Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
Newspaper companies may have reported fatter earnings and slimmer losses this past quarter, but if Washington Post's (NYSE: WPO ) proposed sale of Newsweek is any indicator, the problems that have long plagued the industry still remain.
First, the good news. A better advertising market has revived newspaper companies that were left for dead.
Among the nationals, News Corp. (Nasdaq: NWS ) said that operating profit from its newspapers rose 350% in its fiscal third quarter. New York Times (NYSE: NYT ) turned last year's operating loss into a $52.7 million operating profit. And excluding special items, Gannett (NYSE: GCI ) doubled its diluted earnings per share to $0.49.
Regional chains didn't fare as well, but also didn't do poorly. Lee Enterprises (NYSE: LEE ) reported a 16.2% increase in cash from operations and reversed last year's net losses. Tampa Tribune owner Media General (NYSE: MEG ) reported improved operating income, but still lost $0.75 per share in the first quarter. Finally, McClatchy (NYSE: MNI ) posted higher circulation revenue and earned $0.06 per share from continuing operations, reversing last year's Q1 loss.
Standing out against this backdrop is the planned Newsweek sale. "I did not want to do this, but it is a business," Washington Post Co. CEO Donald Graham said in an interview with The New York Times. "We don't see a sustained path to profitability for Newsweek."
Talk about a troubling statement. Newsweek was to pave a new path for profitable journalism by cutting circulation and mixing more thoughtful commentary in with its customary news coverage. Subscribers would pay more for better-quality work, went the thinking.
"If we don't have something original to say, we won't," editor Jon Meacham told The Times last February. By most accounts, Meacham kept that promise, and it cost the magazine. Newsweek's revenue declined more than $100 million last year on a 25.9% drop in available pages, according to data provided by the Magazine Publishers of America.
"The drill of chasing the week's news to add a couple of hard-fought new details is not sustainable," Meacham said when unveiling Newsweek's new strategy last year. He was right. Unfortunately, neither was the new model. And that's a shame.
Which newspaper stocks would you buy? Discuss in the comments box below.