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Newspapers Will Suffer as New Media Gains

Reuters reports that the U.S. newspaper industry is likely to face a somber second half of the year, with circulation and advertising revenue remaining under pressure, according to an analyst's report.

The report casts doubt on any hopes of a major recovery for an industry that has seen share prices fall by 15 percent in the last 12 months amid declining readership and a migration of advertising dollars to the Internet. "The environment will get harder for newspapers before it gets better," according to Deutsche Bank analyst Paul Ginocchio. "And we're not sure when it is going to get better."

Ginocchio wrote that advertising trends are likely to weaken in the second half of the year, saying there are "few positive catalysts."

Ginocchio predicted that retail advertising, a key category for newspapers, will likely be hurt by a shift away from newspaper advertising by Federated Department Stores Inc., which is closing a number of stores and is expected to put more of its marketing dollars into television and the Internet.

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