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11.21.08

Finally, Good News for Newspapers

Sources tell The Daily Beast that newsprint companies won't raise their rates next year, giving the nation's struggling dailies a reprieve.

In a rare reprieve for the print media, several paper manufacturers are indicating that they will end the price hike that has been crimping newspaper budgets for the past year.

The cost of newsprint on the East Coast has risen by 37 percent since last October, to a 12-year high, contributing to wave of downsizing in the beleaguered newspaper industry. But several major paper producers are now signaling that the increase has reached its peak, according to senior executives from two newspaper companies who have held discussions with them.

"In the last couple of weeks, very quietly, the newsprint companies are making clear that they are not going to raise rates next year," one of the newspaper executives said. "It's going to save millions upon millions of dollars for the newspaper companies."

Newsprint producers also said they would cancel several price increases that were announced for the fourth quarter of this year, an executive from another newspaper company said.

Newsprint is the one of the single biggest costs for any print publication, and price increases throughout the last decade have been crippling for publishing companies already suffering from declining circulation and ad sales. USA Today, for example, announced in October that it would raise its newsstand price by a third to offset higher newsprint costs.

"In the last couple of weeks, very quietly, the newsprint companies are making clear that they are not going to raise rates next year," said a source.

The newspaper executives asked not to be identified because their discussions with the manufacturers were confidential, and they declined to specify which manufacturers they had spoken with. A representative for White Birch Paper, one of the North American newsprint manufacturers, said the company had not made any such assurances to its clients. A representative for Tembec declined to comment; AbitibiBowater, Kruger Inc., and Catalyst Paper did not return requests for comment.

The spike in newsprint prices has come during a particularly tough year for the newspaper industry, which was already reeling from the economic downturn and competition with online media. In addition to layoffs, many publications have reduced paper expenses by switching to cheaper material or decreasing their content. Last month, The Christian Science Monitor announced it will become the first national newspaper to give up on its daily print edition.

Pat Talamantes, the chief financial officer for McClatchy, said the end of the price hike will prove "extremely helpful" in getting newspapers through the recession.

"We're facing very difficult newsprint price increases, which have caused us and other newspaper publishers to cut back," Talamantes said. "As advertising trends have grown weaker, newsprint prices have been climbing."

The future of the newspaper industry has been so dim that paper manufacturers cut down on their production even before demand from publications dropped commensurately. That resulted in a price imbalance that is only now rectifying itself as newspapers decrease their paper usage. Another factor in ending the spike is the strengthening American dollar. Many North American manufacturers are based in Canada, and a stronger dollar makes it easier for U.S. newspapers to buy their product.

Since demand for paper will probably continue to slide next year, experts predicted that prices will actually decrease, unless manufacturers make more significant cuts to their supply.

"Early next year, we will probably reach a point where producers won't be able to hold on to those prices," said Rahul Gandhi, a paper analyst with CreditSights. "If they don't do anything for the first four or five months next year, we might see prices start slipping."

Before joining the Daily Beast, Ross Goldberg worked as a staff reporter on the New York Sun's city desk, where he covered courts as well as general assignments. In college, he served as managing editor of the Yale Daily News.