If anyone thought on Monday that Sir Martin Sorrell was being unnecessarily gloomy when he predicted that things were only going to get worse, they were soon proved wrong. The chief executive of WPP Group, the global advertising business, told a UBS conference in New York that although financial markets would likely stage a recovery by mid-2009, the rest of us would continue to hurt for a further year. “The real world won’t change for the better until 2010 when greed has overcome fear yet again,” he said.

Before the day was out, journalists at one of America’s best-known newspaper companies had had a dose of the real world’s pain when Tribune Company, the publisher of the Los Angeles Times and Chicago Tribune, filed for Chapter 11 bankruptcy protection. This was a surprise – most had read the company’s appointment of Lazard as a bankruptcy adviser merely as a negotiating tactic amid discussions with Tribune’s lenders.

Tribune’s filing came as it emerged that the New York Times Company planned to sell and leaseback its share of the newspaper company’s Eighth Avenue headquarters to raise cash. And Donald Graham, chief executive of the Washington Post Company, used the UBS conference to give warning that the company’s flagship newspaper would be unprofitable this year.

For local newspapers, this kind of agony is nothing new. McClatchy Company, the publisher of 30 papers including The Kansas City Star and The Sacramento Bee, has laid off 2,550 workers so far this year. Gary Pruitt, the company’s chief executive, told the same conference: “This is a way of life at McClatchy.”

Advertising forecasts suggest that writers on the national newspapers should get used to the new reality. ZenithOptimedia said this week that it expected US advertising spending to fall by 6.2 per cent next year.

Struggling carmakers and financial companies are already slashing their ad spend and retailers, under pressure after poor holiday sales, could be the next to cut budgets, according to GroupM. These depressing predications, however, are practically rosy compared with those coming from Wall Street media analysts. Fitch Ratings reckons that spending could fall by as much as 9 per cent next year, in line with the drop that hit the media industry in 2001 after the dot-com bubble burst and 9/11. That was the worst year for advertising since 1970.

So is the near-collapse of Tribune a sign of things to come for America’s newspapers and news magazines? Not necessarily. As Martin Peers, the media commentator, pointed out, Sam Zell’s $8.2 billion buyout of Tribune was one of only three $10 billion-plus leveraged buyouts done in the media world during the M&A boom of recent years – for good reason.

The property entrepreneur used Tribune’s employee stock ownership plan (Esop) to finance the acquisition. Companies use Esops as a tax-friendly way of borrowing – the plan borrows the money and uses it to buy the company’s shares. It then uses the money raised by selling the shares to fund, for example, some kind of expansion.

As the company contributes money to the Esop in the form of retirement contributions, bank loans are slowly repaid and then the shares are released into employees’ pension accounts. And because an Esop is technically a retirement fund, both the interest and the principal on the loan repayments are tax-deductible Even in good times, however, Tribune, which had been suffering for some time from declining readership, might have struggled to service the huge loans taken out by its Esop. The recession made it impossible.

“Leveraging companies up as much as occurred in some of these deals isn’t smart at the best of times,” Mr Peers said. “But for companies exposed to ad revenues, which fluctuate with the economy, it is particularly troublesome. And for players in industries facing secular decline, such as newspapers, it can be disastrous.”

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