I suppose it'll be something like a nursing home for newspapers -- a place to send spent fish wrappers as they continue to dwindle and perhaps move toward the conclusion of their long, useful lives. At least, that may be the trend Belo Corp.
Last week, the company announced that it plans to spin off its daily newspapers into a separate, publicly traded company to be called A.H. Belo Corp. The new company will operate Belo's four dailies, along with direct mail and commercial printing businesses. Belo Corp. will keep its 20 owned and managed TV stations and a handful of cable news channels, with many of its stations located in fast-growing markets.
Last quarter, total revenues at the company decreased 3.2%. Although the television side recorded a 2.5% increase, the newspaper business offset the increase with an 8.5% drop in revenue. At least one side (arguably, both sides, actually) of the company was struggling with the previous arrangement under one roof. This spinoff will allow both companies to focus on their business needs separately, especially since both industries are changing dramatically. By keeping the $1.2 billion of debt with Belo Corp., the fresh newspaper company will have financial flexibility to compete in the challenging environment. One way A.H. Belo plans to invigorate revenues is through its newspaper partnership with Yahoo!
While newspapers have been consolidating in recent years, Belo's approach to separate its business units is noteworthy. In fact, I'm betting that Belo's approach could be mimicked by the likes of Gannett
The broadcasters have themselves historically experienced bouncy revenue patterns, based largely on the biannual presence of national elections and the Olympics. But the group's prospects do appear to be brightening. For instance, after six decades of coexistence with the cable operators, during just the past year they've been able to negotiate -- or force -- contracts with the cable MSOs that yield retransmission fees for the multistation broadcasters. With that in mind, it's even more difficult to understand why any of the publisher-broadcasters would continue to permit their ailing newspapers to further drag down their TV groups.
So watch for other broadcasting and publishing companies to fall in behind Belo. It'll be interesting to watch, but keep in mind that none of those companies is worthy of your Foolish investment shekels just yet.
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Belo may feel a need to undertake a major restructuring, but the company is generally fairly highly rated by the CAPS community. Indeed, by a more than 6-to-1 ratio, CAPS players expect the company to outperform the market. Have an opinion? Add your insights to CAPS. Yahoo! is a Stock Advisor pick.
Fool contributor David Lee Smith is a confirmed reader of newspapers, especially Monday morning sports sections. He doesn't own shares in any of the companies mentioned. The Motley Fool has a disclosure policy.