which includes any person who worked 15 hours or more in a week without pay in a family-operated enterprise.

So anyone working a non-paying part time job is considered fully employed. Further, if you meet any of the following qualifications, you’re considered employed:

All persons who did any work for pay or profit during the survey week.

All persons who did at least 15 hours of unpaid work in a family-operated enterprise.

All persons who were temporarily absent from their regular jobs because of illness, vacation, bad weather, industrial dispute, or various personal reasons, whether or not they were paid for the time off.

Therefore:
Housewife spending more than 15 hours cooking, cleaning, or taking care of the kids with no paying job = employedGuy selling “Real Change” for 1 hour per week = employedGuy laid off 3 weeks ago and actively looking for work = not employed or unemployed, so not part of the workforce

It’s a wonder anyone believes that this is a useful stat for measuring unemployment.
14 plymster // Jul 20, 2007 at 3:19 pm

That last bit should read:
Therefore:
Housewife spending more than 15 hours cooking, cleaning, or taking care of the kids with no paying job = employed
Guy selling “Real Change” for 1 hour per week = employed
Guy laid off 3 weeks ago and actively looking for work = not employed or unemployed, so not part of the workforce
15 Alan // Jul 20, 2007 at 3:37 pm

Comments have again been censored over at RCG.

They are getting smarter because now you can’t even view old comments.

I smell fear.
16 Alan // Jul 20, 2007 at 3:41 pm

Oh, never mind. I thought that was the artcile about tightening lending standards.

Nothing to see here.
17 redmondjp // Jul 20, 2007 at 4:17 pm

Alan,

They announced on 6/29 in this post that there would be no further commenting allowed on the weekly rate posts, as suggested by A.D.
18 Ardell DellaLoggia // Jul 21, 2007 at 1:50 am

Alan,

I asked Rhonda to post the rates weekly, as I found that helpful. But we were getting over 100 comments at one point on the article, and it was too much of a burden on Rhonda, especially when her Dad was deathly ill in the hospital.

We had to decide to either stop posting the rates weekly, or close comments on it weekly. I felt having the rates every week without comments, was better than not having the Friday Rates post at all.

So that’s how we went. I think it was the right decision. All other posts are still open, so if someone really has to comment, there’s plenty of place to do that.

The hard part of posting a good blog entry is finding the time to manage the comments. Rhonda posts Friday rates no matter how crazy her life is, and we appreciate that. If the best she can do is to do it without comments, to fit it into her schedule, we are grateful for the info being posted.
19 Lake Hills Renter // Jul 21, 2007 at 8:20 am

I don’t understand why she has to monitor/respond to each comment. On things like forums and blogs, the first post starts the conversation which generally has a life of its own and doesn’t require micromangement by the original poster.

I hope you understand that it looks like discussion is being stifled because you don’t like what people are saying, whether that is true or not.
20 Ardell DellaLoggia // Jul 21, 2007 at 8:46 am

Lake Hills Renter,

I appreciate your thoughts. We decided to try it this way for a couple of months. It gives Rhonda time to write things besides Friday rates and still get some work done.
21 rose-colored-coolaid // Jul 21, 2007 at 9:56 am

Can anybody say ‘Big Brother’?
22 softwarengineer // Jul 21, 2007 at 11:29 am

FREEDOM OF SPEECH AND FREEDOM OF INFORMATION ACT STILL EXISTS IN AMERICA

Hey, you far right corporate fascists (fascist= someone with excessive money control of business and government, can be DEM or REP) MSM types trying to illegally repress free speech. Keep it up, its butchered the Democrats in half to vote Independent, because you’re infuriating Americans. Its working to the populist’s favor, 80% of the American voters.

We can also sue you big time if its illegal and you keep it up, I know many attorneys that will handle these type of slam dunk cases on contingency.

Thank you Tim, for your bubble blog on MSM inadequacy, great topic choice and viva freedom of speech!!!
23 softwarengineer // Jul 21, 2007 at 11:59 am

HEY, ROSE COLORED KOOLAID: HERE’S MORE “SNAPSHOT” ECONOMIC DATA ON THE SEATTLE AREA ECONOMY, THE LOCAL MSM WON’T TOUCH, FOR YOUR NEW TOPIC YOU MENTIONED

I went out on “primetime” last night at 8-10PM, this time to Supermall in Auburn. There was a carnival going on last night; as it had a live music stage with Latino music, several rides, game booths and booths selling food/stuff. It was hard to count all the people, because the carnival was spread out on 5-10 acres, but my son and I walked around and counted people. There were about 30-50 carnival workers and a measly 20-30 paying customers. I’d estimate just setup and material costs for the carnival at $100-200K, so the $5 entree fee didn’t even pay the carnival worker’s pay last night, let alone setup and rent at the Supermall [I wonder if they'll fail to pay Auburn Supermall the rent?].

Hardly none of the hanful of paying customers were eating there either or riding the rides. I tried to talk to the carnival workers, but almost all of them spoke English poorly or not at all. I don’t know Spanish, their language.

I suppose you could chalk this up to Bush’s Rosy economy in Seattle too? And speaking of unemployment rates, these workers probably received little or no pay, how could they?

I’ll keep these real news “snapshots” rolling in….

Hey, Finance, here’s your low unemployment rate with lots of money in the local Seattle economy churning away like a washing machine without any water [money].
24 Orion // Jul 21, 2007 at 5:22 pm

Who would want to pay 5 bucks for a parking lot carnival? I could see paying to get in the Puyallup Fair or something substantial, but everything inside the carnival is going to charge money anyway, they’d be smarter to make it free.
25 Joel // Jul 21, 2007 at 11:08 pm

You should put up a post here on the bubble linking to the weekly rate post on rain city and then everybody can comment on the rates without Rhonda feeling like she has to moderate them.
26 synthetik // Jul 22, 2007 at 1:20 am

I don’t think she gives a RA.

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