Newspapers Start To Produce Better Numbers From Their Print Operations, and Their Internet Activities Continue Amazing Growth, But Three Major Wall Street Analysts Say Its Way Too Early To Say The Worst Is Over

Lauren Rich Fine of Merrill Lynch, one of Wall Street’s most respected media analysts, probably summed it up best. “Yes, most companies have reported May newspaper ad revenue results that were better than the flattish year-to-date trends observed through April; yet we think it is premature to conclude the acceleration as a trend.”

Paul Ginocchio of Deutsche Bank, also heavily listened on the Street, said in a report, “Our view of second half advertising dynamics remains somber. We think large markets will continue to face the bleeding edge of the shift of readers and advertisers to the Internet.”

And Goldman Sachs analyst Peter Appert downgraded The New York Times Company and Dow Jones to “underperform” shortly before they announced their May numbers. His reasoning sums up Wall Street’s addiction to enhancing shareholder value

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As Public Newspaper Companies Hold Their Annual Shareholder Meetings The Ghost of Knight-Ridder Newspapers Is There, Too.
Tribune Chairman, President, and CEO Dennis J. FitzSimons told his shareholders this week what a few weeks ago would have been the unthinkable: “As Knight-Ridder found out, everything in this environment is possible. That’s one of the reasons we have to operate as efficiently as we are operating right now and continue to look for efficiencies.”

Google’s Capitalization Drops $20 Billion In One Week, Yet It’s Still Worth Nearly Double All Publicly Quoted Newspaper Stocks on the US Markets Combined. But Might Rupert Murdoch Be Preparing to Out-Google Google?
It was a bad week for Google. It started when Yahoo’s fourth quarter earnings, although good, came in just under what Wall Street expected. So Yahoo got dumped on and in Wall Street’s natural way it also sold off its prime competitor. And then the week ended with a double whammy – news broke that Google was fighting a US Justice Department subpoena to hand over one week’s worth of search requests and Wall Street on Friday suffered its worst loss in almost three years.

Dow Jones Dumps Its Wall Street Journal Publisher and Kicks Her Husband, the Company’s CEO, Upstairs Temporarily to Chairman, Wall Street Rejoices With A One-Day 10% Share Price Increase And With Knight-Ridder For Sale, Traders May Finally Be Seeing Some Results They Like From US Newspapers.
Tony Ridder didn’t have much choice. His three largest shareholders said they wanted to see Knight-Ridder sold to achieve shareholder value and there wasn’t much he could do about it and the sales process is in full swing. But Dow Jones is another matter. While a public company it is still controlled by the Bancroft family and the family really hasn’t been that active in pushing for a better performance. Until now. In one swoop the company ceo is out come February 1 -- kicked upstairs as chairman until he retires in a year -- and his wife, the Wall Street Journal (WSJ) publisher, has been given two months to pack up her office.

All Wall Street Really Wanted to Finally Rocket US Newspapers Shares Up Was Some Good News, And This Week, Finally, The Industry Delivered. And so Did Wall Street
First it was the New York Times that reported, unexpectedly, that its November advertising revenue grew 5,8% from November, 2004. Then the Wall Street Journal announced a 34.3% gain in classified advertising from the same month a year ago. Sure, this year there are the Saturday editions but it was clear to Wall Street that something positive was happening.

US Newspaper Executives Tell Wall Street This Week Their 2006 Prognosis But the Real Story is That Knight-Ridder Won’t Be Presenting – It’s In the Midst Of Being Forced to Try and Sell Itself -- And That’s the Real Future That Many of Them Don’t Want to Talk About!
When the major US publishing companies give their various reports to the 33rd annual UBS Media Week Conference and to the Credit Suisse First Boston media meeting this week the shadow of who is not there will be overwhelming. Knight-Ridder’s prognosis is already known – its three main shareholders want it sold to gain shareholder value, and many of those other newspaper companies – especially those without family protection on their shareholdings – fear they could soon be in the same boat.

Knight-Ridder, he said, was forced to sell itself because of shareholder pressure and its share price consequently rose; Tribune is buying up 25% of its shares with the consequence that its debt is now rated as junk but the share price moved up, too. But Dow Jones and the Times have dual classes of shares meaning their respective families have full control meaning little can be expected from them in any major restructuring intended to increase shareholder value that might dilute their control. Maybe a little dividend increase, perhaps some more share buy backs, but nothing dramatic like Knight-Ridder and Tribune.

And even though the May advertising numbers were up, they came on top of a very poor Q1 and there was a particularly bad sign that advertising growth for the year would not be as healthy as most had predicted. Traditionally US advertising rises at a higher percentage rate than the US GDP, but in the first quarter, for the first time in a very long time, ad expenditure only kept pace with the GDP figure of 5.2% whereas most analysts had expected around 5.5%. That caused economists and media analysts to take another look at their full-year forecasts and most of them are now reducing their overall 2006 ad growth figures.

Local US newspaper advertising, especially hard hit in retail, automotive and telecommunications, saw a 6.1% drop in advertising so far this year, according to TNS Media Intelligence. Even the television up-fronts have been lackluster.

The Internet continues to be a bonanza for newspaper companies with ad revenues increasing at newspaper web sites by 34.9% to $613 million in the first quarter compared to the same quarter a year ago, according to the Newspaper Association of America. The problem is that in spite of how good that growth is, it needs to be much more and it needs to come in even more quickly. The Internet ad revenue increases barely cover what print loses. Print did manage an increase – all of 0.3% -- and that was due to strong gains in real estate advertising. But as part of the overall picture, Internet advertising still only represents some 5.5% of a newspaper’s total ad revenue, according to the NAA.

Combining print and online ad revenues the industry earned $11.1 billion for the first quarter, a 1.8% increase overall. Study those numbers closely and it shows how much more money print still earns over its Internet properties, that 34% Internet increase combined with 0.3% for print resulted in just an overall 1.8% revenue increase.

Another NAA study says that frequent readers of newspaper web sites are more likely to make online purchases than any other Internet user, something that newspaper marketing departments will likely use to good advantage. According to the study by MORI Research about 40% of frequent newspaper web site users fall into the 18-34 age group preferred by advertisers, they stay online longer, they have a median income of about $73,200, and they browse for items in online sales. And what attracts them to the newspaper site? Local news! Think there might be a message in there somewhere?

Perhaps the best news for print is that some of its classified revenues are returning. As a whole classified advertising was up 4.7% with real estate advertising up 26.3%. But one line item in the classified is sure to worry – automotive was down 14.5% so it is not just the automakers and their dealers who are fast migrating to the Internet, but also the at-home used car sellers, too.

Deutsche Bank reported recently that those newspapers that do best in online classifieds have usually partnered with large online classified networks like CareerBuilder. Those that have such a relationship are holding on to about 57% of their online classified markets whereas those newspapers that have no affiliation are holding onto about 41% of their markets.

And it seems that newspapers serving small markets are doing better than their bigger brethren, sometimes fetching 2-4 times more revenues for their individual classified postings, probably because big online sites don’t cover small towns and are not as prevalent in mid-sized cities.

So with print advertising not showing much growth cost containment is still very much the byword at newspapers. But it looks like the newsprint industry is doing them no favors.

According to a Bank of America Securities report, a $50 a ton increase in newsprint costs will reduce newspaper earnings by 4.3%. And which company had the highest newsprint increase so far this year? According to Bank of America it is Dow Jones that saw newsprint costs increase 24.7% in Q1 because of a 15.1% price increase and also because the new weekend edition means more newsprint consumption – up 8.4%.

Throw all of this into the pot and it is little wonder that a one-month improvement in ad revenues does not have Wall Street eyeing the newspaper industry any differently. As Lauren Rich Fine said recently, “It’s a stinker”.

The State of the Print Media in the World New! October 2006

Newspapers Start To Produce Better Numbers From Their Print Operations, and Their Internet Activities Continue Amazing Growth, But Three Major Wall Street Analysts Say Its Way Too Early To Say The Worst Is Over

The State of the Print Media in the World
New! October 2006