A Merrill Lynch analysts' report, "Deep Depressing Dive," released Friday, said they have an "increasingly sober" outlook for the newspaper industry and are lowering newspaper ad spending estimates once again, MediaPost writes (via MediaBuyerPlanner). Estimates for next year were lowered from 1.4 percent to 1.1 percent, and Merrill expects 2006 newspaper ad spending to rise only 1.2 percent instead of its earlier estimate of 1.8 percent.

"We remain concerned regarding the newspaper industry's outlook as the dual impact of changing media consumption habits and the migration of highly lucrative classified ads to the Internet are squeezing margins and hampering growth," said Merrill Lynch analyst Lauren Rich Fine.

Merrill Lynch also said that although newspaper publishers are adapting their business models to adjust to the migration of classified advertising and readership online, these papers are "being too aggressive with their online pricing as these new competitors are either not charging or charging lower prices as they seem more motivated to use the traffic being generated by the listings to offer other wraparound services."