Can the Washington Post Make the Grade in the 21st Century?

The Washington Post  (NYSE: GHC  ) , boasting one of the most respected news-gathering pedigrees in the world, proves itself every day in the rough-and-tumble world of journalism.

But the Post is emblematic of newspaper companies everywhere in the 21st century. It is trying to monetize its renowned brand online -- in social media and on tablets and mobile devices -- at a time when the Internet has dramatically eroded the economic and societal power of a traditional daily newspaper.

This is an industry struggling for solutions. Circulation is down. Advertising is always problematic. People get their news now more and more on iPads and cellphones. The Post has to find a way to become as identifiable in that world as it has in the dead-trees newspaper industry. Sure, Jon Stewart is a sarcastic comedian at the root, but as an opinion-shaper, he has become a trusted news source as well.

That's the reality of the changing times. When the Post made its mark nationally 40 years ago by bringing down President Richard Nixon in the infamous Watergate scandal, it primarily worried about The New York Times (and, secondarily,The Wall Street Journal) as its chief competitors.

Today, such upstarts as the popular website Buzzfeed have elbowed their way into the discussion of what a "media" company looks like in the digital age -- and by the way, Buzzfeed has a lot more buzz in the social media outlets of Facebook and Twitter than most newspapers.

If the Post needs to glimpse its probable future, it only has to refer to its earnings report on May 3. The good news there was that its cable TV operation had a top-line jump of 5.2%

In that quarter, however, newspaper publishing continued to lag, showing a 4% slide in revenue. Print ad revenue at The Washington Post tumbled 8% to $48.6 million. Plus, the daily and Sunday circulation figures for the Post declined 7.2% and 7.7%, respectively.

Online publishing revenue, particularly WashingtonPost.com and Slate.com, gained roughly 8% to $25.8 million. Display online ad revenue gained approximately 16%. Online classified revenue dropped by 8%.

Meanwhile, revenue at the Post's education division, which encompasses Kaplan University and test-preparation services, dropped 3% to $527.8 million, representing a more narrow loss than in the past. In addition, the student enrollment at Kaplan University and the education campuses declined by 12% (or 8.3% not including shuttered campuses).

It became clear that Gannett upped the ante in the U.S. newspaper industry when it recently acquired Belo. It transformed itself into what Wall Street happily identified as a broadcasting powerhouse, which also has a daily newspaper component.

As I noted in a piece on Gannett, "Publishers trade at an average of about 13 times forward earnings expectations, according to Thomson Reuters data, while broadcasters trade at a little more than 25 times."

This is the kind of decisive, action-oriented proactive move that Wall Street wants to see from the Post. The Street rewarded ambitious Gannett as its stock price roared 27% to a five-year high, adding more than $5 and breaking past the $25 barrier.

The Post's shares have jumped about 57% in the past year, but continued growth may be a challenge. Morningstar analyst Liang Feng told me this week that he regards the Post's shares now as being "fairly valued."

To get Wall Street excited down the road, the Post will likely have to increase its broadcasting presence, as rival Gannett did a few months ago.

"The Washington Post Co. has benefited from the improved sentiment in broadcasting and we would look at them to expand," Feng said. "However, the company has less scale than some broadcast peers."

As Feng pointed out, the Post would benefit from increasing its strength in broadcasting because that would enable the company to command higher premiums.

Where does all of this leave the Post's shareholders?

A Wall Street analyst once summed it up for me when he said, with a wan smile, that the Washington Post would be a terrific investment -- if that darned newspaper didn't weigh it down.


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