MediaFile

Newspapers: They’re *still* dying

Moody’s debt analyst John Puchalla analyzed the state of newspapers today. Conclusion: The sun rises in the east, usually in the mornings. In other words, newspapers are still doomed.

Despite the report’s obvious conclusion, it’s worth reading for Puchalla’s analysis of the cost structure that newspapers deal with. Here’s an excerpt from the press release announcing the report:

Currently, a structural disconnect exists in the newspaper industry’s cost structure. Just 14% of cash operating costs, on average, are devoted to content creation — the primary value creation activity — while about 70% of costs support the print distribution model and corporate functions. The remaining 16% of cash operating costs relate to advertising sales — another critical task that drives the majority of newspapers’ revenue. The overall imbalance limits the industry’s flexibility to overcome competitive threats. …

Most newspaper companies have moved only slowly away from in-house print production and distribution, said Moody’s. Thus, high operating leverage for the industry remains, and is creating intense pressure on cash flow as revenue declines.

“Ultimately, we expect the industry will need to reverse the vertical integration strategy through cross-industry collaboration and outsourcing print production and distribution processes,” said Puchalla. “Although newspapers may lose some of their in-house control over press time, they would also release resources to beef up investment in content and technology.”

Could Google buy Twitter? Ask Arrington, then ask Swisher

******We sprinkled updates into this blog. We’re highlighting them like this.******Thanks to TechCrunch, U.S. tech reporters are about to spend another weekend working instead of playing. UPDATE: Or maybe Kara Swisher at All Things D will save them!******Two sources told proprietor Michael Arrington that Google “is in late stage negotiations to acquire Twitter.” He wrote:***

We don’t know the price but can assume its well, well north of the $250 million valuation that they saw in their recent funding.

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Twitter turned down an offer to be bought by Facebook just a few months ago for half a billion dollars, although that was based partially on overvalued Facebook stock. Google would be paying in cash and/or publicly valued stock, which is equivalent to cash. So whatever the final acquisition value might be, it can’t be compared apples-to-apples with the Facebook deal.

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Why would Google want Twitter? We’ve been arguing for some time that Twitter’s real value is in search. It holds the keys to the best real time database and search engine on the Internet, and Google doesn’t even have a horse in the game.

Reshuffle at Yahoo, Microsoft shuffles on layoffs

Rumors of a Yahoo management reshuffling, two newspaper publisher bankruptcies and a bit of PR unsavvy on Microsoft’s part do not make for a quiet weekend. Although not exactly high-octane breaking news, the stuff kept happening in dribs and drabs throughout the weekend, leading me to update my Facebook status thus: “Anupreeta would have liked at least 30 percent more weekend.” But so it goes.

On Friday night, All Things Digital’s Kara Swisher reported that a major Yahoo management reorganization was underway, and could come as early as this week. The Wall Street Journal, which shares an owner — News Corp’s Dow Jones — with All Things D, followed with its own story a day later.

Then, Microsoft — a big employer of foreign workers which took some heat last month from politicians for announcing plans to lay off 5,000 people — dug its heels deeper into the mess. It seems the software giant overpaid some laid-off workers because of an accounting error, and now wants the money back. Yikes. Does Microsoft need to do more damage control than this?

Moody’s reads newspapers

Moody’s thumbed through the newspapers of the United States on Monday and concluded what many of us know: the outlook is negative. The summary: ad revenue falls, less money comes in, newspapers have to cut back to survive and it gets harder to pay their debt.

Having said that, this newspaper beat reporter found signs of a thaw, just like a crocus peeking through snow.

First, the negative:

The negative outlook for newspaper-ad revenue has worsened in the past six months as bleak data on the economy mounts, says Moody’s. Rising job losses, the weak housing market and tighter credit availability raise concerns that consumer spending will weaken further, extending and deepening the economic downturn.