Newspaper Industry – Renewed Hope?

BERKSHIRE HATHAWAYIn the last decade, the print media and newspaper industry have suffered tremendously from the onslaught of free online content that besieged the music industry. Not only did the proliferation of free online news outlets hit newspaper circulation, it also introduced a new form of advertising media that successfully competed against the industry for advertising revenue. Furthermore, the advent of cable television and its successful draw on both viewers and advertisers alike meant valuation of newspaper properties on the market have taken a substantial hit.

However, recent moves by famous investors to pick up shares of publicly-listed newspaper companies have raised a few eyebrows. In November 2011, Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) bought the Omaha World-Herald Company for US$150 million – giving the famed value investor ownership of the World-Herald, six daily newspapers and several other weekly newspapers in Nebraska and Iowa. The move was surprising especially after Warren Buffett said in 2009 at Berkshire’s annual shareholding meeting that “we would not buy them [newspapers] at any price.” More recently, Buffett doubled down on his bet on the industry as he reached a deal with Media General Inc. to acquired 25 daily newspapers for another US$142 million in May 2012.

Is the market undervaluing the print media industry? Are publicly-listed newspaper companies [listed below] poised to increase in value? And more importantly, can opportunities in digital media stoke growth in the industry again? This article aims to shed some light on the current dynamics of the industry – its risks and its opportunities.

Briefly, the U.S. newspaper publishing industry includes more than 5,000 companies that make annual revenues of around US$35 billion. The industry is highly concentrated, with the top 50 companies controlling close to 80 percent of the market. Major companies include Gannett Co., Inc. (NYSE:GCI), The McClatchy Company (NYSE:MNI), the Tribune Company and The New York Times Company (NYSE:NYT). Because newspapers were traditionally largely funded by advertisers rather than the sale of its product, the general health of the economy is a key driver in generating revenue from the industry.

In advertising, newspapers have done horribly in either attracting or maintaining its traditional revenue stream. In 2000, advertising spending on the internet and mobile devices made up only five percent of the domestic market while newspapers held a commanding share of 30 percent (US$49 billion) in the same category. 11 years later, newspapers’ share of advertising spending has plummeted to 12 percent (US$21 billion) while internet and mobile devices grew three fold and captured an 18 percent share. This decreasing share of newspaper advertising revenue is a concern especially because the advertising market in general has improved during the same time period.

Newspaper Industry – Renewed Hope?

To compound the bad news, newspaper circulation has also declined rapidly. Newspaper readers are finding new sources of information through the internet and cable television while the increase in newsstand prices and the reduction of circulation areas have also not helped its cause. The latest Audit Bureau of Circulations report released for the six months ending September 30 found that daily circulation for all 613 U.S. newspapers decreased by another 0.2 percent. The national daily, USA Today, saw its total average circulation decrease another 3.9 percent from the same period last year, while the Washington Post saw a steeper 8.9 percent decrease in the same category.

Amidst all the doom and gloom, a bright spot in paid digital models have emerged. As more newspaper outlets explore the idea of an online pay wall, there is the potential for companies to earn more revenue from circulation rather than depend on advertisers. Business dailies such as The Wall Street Journal and the Financial Times have had pay walls in place for some time and have been marginally successful in charging its relatively wealthier clientele for digital access.

Newspaper Industry – Renewed Hope?

In recent months, general newspapers have also caught up in establishing similar pay models. The New York Timesstarted the ball rolling last year as it began a paid access model for the first time – signing up 100,000 digital subscriptions in the first month. A year after the launch, the paper has had a mildly successful campaign with over 450,000 unique digital subscribers (excludes print subscribers that also receive digital access for free). As a result, circulation revenue at The New York Times is now larger than advertising revenue for the first time in its storied history.

Unfortunately, not all digital pay walls work and the advent of digital media will substantially decimate news outlets that do not have a strong following or a unique reporting niche (such as business news). For example, theBoston Globe have had a less successful attempt in charging readers for its reporting as it has only attracted 19,000 unique digital subscribers in the first three months of its paid access launch. The Gannett Company, a major publisher with multiple newspapers in its stable, have also began to roll out its paid subscription in 23 markets and the results will be out very soon.

In conclusion, it seems that the industry is going through a consolidation cycle where only the fittest newspapers will survive. The ability to attract online readers to pay for quality reporting will be essential to newspapers that want to adapt to the new business landscape. Furthermore, newspapers that have a reporting niche such as business news or local news of tight knitted communities will continue to survive due to the lack of free alternative in the digital space.

Business Section: Investing Ideas

In the subsequent days, Kapitall Wire will be extending our discussion on the newspaper industry with a more in-depth look at the individual publicly listed newspaper publishing companies. Check out this space next week for our discussion on The New York Times Company. Update: Read The New York Times Company – Moving into the Digital Age


Meanwhile, looking to trade the trend?  Here’s a list of publicly-listed U.S. newspaper publishing companies:

1. The New York Times Company (NYTEarningsAnalystsFinancials): A global, multimedia news and information company that includes newspapers, digital businesses, investments in paper mills and other investments. Market cap at $1.3B

2. Gannett Co., Inc. (GCIEarningsAnalystsFinancials): Operates as a media and marketing solutions company in the United States and internationally. Market cap at $3.88B

3. The McClatchy Company (MNIEarningsAnalystsFinancials): Operates as a newspaper publisher in the United States. Market cap at $224.64M

4. Media General, Inc. (MEGEarningsAnalystsFinancials): A provider of local news and information over multiple media platforms principally in small and mid-size communities throughout the Southeastern United States. Market cap at $95.45M

5. The E. W. Scripps Company (SSPEarningsAnalystsFinancials): Operates as a diverse media company with interests in television stations, newspapers, and local news and information Web sites. Market cap at $586.63M

6. Lee Enterprises Inc. (LEEEarningsAnalystsFinancials): Incorporated provides local news, information and advertising in midsize markets, with 49 daily newspapers and a joint interest in four others, nearly 300 weekly newspapers and specialty publications in 23 states. Market cap at $77.91M

7. A. H. Belo Corporation (AHCEarningsAnalystsFinancials): Operates as a news and information company primarily in the United States. Market cap at $108.7M

Compare analyst ratings for these publicly traded newspaper companies:

Newspaper Industry – Renewed Hope?

This article was originally written by SiHien Goh, and posted on Kapitall.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!