Lower your newspaper expectations – now

October 15, 2008

newspapers.jpgFormer Merrill Lynch newspaper publisher analyst Lauren Rich Fine said something cautiously optimistic about newspapers at the Dow Jones Media and Money conference on Wednesday: “Most of these companies can still be decent businesses. They just have to rethink their expectations. … Eventually, people will demand quality information, and they will pay for it.”

You can quibble with whether that’s optimistic if you like. To be fair, it’s a nice way of saying that newspapers will no longer be equipped with a license to mint their own coin, and that it’s Wall Street that has to get used to it. After all, as long as Wall Street doesn’t get used to it, you see stock moves like these today:

Gannett down 10 percent, McClatchy down 13 percent, New York Times down 8 percent (To be fair, Journal Register is up 50 percent this afternoon to an ultra-cheap 1.5 cents per share on news likely known only to itself)

Fine, who retired from Merrill and now teaches at Kent State University and was just hired to media blog PaidContent.org, made her comment on the same day that Goldman Sachs analyst Peter Appert — negative on the newspaper business for more than three years — dared to put a time on when U.S. newspaper publishers might see fortunes improve.

Here’s a line from his research note on Wednesday:

Newspaper companies are NOT going out of business (although highly leveraged companies will face particularly acute challenges). Ultimately, we believe newspapers will re-emerge as healthy and dominant players in the local media marketplace as their business models evolve into a hybrid print and online offering. Margins, however, will be significantly below the 20%+ levels historically achieved, and it will likely take another five years before online revenues are sufficiently large to offset secular declines in the print business. Accordingly, we continue to recommend an underweight position in the group.

Again — cautiously optimistic.

Another noteworthy moment at the conference was when Wall Street Journal Managing Editor Robert Thomson responded to the question of whether newspapers should be run as non-profit entities to help them survive:

“I think it’s fair to say that a lot of newspapers already were not for profit.”

The audience liked that one.

The panel also included comments from Fine, Thomson, Tribune innovation chief Lee Abrams and others on whether the U.S. government should bail out newspapers as a way to preserve the future of the press and its role in U.S. society. Read PaidContent for the writeup, though it’s safe to conclude before clicking on the link that the answer was “No.”

Also see Portfolio.com where Mixed Media reporter Jeff Bercovici wrote about Abrams waxing revolutionary about Tribune Co. He also wrote about Robert Thomson’s remark on Wall Street Journal newsstand circulation being up 20 percent (he explains the frame of reference in which Thomson made that remark.)

(Photo: Reuters)

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