It's hard to know what to look forward to in 2009 — but it is obvious that in the newspaper industry the big story will be about one thing: debt. Johnston Press has already tapped investors for cash, while, in America, Sam Zell's ridiculously over-leveraged Tribune Group is in Chapter 11 bankruptcy protection.

It is easy to make all sorts of assertions — a few numbers, though, might help to explain how tough it might become.

There are three parts to the newspaper revenue model: readers, advertisers and the digital bit. For upmarket titles, such as, The Times, The Guardian and The Daily Telegraph, something over half of revenue comes from advertising. For tabloids, a similar level of revenue comes from the cover price.

Cover prices are rising and circulations are falling; add it all up, and the expectation is that revenue from copy sales will be roughly unchanged.

In a way, this makes amateur forecasting easy: take the advertising revenue forecast for 2009 and halve it to find the total impact on a title's turnover. The hard part is working out how bad 2009 will be. Publishers generally talk about a fall in advertising of about 15 per cent (although the past fortnight has been better), roughly the level of decline since the summer — although, helped by retailers' spending, The Sun, at least, seems to be doing better.

Digital, meanwhile, is not big enough to compensate to any great extent. Newspaper owners do not release digital advertising figures, but those who are doing well with digital, are likely to receive about 7 to 8 per cent of total revenues, meaning that print advertising is more than 40 per cent. Translate that into a figure and it might be £20 million per title; increasing that by 25 per cent to £25 million does not offset a big fall in print advertising revenues of five times that size.

More generally, companies hoping for lots of digital advertising revenue have usually been over-optimistic — with the exception of the global winners. Google alone is forecast to take 55 per cent of the £2.9 billion online advertising market in the UK, leaving everyone else to fight over what's left.

As for trading, that's not likely to change in January, what with ITV, the best lead indicator for the whole advertising market, predicting a fall of anywhere between 12 and 18 per cent. The question, though, is what will happen throughout the year and whether credit and consumer confidence will pick up by summer.

ZenithOptimedia, the industry forecaster, estimates that newspaper advertising will be down by 3.6 per cent in 2009, which, if true, would have proprietors singing Hallelujah in harmony with Alexandra Burke.

That thinking rests essentially on next year's second half not being as bad as this one. That is a possibility, of course, but there is no obvious summer catalyst — no World Cup or Olympic Games around which advertisers like to spend. What is certain is that fairly small percentage differences add up to big numbers.

To illustrate, last year The Guardian and Observer had turnover of £261 million; the Telegraph titles, £356 million; Mirror Group Newspapers, £488 million; Associated Newspapers, home of the Daily Mail, £859 million, and News International, owner of The Times and The Sun, £1.08 billion. If Zenith is right, turnover will fall by between £4 million and £20 million — assuming all publishers are affected equally. Not much imagination is required to see what would happen if advertising fell by 7 per cent, twice the Zenith prediction.

That would be more easily bearable if costs could be controlled, but that is not so simple — not least because of the soaring cost of newsprint. It is set to increase by 16 per cent next year, and paper costs for newspapers represent about a fifth of total turnover. Even allowing for recent redundancies, it is proving tough to reduce costs in 2009. Expect profits, then, to fall by about as much as advertising comes down, with soaring newsprint costs absorbing the savings achieved.

None of this is welcome news for the newspaper industry, but it is still far from time to argue, as the American chat show Jon Stewart did recently, that newspapers are black and white and completely all over.

Having a pile of cash helps. With £367 million in the bank, and profits from Auto Trader elsewhere, Guardian Media Group can afford to run a £26.4 million loss on its national newspapers for a while.

Those with higher levels of debt and a smaller business have less room for manoeuvre. Such publishers will look forward to economic recovery — whether it is Trinity Mirror, with £450 million of debt against £135 million of forecast operating profits in 2008; Daily Mail and General Trust, with £1 billion of debt against £317 million of operating profits in its year end of September 28, 2008; or Telegraph Media Group, with £218 million of borrowings on £38.5 million of operating profits in 2007.

By next summer, we will know what the economy is delivering.

dan.sabbagh@thetimes.co.uk

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