Car Dealership Closures Compound Newspaper Woes

Newspapers just can't catch a break. Even the decisions last week by General Motors and Chrysler to close nearly 2,000 auto dealerships will disproportionately impact the print media world.

Auto dealerships spent roughly $8 billion in advertising in 2008, according to data provided by the National Automobile Dealers Association (NADA). The biggest recipient of those advertising dollars was the newspaper industry, which took in $2 billion worth.

It gets worse. The dealerships on the chopping block are disproportionately on the smaller end, says Paul Taylor, NADA's chief economist. Those dealerships invest even more heavily in newspaper advertising on average than large dealerships do, because they can't afford the higher cost of television advertising.

Dealers who sell between 1 and 399 units spend just about a third of their ad money on newspapers; shops that sell less than 150 spend more than a third. Dealers who move more than 750 units spend less than a quarter of every ad dollar on newspapers. Large dealers spend roughly a fifth of their ad dollars on TV; small dealers only a tenth.

Small dealers, because they don't have the leverage of size, are forced to spend more on advertising for every car sold -- $794 per vehicle compared to $435 for the big boys.

Once upon a time, car dealerships were a major source of revenue for mainstream journalism. In 1997, dealers spent 52 percent of their ad money on newspapers. By 2007, it was down to 26.7 percent, with the Internet picking up 16.6 percent. The Web doesn't register in NADA's data in 1997.

That trend will be exacerbated by the dealership closures and was already being driven into the ditch by the falling economy. Advertising spending was down overall by nearly a tenth in 2008, Taylor said, but because sales were so slow, the average amount spent per unit sold went the opposite direction, rising by more than a tenth.