US newspaper groups could face a US$20 billion shortfall in the next five years as readers and advertisers shift to the web, according to

researchers

.

Analyst group Outsell said a ‘perfect storm’ of declining circulation, pressure on print advertising and rapid growth of online news media would lead to a huge revenue gap for the newspaper industry by 2010.

It predicts that the decline of paid circulation revenue for print newspapers will accelerate as 18 to 39 year olds continue to shift online for news, with circulation of daily papers possibly dropping by as much as 19.5% from 2004 levels.

The report says growth in newspaper groups’ online ad earnings will not be fast enough to replace lost print ad revenue, and warns that they will need to generate new top-line growth and negotiate better revenue-producing agreements with Google et al in order to transform themselves in time.

The estimated shortfall is even larger than newspaper executives have acknowledged,” said Outsell lead analyst Ken Doctor.

“The business of news faces an unprecedented transformation as these trends likely accelerate over the next five years.”

Although the report didn’t focus on UK newspapers, it’s been clear for a long time that they face similar pressures.

It’s also interesting in light of the article we published last week on UK newspapers and Web 2.0. As Big Media firms try to stay relevant and improve their websites for users, this will require a total shift in mindset away from intrusive ad formats and towards user-centricity.

One of the key challenges for publishers is to make sense of all that data they presumably log (explicit, behavioural, etc), to improve relevancy for users and targeting for advertisers (increasing the rate card in the process).

E-consultancy has been beating this drum for years – read Ashley’s comments on web analytics and user profiling from 2004.

Some publishers appear to be taking note of these warnings, yet so long as we keep seeing godforsaken pop-ups and pop-unders we’ll assume that more pain is to come…