Shares of many newspaper companies sagged Monday, even more than the broader market, as analysts feared an extended economic downturn would further dampen advertising revenue and impede the industry's ability to borrow money.
The newspaper industry, already hurt by an ongoing migration of consumers and advertisers to the Internet, has seen its advertising woes compounded in recent months as a weak economy resulted in fewer retailers, employers and real-estate brokers buying classifieds and other ads.
Now, the troubles in the financial sector could spill over to newspaper companies.
"These companies need healthy banks to continue to refinance the newspaper companies' debt," said Mike Simonton, a media analyst with Fitch Ratings.
Investment bank Lehman Brothers filed for bankruptcy protection Monday, while Merrill Lynch agreed to a sale to Bank of America for $50 billion in stock. Also Monday, insurer American International Group Inc. asked the Federal Reserve for emergency funding.
Meanwhile, the nation's largest newspaper publisher, Gannett Co., said Monday that its non-broadcast advertising sales fell more than 16 percent year-over-year for the third consecutive month in August. Though the rate's stability is a positive sign, analysts were hoping to see those numbers start to decline.
The Gannett numbers and fears that the economy won't recover quickly suggest "that the advertising turndown is going to be deeper and longer than people had hoped," said Ken Doctor, news industry analyst for the research firm Outsell Inc.
Gannett's stock slipped $1.21, or 6.9 percent, to close at $16.32 in trading Monday.
Media General Inc. plunged $2.09, or nearly 20 percent, to $8.54. The stock hit a new 52-week low of $7.13 earlier in the session.
New York Times Co. shed $1.76, or about 11.5 percent, to $13.49.
Lee Enterprises Inc. fell 33 cents, or more than 12 percent, to $2.35.
McClatchy Co. fell 26 cents, or 7.1 percent, to $3.38.
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