Fat newspaper profits are history

Alan points his substantial intellectual capacity to an issue that most of us miss, which is that despite a gutting of classifieds and other forms of advertising the newspaper business is very profitable when it is profitable. Newspaper sustain their profitability by cutting into the meat of their business, payroll and physical inventory (i.e. number of printed pages) and their operating margins are really quite enviable.

As proof of the industry’s amazing power to produce profits, you need look no further than its performance in the first three months of this year. Despite a 14.4% drop in industry-wide print advertising revenues in the first quarter, the average operating profits of the seven largest publicly held newspaper companies fell only two percentage points to 17.6% from 19.5% in the same period, according to Fresearch.Com.

[From Reflections of a Newsosaur: Fat newspaper profits are history]

However, they are sustaining their margins by cutting meat as there simply isn’t a lot of fat left, and the lack of investment in disruptive strategy will certainly result in more pain later. I wrote about this a couple of days ago, I fail to see how reducing their coverage is going to make for a better newspaper experience, and a while back I wrote about how display ad models are failing local and regional newspapers yet despite this obvious conclusion it is not evident that newspapers are doing anything transformational on the advertising front.

It’s not often talked about, but broadcast networks are not that far behind newspapers as their audience declines with each reporting period and the forced shift to digital this upcoming February is certain to accelerate that trend as the big networks rely on about 15% of their primetime audience watching via over the air signals.

Reuters and NewsGator Partner on Election Coverage

I was remiss in not writing about another announcement we made yesterday. Reuters and NewsGator have teamed up to offer U.S. election coverage widgets for individuals and publishers.

The idea of doing widgets with specific event coverage is nothing new, but what makes this program unique is that we are offering full text Reuters coverage and video in a branded widget that can be co-branded and customized for a specific publisher.

When content in the widget is clicked on, the click brings you back not to Reuters site but to the partner site that is cobranding the widget, as is the case here with Joe the Plumber on the Denver Post site. Pretty cool, huh?

Reuters deserves a lot of credit for offering publishers the ability to take advantage of their content in a manner that benefits both the publisher and of course Reuters. With the AP struggling to maintain their customer list of newspapers, it is no surprise that other information service providers are jumping at the opportunity to disrupt the marketplace with innovative syndication offerings.

RSS technologies when combined with widget syndication offer the ideal vehicle for aggregating and distributing content in a manner that retains the integrity of the brand and ensures that monetization flows exactly where it should, to content owners and publishers.

$7.5B sales plunge forecast for newspapers

The newspaper industry is likely to be the next one calling for a bailout… if these projections are accurate.

Should this forecast prove to be correct, sales would tumble by 16.5% to $37.9 billion from last year’ s depressed level and the industry will have lost a staggering 23.4% of its revenues since producing a record $49.4 billion in sales in 2005.

[From Reflections of a Newsosaur: $7.5B sales plunge forecast for newspapers]

More interestingly, the online newspaper sector has been growing significantly over the last couple of years and online news sites have done all the right things with regard to adding video/audio content, expanding features sites, syndicating third party content and services, and courting interaction with the audience. We can quibble that they aren’t doing enough of the above, but the fact remains that online audience has consistently grown and key metrics, like time spent, have improved.

The elephant in the room is the ad networks and declining value to newspapers as their core audience grows and online inventory expands. I argued as much in this post, suggesting that at it’s core the newspaper business (and associated advertising sales operation) is inherently local while ad networks are generalized.

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NAA Advertising Estimates Down ONLY 5.5%

Does anyone really believe that newspaper advertising next year will decline less than this year? I guess at some level you could argue that there has to be a floor but given the macro conditions and the two largest industries who advertise in newspapers going to crap, financial services and automotive, it’s hard to believe next year will look less bad than this year.

Jen: The Newspaper Association of America calculated the industry’s ad revenue forecast for the remainder of 2008 and 2009. For 2008, the association is estimating that print revenue will fall 12.5% while total revenue will drop 11.5%. The numbers look at little better in 2009 with total revenue declining 5.5%.

[From Fitz & Jen: NAA Ad Forecast]

Zillow Syndicates Content to Newspaper Consortium

Last week I wrote about how Gannett’s move to increase it’s stake in CareerBuilder seemed to be a logical move with regard to their interest in a consortium of newspapers and a shared ad network. The content syndication topic is gaining steam as these companies are moving beyond job listings to the bread-and-butter category of real estate content.

This is a huge deal that will be as transformative to the newspaper industry as going digital was a decade ago. The Zillow piece is just one element, the transformative part is how newspapers are fundamentally rethinking their online business strategy having recognized that doing online what you do offline simply doesn’t work.

Lastly, this is a direct assault on Yahoo Newspaper Consortium by 11 very big media companies.

Under the Zillow Advertising Network agreement, the consortium’s advertisers can tap into Zillow’s user base of more than 5 million unique monthly visitors, while Zillow’s advertisers will have access to readers of the newspapers’ online real-estate content.

[From Zillow, newspaper consortium launch ad network | News - Digital Media - CNET News]

Why Newspapers Shouldn’t Allow Comments

I read the comments on SFGate.com and for the most part they are insipid, obtuse, and alternating between insane and incomprehensible. Despite some well meaning efforts by the editors to remove comments that rise to the level of being patently offensive, the bulk of the user generated comments are worthless and only serve to reveal frightening insights into the fringe elements of our society.

As Mike rightly points out, the problem also lies with the fact that newspapers don’t provide incentives for posting good comments, or promote social signals to improve the quality of discourse. I’d take it a step further and suggest that simply because nobody calls out people for posting nonsensical and offensive comments, there is no disincentive to wasting bits on stupid shit.

I get enough “community” elsewhere online, I’d prefer that newspapers just ditch comment systems altogether at this point.

Comments are thought to be an added value to a newspaper’s site—providing another reason to read. You come for the article, and stay for the interesting discussion. The only problem is, there is no interesting discussion. Almost never. Not even from the mythical supersmart New York Times readers.

[From Newspapers: Why Newspapers Shouldn't Allow Comments]

$19 Billion Gets You All of It

Gets you what? $19 billion is the market capitalization of 10 of the major U.S. newspaper stocks. Put another way, about 1/8th the value of Google.

To be clear, this is not the valuation of the top 10 newspaper companies because Hearst, Tribune, Cox are private and Dow Jones is part of behemoth News Corp, but it does make a stark statement about the wisdom of being public ownership of media stocks. There are calls for private equity to jump in and pick up cheap newspaper stocks but I don’t see that happening because 1) The Sam Zell Experience, 2) organized labor is a hazard on the print side of newspaper operations and threatens the online side as well, and 3) we’re dealing with some fundamentally broken businesses who’s salvation is not going to be found in cost cutting and reorganizations.


Name Symbol Last price Change Mkt cap Volume Open High Low
Gannett Co., Inc. GCI 18.34 0.57 $4,194 3260344 17.83 18.74 17.61
Journal Register Company JRCO 0.09 -0.01 $4 229059 0.095 0.105 0.09
Journal Communications, Inc. JRN 5.58 0.59 $313 299080 4.9 5.97 4.9
Lee Enterprises, Incorporated LEE 4.31 0.26 $193 492527 4.57 5 4.1
Media General, Inc. MEG 13.54 -0.09 $310 71662 13.51 14.24 12.95
The McClatchy Company MNI 5.18 0.23 $426 509975 5.06 5.34 4.98
The New York Times Company NYT 13.06 0.2 $1,878 1939797 13.05 13.42 12.38
Sun-Times Media Group, Inc. SUTM 0.4 0 $32 0 0.4 0.4 0.4
The Washington Post Company WPO 610.51 10.01 $5,816 8900 598.1 613.49 598.1
Scripps Networks Interactive, Inc. SNI 39.7 0.61 $6,487 196624 40.21 40.4 38.5

BONUS: Here’s a really cool family tree chart that details who owns what in the media business.

Newspapers in Survival Mode

You know it’s bad when your trade organization just gives up trying to put positive spin the numbers.

In fact, the industry group that compiles and releases ad revenue figures, the Newspaper Association of America, this month stopped putting out quarterly press releases with the numbers, though it quietly updated them on its Web site.

NAA spokeswoman Sheila Owens said in an e-mailed statement that the organization will now put out press releases only with full-year data “to keep the market focused on the longer-term industry transition from print to a multiplatform medium.”

[From Washington Times - In 'survival mode,' newspapers slashing jobs]

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Newspapers Continue to Grow Online

Pretty interesting stats about online newspaper site traffic. 69.4 million unique visitors in May resulting in a 41% reach.

Note that 10 of the top 30 in this list are newspapers or newspaper companies – one more than last month! Newcomers to the newspaper list are washingtonpost.com and Hearst Newspapers Digital. MediaNews Group, which ranked 30th last month, is not on the top 30 list this month.

[From Digital Edge Blog - Newspaper Association of America: Advancing Newspaper Media for the 21st Century]

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