The US newspaper industry is facing tough times. The Tribune Company, the nation’s second largest newspaper publisher, filed for Chapter 11 bankruptcy protection. The company has been saddled with debt and declining sales since billionaire Sam Zell took the company private last year. I paid particular attention to this bankruptcy announcement because they own my hometown newspaper, The Baltimore Sun. Tribune Company also owns some of the largest newspapers nationwide including Newsday, L.A. Times, and the Chicago Tribune.
Tribune is not the only struggling newspaper publisher. Gannett, EW Scripps and the New York Times all face similar problems. The newspaper industry as a whole is in trouble. Newspapers are becoming increasingly irrelevant. Newspapers throughout the country have experienced declining revenue from subscriptions losses and lower ad revenue. Ad revenue declined 18.3%, 11.1%, 17% over the past quarter at the New York Times, Gannett and EW Scripps respectively.
Subscribers have abandoned newspapers for online content. Following this trend advertisers have moved ad dollars from print media to online media. The newspaper industry is at a crossroads. In the age of 24 hour news, newspapers seem out of date. By the time you read the newspaper you have probably already seen the news. National news has been replaced by CNN, Fox, MSNBC or your local news station.
Newspapers have become a niche item. People are no longer concerned with having a physical product to hold in their hands. Newspapers only sell well during major historical events. Special events such as this past presidential election demonstrate that people do still want a tangible product but only when a significant event occurs. Newspapers sold out of issues the day after the election.
I think the only hope for the newspapers publishers is to reinvent themselves. They should move their focus from print to online. Publishers should allocate more capital to their online websites. They need to get their online sites on par with the larger media conglomerates. They need to utilize their advantage over major news outlets which is in having the scoop on all local news. They need to focus on becoming a 24 hour news site on all things locally. They could use the print editions for special issues and weekend editions only.
Until newspaper companies can find a way to reinvent their business models, I wouldn’t buy these stocks even at these prices.
