After more than a year of the same old funeral dirge, the newspaper industry seems to be cautiously humming a different ditty these days. In recent weeks things have been looking up for the daily news business - or at least, a lot less down.
A year ago, the industry was saying a lot of goodbyes: The ink ran dry at Denver's Rocky Mountain News, the Halifax Daily News, and the Baltimore Examiner, among others. The Seattle Post-Intelligencer and the Christian Science Monitor both eschewed print operations entirely in favour of an online format. U.K. publisher Daily Mail & General Trust PLC sold one of its papers, the London Evening Standard, to Russian mogul Alexander Lebedev for just £1. And the San Francisco Chronicle was facing closing, which would have made that city the first major centre in North America without a daily paper.
A year later, it would be folly to say the industry is doing well. But the Chronicle has yet to shut its doors; newspaper stocks have risen, and advertising revenues are seeing milder declines.
Consider McClatchy Co., publisher of newspapers including The Sacramento Bee and The Miami Herald. Last month, it reported that advertising declines had slowed in the first quarter, dropping 11 per cent compared with roughly 20 per cent in the fourth quarter of 2009. Its stock price has bounced back as well: This week it was trading more than eight times higher than a year ago, when it sold for 58 cents (U.S.).
In Canada, Torstar Corp. managed to swing to profit in the first quarter, reversing a year-ago loss of $21.4-million for net income of $7.4-million. Executives noted that better trends had shown up in advertising on this side of the border as well. Torstar's stock price has more than doubled compared to this time last year, when it traded at $5.32.
It seems that some large investors are still willing to hold newspaper assets: this week, in an auction of the newspaper chain of the insolvent CanWest Global Communications Corp., Torstar's bargain bid of $800-million was left in the dust when a group of the company's unsecured creditors offered $1.1-billion.
JPMorgan Chase & Co., which is helping to finance that winning bid for CanWest's papers, also disclosed this week that it now has a roughly 10 per cent stake in Gannett Co., publisher of USA Today and a stable of other newspapers.
While papers are enjoying a bit of a respite from their own bad news, the trend is likely not sustainable, said Alan Mutter, a former newspaperman who now writes the Reflections of a Newsosaur blog, works as an industry consultant and lectures at the journalism school at the University of California at Berkeley.
"I doubt a whole lot of investors are buying newspapers thinking they're going to forever own those shares," Mr. Mutter said. "I think it's more of a trading opportunity … on a relative basis starting a year ago, yeah, they do look a lot better. But would I put my daughter's entire college fund into newspaper stocks and assume I could count on them to grow handsomely in 10 years? No, I would not."
Structural challenges in the industry remain. No one expects advertising budgets to be as handsome as they were before the recession, and subscribers are unlikely to tolerate the kind of price increases that would compensate for those declines.
Two weeks ago, Mr. Lebedev once again bought a newspaper - this time the Independent and the Independent on Sunday - and once again, paid only £1.
Mike Simonton, a media analyst with Fitch Ratings in Chicago, cautioned against being too optimistic simply because last year's carnage has abated.
"The performance that we're seeing is still weak, and weak off a very easy comparable period," he said. "We believe they will still be faced with relentless longer-term pressures from the Internet … newspapers will generally be left behind in an economic recovery."
While they may not be headed for extinction as quickly as many thought, newspapers will have to find new ways to make money beyond the old model of print advertising. Many of the companies that are doing better in recent months also went through aggressive layoffs and other cost-cutting measures last year - a recipe for relief, yes, but not for sustainable growth.
"There are some really big problems that have nothing to do with the economy, and have more to do with consumer behaviour, new technology, and the likely future behaviour of advertisers," Mr. Mutter said. "I've never heard of a company that was able to cut its way to success."Report Typo/Error