New evidence shows that online advertisers are building their search engine marketing and moving away from big display ad investments. According toThe Wall Street Journal, "Faced with a slowing economy, advertisers are sticking to what they view as the safest way to reach online customers directly: the plain text ads that appear on search-result pages."
To state the obvious, the news seems to be bad for Yahoo! (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT), and AOL. These portals rely heavily on display ads for their revenue and have modest search income.
The data is much, much worse for newspapers. Companies like The New York Times (NYSE: NYT) are counting on online advertising to take the place of falling print revenue. A great deal of the advertising that runs at newspaper sites is retail and national display. Total ad revenue at The New York Times dropped more than 16% in July. Internet advertising was up less than 1%. Clearly, at that rate, online ads can do little to help that nation's big dailies.
The portals will struggle to keep their display growth intact. They have the lion's share of the market, so scale is on their side. They will almost certainly have the best chance of picking up the marketing dollars from the largest online advertisers. Even if the market keep slowing, their sales should be steady to modestly up.
Newspapers will not be so lucky.
Douglas A. McIntyre is an editor at 247wallst.com.
Rupert Murdoch, CEO of News Corp (NYSE: NWS) and king of all he surveys, wants to buy The New York Times. At least that is what he told Vanity Fairaccording to a Reuters report.
It is hard to see why Murdoch would even bother to dream that dream. Based on the most recent quarterly earnings report and monthly figures reported by The New York Times Co. (NYSE: NYT), the paper probably loses money when the results of its online business are backed out. If ad lineage at the print product keeps falling, and it will, even NYTimes.com will not be able to save the bottom line.
While The New York Times is a trophy, it would almost certainly be an expensive one. The parent company has a market cap of about $2 billion, and the paper might go for more than that because of its unique position as the most respected news outlet in the US.
Murdoch is probably already struggling with The Wall Street Journal. He has to be. Newspaper ad revenue is simply dropping too fast for the Journal to be immune.
Owning another paper is just asking for more losses which would need to be offset by other businesses at News Corp.
Douglas A. McIntyre is an editor at 247wallst.com.
Back in the good 'ol days of say 2004, Gannett Co. (NYSE: GCI) was one of the few newspaper publishers Wall Street liked. Part of the reason was that many of the papers were in smaller cities such as Wilmington, Delaware, and Poughkeepsie, NY, where competition was not as great for advertisers. These days the publisher of USA Today is up the creek with the rest of the industry.
With its shares down more than 50% this year, it should come as no surprise that Gannett is joining the ranks of publishers that are laying off staff. According to a memo leaked to the unofficial Gannett blog, about 1,000 positions will be eliminated across Gannett's Community Publishing Division. Six hundred of those employees will lose their jobs, the memo says.
"Several GCI papers have already made recent job cuts, but at a higher rate: 5%," the blog says. "The division's dailies do not include USA Today, suggesting that any further reductions at Gannett's flagship could be on top of the 1,000 jobs eliminated."
Gannett investors -- who must be the few, the proud like The Marines -- must have been expecting the move. Shares of the publisher have soared 10% in the past month. About the only relief they are going to get is through a takeover by private equity companies. The publicly traded media companies have no interest in buying into an industry whose best days are behind it.
The one last hope failing newspapers could hold onto is that the online versions of their products would grow enough to offset falling print profits. The most recent earnings from the largest chains have raised the question of whether that is possible. Results from The Washington Post Company (NYSE: WPO) have diminished the dream even further.
The numbers for the company's flagship paper, The Washington Post, were remarkably poor. According to The Wall Street Journal (subscription required), "Print ad revenue at the paper declined 22% to $99.8 million in the quarter, compared with an 11% decline in the first quarter." One of the nation's most respected newspapers is simply falling apart.
Online growth at the Post was anemic. It increased only 4% to $29.3 million, not nearly enough to have any meaningful impact on earnings.
The question keeps coming up about what newspapers can do. The stock prices of several of the chains are down over 80% during the last year. Many of these companies have large debt loads.
The only realistic solution may be that editorial staffs will have to be cut by 50% or more. Papers may decide to put out 8 to 16 page news summaries each day in the place of their current products. These smaller papers would point users to their internet sites to get full stories and complete coverage. It would save substantial money on paper and distribution, and it just might force large numbers of readers to web editions. At least that would give the companies a chance, something they do not have now.
Douglas A. McIntyre is an editor at 247wallst.com.
The company has a market cap of about $1.8 billion, roughly the price that CBS Corp. (NYSE: CBS) recently agreed to buy CNET for. Its enterprise value is about $2.85 billion.
Lehman Brothers analyst Craig Huber estimated that the Boston Globe and 15 regional papers could be sold for $575 million after taxes, and valued the company's 17% stake in the Boston Red Sox at $152 million and estimated NYT's portion of its new headquarters at $750 million. About.com, which the Times bought for $410 million three years ago, could fetch a tidy profit if it were sold today.
In this series, we take a look at the 25 stocks on the S&P 500 Index (SPX) that have turned in the worst performance during the past decade – what went wrong, and what happens next.
It's possible that you may have heard some rumors about the death of print media. As it turns out, they're more or less true. Not long after Al Gore invented the internet during the 2000 elections, readers began defecting from traditional print media toward internet-based alternatives. The immediacy and convenience of online publications have sucked the lifeblood -- and the ad revenue -- from traditional, more easily folded newspapers.
And, if you're looking for a company that's waist-deep in the print-periodicals business, look no further than Gannett Co. (NYSE: GCI). The Virginia-based outfit prints daily newspapers that are published around the country, spanning from USA Today to the Detroit Free Press to my own local fish-wrapper, The Cincinnati Enquirer.
What went wrong? At number 23 on our list of the S&P 500's worst 10-year laggards, GCI lost 70% of its value during the decade ended June 30, 2008. The stock peaked at $91.38 in April 2004, and its performance since then can best be described as "prolonged death throes." Sure, there were a few upbeat quarters mixed in, but the industry trend was (and is) inescapable. According to the Newspaper Association of America, circulation revenue has dropped consistently in the past five years. GCI's decline on the charts has been just as consistent; since June 2004, the stock's 10-month and 20-month moving averages have ushered the stock ever southward.
Some commentators are mourning the decline of the newspaper as web-based news rises, lamenting that quality, standards, and depth of research are going the way of the hula hoop.
But here's the problem: as newspapers lose circulation, they cut back on newsroom staff, and then the quality, standards, and depth of research decline.
A new study from the Project for Excellence in Journalism's study, called "The Changing Newsroom: What is Being Gained and What is Being Lost in America's Daily Newspapers" looked at the changing face of newsrooms and found that stories have gotten shorter, and only 5% of editors felt they could predict what the newsroom would look like in just five years.
But I wonder if the opposite is true: as websites continue to take market share away from the newspapers and have the resources to make considerable investments, will web-based journalism become better than newspapers? It seems likely.
If that's the case, then all the complaining about the death of the newspaper is misplaced. The sooner it dies and consolidates onto the internet, the sooner we'll have high quality journalism available for free, online, at our fingertips.
Tribune, formerly a public newspaper and broadcast company, lost the publisher of its largest newspaper, the LA Times, and the editor of its flagship, the Chicago Tribune. New controlling shareholder Sam Zell is in trouble, burdened by buyout debt he may not be able to pay.
Most analysts saw another modest drop in newspaper ad revenue this year. It has been much worse than that. At some companies in the industry, ad sales are off nearly 15%. An analyst recently dropped his price target on The New York Times Company (NYSE: NYT) to $8 and said the firm would have to cut its dividend. The stock currently trades at $13.21.
The two public companies which are at most risk for not making it another year are Gatehouse (NYSE: GHS) and McClatchy (NYSE: MNI). Both took on big debt loads buying newspaper properties. Both are seeing operating income chopped by falling sales. Either could hit debt service problems which could force them to sell properties of file for Chapter11.
Gatehouse dropped as low as $1.11 in the last few days. Its 52-week high is $19. McClatchy is down to $4.93 from a 52-week high of $28.65. Gatehouse is the most troubled with a high dividend and $1.3 billion in long-term debt.
Newspapers companies have gone from being in a tight spot to being candidates for liquidation. They are a short-seller's dream.
Gannett (NYSE:GCI) announced it May revenue results. Nothing in them was surprising.
According to the country's largest newspaper company, "Publishing advertising revenues in May were 14.3 percent lower." Classified ad revenue fell even more, almost 20%. Auto, real estate, and jobs marketing have begun to leave newspapers and financial trouble within those industries has cut their ad budgets to the bone.
The most disturbing piece of new is the report was that at USA Today, advertising revenue was 18.4 percent lower on paid ad pages of 260 versus 324 last year.
USA Today is part newspaper, part daily magazine. It uses color and graphics in a way that is closer to Time, Newsweek, or BusinessWeek than to a typical daily paper. It is also a national product, not local like other papers.
If the country's largest paper, and one of only two papers distributed widely in the USA is in such trouble, it may be a sign that the print ad downturn is moving quickly from newspapers to magazines. Some weekly publications like BusinessWeek are seeing double digit ad drops.
Newspapers may not be the last part of the print publication industry to fall apart.
Douglas A. McIntyre is an editor at 247wallst.com.
The Tribune is not a public company anymore, but CEO Sam Zell says enough about his plans that it might as well be.
According toThe New York Times, Zell "announced a set of deep cuts, saying that shrinking revenue left them no choice." One of the things that means is fewer pages devoted to news as newsprint use is reduced.
The Tribune carries a lot of debt, so it is in more trouble that other chains such as The New York Times Company (NYSE: NYT) and Gannett (NYSE: GCI). But, other large paper operations including McClatchy NYSE: MNI) and Gatehouse (NYSE: GHS) also have massive debt burdens from money they borrowed to expand their empires.
What all of this means is that more reporters and editors will lose their jobs and the typical reader will get a newspaper that is thin as toilet paper. For newspaper company investors it means that stocks, some already down 50% to 70% in the last year, are going down even further.
The trouble also may spell the end of nearly a century of big papers like The New York Times being the news sources of record. The company recently cut 100 people, most of them from the news operation. Covering major national and international stories is becoming more difficult and at some point it may be impossible.
There is always CNN.
Douglas A. McIntyre is an editor at 247wallst.com.
In a sign that the newspaper industry's problems are accelerating, Gannett Co., Inc. (NYSE: GCI), the largest newspaper chain in the U.S., posted awful numbers for April. The information makes it more likely that the stocks of smaller paper companies like The McClatchy Company (NYSE: MNI) will take a dive over the next several weeks.
GCI revenues for the period ended May 4, 2008 declined 7.7 % compared with the same period in 2007. Revenue in the big publishing division fell almost 11%. Real estate classifieds fell almost 24% as home sales in most regions fell apart.
According to Gannett "At USA TODAY, advertising revenues were down 6.4%." As odd as it may seem, falling revenue is not the industry's single biggest problem because most companies like Gannett still have good profits. However, falling operating cash flow is killing companies that took on debt over the last decade to buy other newspapers in the hope of building scale and cutting costs. McClatchy has over $2.4 billion in debt after buying rival Knight-Ridder.
Banks may end up owning some of the newspaper chains.
Douglas A. McIntyre is an editor at 247wallst.com.
Shareholders of Cablevision Systems Corp. (NYSE: CVC) must be scratching their heads over the company's $650 million purchase of Newsday from Tribune Co., the latest in a long series of baffling moves by the Dolan family, which controls the New York-based cable company.
The theory -- if you want to call it that -- is that Cablevision would be able to market the newspaper to its customers and that the company would be able to add additional content to its cable news channel. This makes no sense. People have stopped reading newspapers in droves. The only way that they would even consider subscribing is if Cablevision practically gave the newspaper away. Newsday could have struck an alliance with the cable channel to share content without the paper changing hands; these sort of deals happen all of the time.
Maybe advertisers will be more interested in Newsday now that Cablevision will be able to bundle ad space in the paper and its website along with cable commercial time. The problem, though, is that residents in Long Island have a plethora of media choices including the New York Times, New York Daily News and The New York Post. Like the readers, the only way that advertisers that aren't in the newspaper now would consider doing business with Newsday would be with steep discounts.
It appears that News Corp (NYSE: NWS) will buy the largest newspaper on Long Island, Newsday, from The Tribune Co., increasing pressure on The New York Times Co. (NYSE: NYT) in its home market. News Corp already owns The New York Post. Recent press reports indicate that News Corp is adding more political and international content to The Wall Street Journal to better compete with the Times.
According to The Wall Street Journal, the price for Newsday could be about $580 million, and final details of the purchase or lack of government approval could still kill the deal.
Tribune needs to make the sale to cover debt it took on in its LBO.
The news is especially bad for The New York Times Co. While the Post does not take much advertising from the Times, it does have a circulation of over 600,000 in New York City. Newsday has a daily circulation of about 400,000 in the well-to-do area of Long Island, just east of New York.
The New York Times is already in enough trouble. It posted a loss last quarter, and in March advertising revenue fell about 11%. The firm's stock trades at $20, but many observers believe that it it were not the target of investors who hope to break it up or sell it that the shares price would be much lower.
The value of the company just got undermined again.
Douglas A. McIntyre is an editor at 247wallst.com.
Shares of Gannet Inc. (NYSE: GCI) are trading somewhat higher after the largest newspaper publisher reported better-than-expected earnings. To the dwindling number of investors who still care about the beleaguered sector, this is good news. But shares are barely budging because the overall numbers were dismal.
Net income was $191.8 million, or 84 cents a share, down 9% compared with a profit of $210.6 million, or 90 cents a share, a year earlier. Excluding one-time items, profit would have been 77 cents, a penny better than Wall Street estimates. Newspaper publishing revenue fell 8.6% to $1.51 billion as retail and classified revenue slumped. USA Today revenue rose 2.1% as national advertising held steady. Revenue from its much smaller broadcasting business fell 7% to $170.2 million.
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Some commentators are mourning the decline of the newspaper as web-based news rises, lamenting that quality, standards, and depth of research are going the way of the hula hoop.
The Tribune is not a public company anymore, but CEO Sam Zell says enough about his plans that it might as well be.
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Is BT's offer to save Britain's red phone boxes for £500 fair?
