Thursday, February 19, 2009

How Deep is the Dive?

Consider the following few paragraphs from yesterday's breaking news email bulletins from The Wall Street Journal.

February 18, 2009
WSJ NEWS ALERT: Fed Sharply Downgrades Economic Projections

Citing a "continued sharp contraction in real economic activity," the Federal Open Market Committee on Wednesday said it is expecting GDP to contract by up to 1.3% in 2009, a larger drop than it had forecast in October.

The Fed's latest projections also show the FOMC expects unemployment this year could rise as high as 8.8%, higher than its October projection of 7.1% to 7.6%. January's unemployment rate hit 7.6%, according to the Labor Department.

Separately, the Fed said in the minutes from its meeting Jan. 27 and 28 that members saw no indication that the housing sector was beginning to stabilize.

WSJ NEWS ALERT: Housing Starts Tumbled in January

Home construction fell a seventh straight month during January and a sign of future building tumbled as high inventories and the recession sent builders into further retreat. Housing starts decreased 16.8% to a seasonally adjusted 466,000 annual rate compared to the prior month, the Commerce Department said Wednesday, much worse than Wall Street expected. Year over year, housing starts were 56.2% below the pace of construction in January 2008.

Keep in mind that the Fed is so adverse to delivering bad news that it delayed announcing that we were in a recession until a full year after it had started. And, in case you missed it, the Fed's prediction for the worst unemployment levels for 2009 were hit in January, forcing them to revise and downgrade their forecast.

In other words, the worst unemployment numbers that the Fed would predict for this year have already been surpassed and we are not even two months in.

What does this mean? If there is not a clear intrinsic value attached to your publication, one that readers are themselves willing to pay for, you can't survive. Ad dollars are going away. Period.

The only good news here is that we the consumers win because publications--magazines and newspapers--are going to be forced to deal directly with us personally as customers and clients, rather than with us as a means to charge for advertising. We win in the long term because we get what we want to read and see. Not what looks good next to the advertising.

The demand for news, culture, entertainment, opinion, is as strong or stronger than ever. It is the business model for delivering them that is fooked.


Jason/ARCHETYPE said...

Do we still win if there's nothing left to read: 525 Magazines Folded in 2008 and so far this year has already killed 47 more.

Aric Mayer said...

There's no question about the fact that the publishing world is entering a perfect storm that is going to be extremely painful and scary, as if it isn't already. It would be cynical for me to say otherwise.

But wherever there is chaos, there is opportunity to reorder the paradigms in ways that can't be done in stable times.

There will be plenty to read because there is an audience that wants the product and is willing to pay for it.