Newspaper stocks crashing

My attention was recently called to a July 15 blog post by Alan Mutter at Newsosaur. He notes the collapse of the stock prices for most newspaper companies. Here are the highlights.

: A.H. Belo (AHC) today is worth $119 million, down 58% from $282 million when it began trading earlier this year as a free-standing newspaper publisher.:: GateHouse Media (GHS), worth $59 million, down 95% from $1.2 billion at its curiously strong initial public offering in October, 2006.

:: Journal Communications (JRN), worth $266 million, down 78% from $1.2 billion on Dec. 31, 2004.

:: Journal Register Co. (JRCO), worth $6 million, down 99% from $746 million on Dec. 31, 2004.

:: Lee Enterprises (LEE), worth $145 million, down 93% from $2 billion on Dec. 31, 2004.

:: Media General (MEG), worth $248 million, down 83% from $1.5 billion on Dec. 31, 2004.

:: McClatchy (MNI), worth $387 million, down 93% from $5.7 billion on Dec. 31, 2004.

:: New York Times Co. (NYT), worth $1.85 billion, down 67% from $5.6 billion on Dec. 31, 2004.

:: Scripps (SSP), worth $522 million, which was newly launched as a pure-plan newspaper company on July 1, 2008. More details below.

:: Sun-Times Media Group (SUTM), worth $32 million, down 98% from $1.3 billion on Dec. 31. 2004.

The only companies not on the above list are:

:: Gannett (GCI), worth a bit less than $4 billion, down 79% from $18.5 billion on Dec. 31, 2004.

:: News Corp. (NWS), worth $37.2 billion, down 36% from $58.4 billion on Dec. 31, 2004.

:: Washington Post (WPO), worth $5.5 billion, down 24% from $7.3 billion on Dec. 31, 2004.

My thoughts? Publicly traded newspaper companies have helped bring the news industry to this place. They are NOT solely responsible for everything that is wrong, but they established the concept that serving shareholders is job one. How do they serve shareholds? With something that can only be maintained under monopoly-type conditions: high-profit margins. Gannett’s target for annual profits has been 29 percent. They have essentially determined everything that they do — from corporate to staffing at local papers — based on hitting that target. They have apparently hit that number pretty consistently for quite a few years.

Not going to happen any more.

Now to drag out my crystal ball. A great many newspapers currently operating in the US will cease to exist in the next 15-20 years. I don’t mean simply stop printing on dead trees and move their entire operations to the web. I believe they will go belly up and die.

Companies such as Gannett, while looking fairly healthy compared to their brethren at the moment, will have to get out of the newspaper business (i.e. leave all of their papers to die lonely deaths) or have them suck down the entire company. The worship of profit over everything else would almost dictate my prediction. Their shareholders demand nearly 30 percent in profit. The “newspaper” business of the future will be lucky to achieve 5 percent profit.

What does the future hold? Private ownership of newspapers (although that term will likely soon be anachronistic, since news on paper will be gone). Some of those private owners will be rich people with axes to grind. They may succeed in spite of that. Many will have no newspaper business sense and simply pour some millions into the “paper” and eventually get out. Many former newspaper people will take up the local news slack by starting their own online “papers.” National organizations will take over much of the government watchdog role.

What will get lost? Investigative journalism at the state and local level for many areas. The watch-dog role of newspapers, which some may arguably have not performed very well anyway, will now become largely non-existent. Hopefully the American people will eventually realize what they have lost and support some system that comes along (10 years or so into the future) to support such things.

If it weren’t for the things that newspapers could do, like throw 20 people at a mountain of documents to try and find out how a mayor systematically looted a city for three decades, then I might not miss them. I, too, am sick of the old boy network that blocks innovation and their tunnel vision regarding what is a story (it isn’t news unless I say it’s news). But the price for shedding this will be steep — especially in a country where informed citizens are supposed to keep the government honest, but those informed citizens almost never attend a government meeting and look at government documents even less. The cost of losing that will be far higher than the billions in stock value that evaporated in the month of July 2008.

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