Newspapers Have A Tough May
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The newspaper industry has already suffered declines in advertising revenue and circulation that have been enough to push their public stocks to 52-week lows. Knight-Ridder, the combination of two family-controlled newspaper groups, and the Tribune Company, the marriage of the McCormick and Chandler print empires have been seen their futures changed by shareholder dissatisfaction. Knight-Ridder has been liquidated, and the Tribune is facing the same possibility..
McClatchy, which may end up with the dubious distinction of buying the Knight chain and selling off some of its pieces, recently reported its results for May. The company’s newspaper properties in California and the Carolinas did fairly well, with revenue up in these regions. But, the circulation of all the newspapers in the company fell 2.7% daily and an alarming 4.9% on Sundays. Advertising revenue at the company’s Northwest and Minneapolis properties was fairly flat. If it had not been for real estate advertising, the modest company-wide increase would not have occurred. Categories like automotive and national advertising were off sharply. It is not surprising that McClatchy trades very near its 12-month low of $43.07, well down from the period high of $68.40.
The New York Times Company announced that its May revenue was up 4.4% in the advertising department and 4% overall. The New York Times division of the company saw ad revenue rise 5.6%, but the company’s operations in New England, led by the Boston Globe, had an ad revenue drop-off of 6.9%. The internet ad revenue of the three newspaper operations rose 26.9% in May. The company’s About.com internet operation had a 59% increase in revenue. Looking at the company’s last 10-Q, it is likely that The New York Times Company overall revenue would have fallen, if it were not for the online businesses.
An article at Marketwatch.com describes how the newspaper industry is begging for the indulgence of its shareholders, while it tries to make the transition from print to online advertising. But, the entreaties will undoubtedly fall on deaf ears.
The reason for shareholder dissent is relatively simple. It comes from the shareholder structure that many newspaper companies set up long ago. Whether it is The New York Times Company, the Tribune, or the companies that were merged to create the Knight-Ridder, the rationale was that families must control the voting shares of these enterprises to protect the integrity of their content. Callous management working for financially motivated shareholders would lead editors to make decisions that might be influenced by the almighty dollar.
It is, however, time to pay the piper. Knight-Ridder has done so by selling itself to a smaller rival. The Tribune Company is now threatened by a revolt of the Chandler family interests, whose ancestors build the Los Angeles Times. Why? They want “value”(aka, a higher stock price).
The New York Times Company would also argue that the Sultzberger family, which has controlled the company since its formation, must run the company as a public trust. No outside influence here. But, with a scandal that forced the editor of it flagship newspaper to step down still fresh in the public’s mind, and questions about the reporter Judith Miller’s articles on the CIA leaks that lead to the Scooter Libby indictment, The New York Times Company has not done anything to indicate is a better steward of news integrity than any other prominent news organization.
Certainly, the NYT has shown that it is a poor torch-bearer for the interests of its shareholders. The company now trades at $23.75, near its 52-week low and about half of the price in early 2004. The company’s market capitalization is only one times sales according to Yahoo!Finance.. Gannett’s is 1.7 times sales. McClatchy’s is a bit above 1.7 times. Dow Jones is at 1.6 times. The Washington Post trades at over twice sales.
The market is discounting shares in the NYT, to some extent, because it is controlled by the super-voting shares of the Sulzbergers. But, if this was the only reason, the shares of Dow Jones, which has similar family ownership, would be much lower as well. The same holds true for the Washington Post. It appears the valuation discount to other public newspaper companies is based, to a large extent, on the NYT shareholders concern over management.
And, why not? The company’s revenue has been flat for three years Operating income has dropped each year over the same period. By contrast, revenue at Gannett has risen each year over that time, and operating income has stayed steady. Even companies like Dow Jones and newspaper group Media General have had modest revenue increases each year since 2003. The Washington Post, another family-controlled news company, has actually seen revenue improve in three years, primarily because of its entry into the online education business.
The patience of shareholders in all of these public newspaper companies has run out The issues with the New York Times are especially acute. It has, most would argue, the best news franchise of any newspaper in the United States. Its primary online web property, nytimes.com, ranks seventh of all news sites on the internet, after sites like YahooNews, BBC, CNN, and MSNBC. No other newspaper can claim that kind of reach on the web. But, there is little evidence that the company has exploited it.
It would not be surprising to see some of the family members at the New York Times Company decide that the special voting shares that have kept management in office also depress the company’s value. With family control gone at places like Knight-Ridder and Pulitzer, and slipping away at the Tribune, the Times may well be next.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in any of the companies he writes about.
The newspaper industry has already suffered declines in advertising revenue and circulation that have been enough to push their public stocks to 52-week lows. Knight-Ridder, the combination of two family-controlled newspaper groups, and the Tribune Company, the marriage of the McCormick and Chandler print empires have been seen their futures changed by shareholder dissatisfaction. Knight-Ridder has been liquidated, and the Tribune is facing the same possibility..
McClatchy, which may end up with the dubious distinction of buying the Knight chain and selling off some of its pieces, recently reported its results for May. The company’s newspaper properties in California and the Carolinas did fairly well, with revenue up in these regions. But, the circulation of all the newspapers in the company fell 2.7% daily and an alarming 4.9% on Sundays. Advertising revenue at the company’s Northwest and Minneapolis properties was fairly flat. If it had not been for real estate advertising, the modest company-wide increase would not have occurred. Categories like automotive and national advertising were off sharply. It is not surprising that McClatchy trades very near its 12-month low of $43.07, well down from the period high of $68.40.
The New York Times Company announced that its May revenue was up 4.4% in the advertising department and 4% overall. The New York Times division of the company saw ad revenue rise 5.6%, but the company’s operations in New England, led by the Boston Globe, had an ad revenue drop-off of 6.9%. The internet ad revenue of the three newspaper operations rose 26.9% in May. The company’s About.com internet operation had a 59% increase in revenue. Looking at the company’s last 10-Q, it is likely that The New York Times Company overall revenue would have fallen, if it were not for the online businesses.
An article at Marketwatch.com describes how the newspaper industry is begging for the indulgence of its shareholders, while it tries to make the transition from print to online advertising. But, the entreaties will undoubtedly fall on deaf ears.
The reason for shareholder dissent is relatively simple. It comes from the shareholder structure that many newspaper companies set up long ago. Whether it is The New York Times Company, the Tribune, or the companies that were merged to create the Knight-Ridder, the rationale was that families must control the voting shares of these enterprises to protect the integrity of their content. Callous management working for financially motivated shareholders would lead editors to make decisions that might be influenced by the almighty dollar.
It is, however, time to pay the piper. Knight-Ridder has done so by selling itself to a smaller rival. The Tribune Company is now threatened by a revolt of the Chandler family interests, whose ancestors build the Los Angeles Times. Why? They want “value”(aka, a higher stock price).
The New York Times Company would also argue that the Sultzberger family, which has controlled the company since its formation, must run the company as a public trust. No outside influence here. But, with a scandal that forced the editor of it flagship newspaper to step down still fresh in the public’s mind, and questions about the reporter Judith Miller’s articles on the CIA leaks that lead to the Scooter Libby indictment, The New York Times Company has not done anything to indicate is a better steward of news integrity than any other prominent news organization.
Certainly, the NYT has shown that it is a poor torch-bearer for the interests of its shareholders. The company now trades at $23.75, near its 52-week low and about half of the price in early 2004. The company’s market capitalization is only one times sales according to Yahoo!Finance.. Gannett’s is 1.7 times sales. McClatchy’s is a bit above 1.7 times. Dow Jones is at 1.6 times. The Washington Post trades at over twice sales.
The market is discounting shares in the NYT, to some extent, because it is controlled by the super-voting shares of the Sulzbergers. But, if this was the only reason, the shares of Dow Jones, which has similar family ownership, would be much lower as well. The same holds true for the Washington Post. It appears the valuation discount to other public newspaper companies is based, to a large extent, on the NYT shareholders concern over management.
And, why not? The company’s revenue has been flat for three years Operating income has dropped each year over the same period. By contrast, revenue at Gannett has risen each year over that time, and operating income has stayed steady. Even companies like Dow Jones and newspaper group Media General have had modest revenue increases each year since 2003. The Washington Post, another family-controlled news company, has actually seen revenue improve in three years, primarily because of its entry into the online education business.
The patience of shareholders in all of these public newspaper companies has run out The issues with the New York Times are especially acute. It has, most would argue, the best news franchise of any newspaper in the United States. Its primary online web property, nytimes.com, ranks seventh of all news sites on the internet, after sites like YahooNews, BBC, CNN, and MSNBC. No other newspaper can claim that kind of reach on the web. But, there is little evidence that the company has exploited it.
It would not be surprising to see some of the family members at the New York Times Company decide that the special voting shares that have kept management in office also depress the company’s value. With family control gone at places like Knight-Ridder and Pulitzer, and slipping away at the Tribune, the Times may well be next.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in any of the companies he writes about.
posted by douglas mcintyre at 7:03 AM
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