More Newspapers Into the Fire

Print media is still dying, but there may be hope in keeping the presses running.

McClatchy (NYSE: MNI  ) projects that its advertising revenue for the quarter will fall by a low-20% to mid-20% range. As bleak as that seems, it's a sequentially promising development, after the company suffered ad-revenue dips of 30.2% and 28.1% during the second and third quarters, respectively.

McClatchy is cutting its cash operating expenses at a rate that's even more aggressive than the slide in ad revenue. The end result is that it sees operating cash flow growing the current quarter. "In 2010 we expect to at least maintain if not grow operating cash flow," McClatchy advises.

Larger rival New York Times (NYSE: NYT  ) is eyeing a 25% slide in print-ad revenue for the current quarter, partly offset by a 10% increase in online advertising proceeds. It also sees a 2% increase in circulation revenue, an encouraging sign in an industry trying to stay afloat.

Of course, if media companies are cutting expenses faster than their sponsors are, the game can't end well. The industry needs to bottom out, if it doesn't unearth new revenue streams first.

Digital delivery remains a wild card. Amazon.com (Nasdaq: AMZN  ) , Sony (NYSE: SNE  ) , and Barnes & Noble (NYSE: BKS  ) -- with its brand new Nook -- aren't breaking out digital-subscription data, but this is clearly a growing business. If Apple (Nasdaq: AAPL  ) ever blesses the market with its Web-enabled tablet, we'd see another great catalyst in generating low-cost distribution of premium news.

Just as magazine publishers are forming a consortium to develop open standards in digital publishing, newspapers need to flex their collective muscles. The bleeding is easing, and that's good: It's better to be green than black and white and red all over.

How would you save the newspaper industry? Submit your lifelines in the comment box below, and Rick will be back next week to discuss some of the suggestions.

Apple and Amazon.com are Motley Fool Stock Advisor picks. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz doesn't mind getting ink on his hands when he reads the morning paper, but he is starting to wonder why it's all yesterday's news. He owns no shares in any of the companies in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (4)

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  • Report this Comment On December 08, 2009, at 3:29 PM, catoismymotor wrote:

    Who here, honestly, still gets the paper at home? Not at our house. We buy the local Sunday addition for the coupons. The content, save the Comics and Living sections, goes unread.

  • Report this Comment On December 08, 2009, at 4:29 PM, Nextnik wrote:

    Sadly, newspapers blew it in the mid '90's thinking that the advertising only model would work. And then for the longest time treating their web presence as an afterthought.

    I'm waiting for Steve Jobs to save the newspaper industry the way he's doing with the music industry.

    Here's a 3 minute video on the subject, "The End of Newspapers"

    http://www.youtube.com/watch?v=wl1HsZpKAdQ

  • Report this Comment On December 08, 2009, at 4:39 PM, Nextnik wrote:

    Sadly, newspapers blew it in the mid '90's thinking that the advertising only model would work. And then for the longest time treating their web presence as an afterthought.

    I'm waiting for Steve Jobs to save the newspaper industry the way he's doing with the music industry.

    Here's a 3 minute video on the subject, "The End of Newspapers"

    http://www.youtube.com/watch?v=wl1HsZpKAdQ

  • Report this Comment On December 08, 2009, at 6:54 PM, Nvrweakly wrote:

    Talk about hidden gems! The newspaper companies that survive will be trading at five to 50 times their current price when the dust clears. Non-print media (including sadly, some Foolish ones) wet themselves in giddiness while they trumpet the death of print. One hint why that is false prophecy is mentioned in one of the obits above: coupons. He still gets the Sunday paper for the coupons. Of course, single coupons can be delivered online, but what about those fat inserts from Kohls, Sears, WalMart, etc? Those are still what shoppers prefer to peruse, and they are delivered, largely in Sunday newspapers.

    The death marchers also ignore the local news operations owned by newspapers and underestimate the power of local, local, local. Small and regional newspapers are not going out of business because they own their markets and those get-it-here-only news operations. People's self-interest cannot be underestimated, and news of their community -- and themselves -- is irreplaceable by the Web.

    From a news (and self-interest) standpoint, Webmeisters rarely discuss the most glaring weaknesses of web-based news gathering: lack of depth, lack of professionalism (citizen journalists? Please) and lack of accountability. Where is the crusty old editor asking a poster, "Sez who?" before some outrageous piece of baloney is flung across the cyber universe?

    This is not to ignore the enormous challenges of newspaper companies. Their fixed costs are awful. Their classified advertising model has been pretty much destroyed. But they still have assets, they still have news franchises, they have a delivery system and they still have more than 100 million daily readers. It ain't over, folks. If you'd bought Lee or McClatchy eight months ago, you'd have a 10-bagger today.

    Anyone who believes there will be no newspapers in 10 years is ignoring the cards they still hold.

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