Tuesday, August 01, 2006

Newspapers and the Internet...No Obits for Papers Yet

A number of value investors, notably Bruce Sherman, of Florida based Private Capital Management love media stocks for their free cash flow characteristics.

Notably, as Buffett reminded us at this year's annual, every time you attend a funeral, you should be thinking, there goes another newspaper reader. The competition for the same two eyes over the same time span by all different kinds of media has become ever fiercer.

My only newspaper holding, the New York Times (NYT) is recumbent near its low. Recent earnings were flat following ongoing cost-cutting charges ...no excitement here. Yet underneath it all, interesting trends are emerging.

Web sites in the NYT News Media Group showed revenue gains of 25%, About.com showed revenue increases of 63%. Regrettably, these businesses represent a token, but at least a growing token at 7.7 % of total revenues. Total revenues for the firm were up but 1.6% on a slight 0.6% increase in circulation. The great shrink of shares outstanding continues...down to 144.6 million shares with $124 million left in repurchase authorization. Five years ago, this was 172 million shares.

More broadly speaking though, a report came out yesterday on The Use of the Internet by America's Newspapers by the Bivings Report.A survey of America's 100 largest newspapers (by circulation) was undertaken. To quote the report

"The results of our research clearly showed that America’s newspapers, unlike political candidates, are generally embracing the Internet and are using new and improving Web tools to their advantage. Here are some of our results:

* 80 of the nation’s top 100 newspapers offered reporter blogs. On 63 of these blogs, readers could comment on posts written by reporters.
* 76 of the nation’s top 100 newspapers offer RSS feeds on their websites. All of these feeds are partial feeds, and none included ads.
* Major Web tools, such as blogs and RSS penetrated both the most and least circulated newspapers.
* Video was the most common form of multimedia found on the websites, and was offered by 61 of the newspapers."

Consider this survey by the Pew organization

For broadband internet users, online news is a more regular part of the daily news diet than is the local paper; it is nearly as much of a daily habit as is getting news from national TV newscasts and radio. For home dial-up users, however, online news is not as much an everyday activity.

Note the fact that TV, radio and the paper retained significant aspects of the total audience.

Perhaps newspapers are not suffering as fast a demise as some believe.

Disclaimer: I, my family, and some clients have a current position in the New York Times.


At 2:26 PM, Blogger NO DooDahs said...

You might want to look at Gannett as a possible choice. I wrote about it here.


They have several properties that are not paper, and their paper focus is small-town, which is where paper-reading is highest (see your next post and extrapolate "dial-up" for "small town").

I'm currently not long it, but may be if I can be more confident the sentiment has turned. I have been long it but when it started back down, I realized I was early.


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