The news is not good for daily newspapers
Normally, when an industry suffers a steep decline, it’s all over the newspapers. Whether it’s airlines, the forest sector, or dot-com stocks, the financial pages will be full of articles explaining what’s going on and where it might all lead.
However, when the news was the decline of the daily-newspaper industry itself, it took a little longer before editors began allowing this story to be told.
That is beginning to change as a result of some astonishing developments. On July 31, the share price of CanWest Global Communications Corp.—owner of the Global Television Network and the Vancouver Sun and Province—fell below $2 for the first time ever before rebounding on August 5 to close at $2.40.
To give you an idea of the magnitude of the drop, CanWest shares closed at $18.55 on July 31, 2000, the day the company announced the purchase of 13 Hollinger daily papers, 126 community papers, and a half interest in the National Post. In January 2007, CanWest shares closed at $10.63 on the day it announced a joint deal with Goldman Sachs and Co. on a $2.3-billion takeover of Alliance Atlantis, which owns specialty television channels.
Meanwhile, the publisher of the Toronto Star, Torstar Corp., has also seen its share price drop, though not as sharply as CanWest’s. Torstar, which is carrying a $636-million debt, announced a restructuring plan in April that resulted in the loss of 160 positions. The stock fell below $12 this month, down from its 52-week high of $20.54, before rallying to close at $13.77 on August 5.
Torstar also owns almost 20 percent of the privately owned Black Press, which publishes community papers across the Lower Mainland. Torstar recently reported a loss of $2 million from its investment in Black Press in the second quarter of 2008, compared with income of $2.2 million in the second quarter of 2007.
In the first six months of this year, Torstar reported a $2.9-million loss from Black Press. Based on Torstar’s equity stake, this suggests that Black Press, which is controlled by Victoria entrepreneur David Black, has lost $14.5 million in the first six months of this year.
Torstar stated that $2.1 million of its decrease in its Black Press results related to adjustments to Black Press’s future tax assets. “Operating results were down in the second quarter as the U.S. newspapers were negatively impacted by the U.S. economy and sub-prime mortgage crisis and higher amortization expense was incurred from acquisitions,” Torstar stated in its July 31 quarterly report to shareholders.
“The Canadian newspaper business continued to perform well. Year to date, Black Press results were also negatively impacted by the mark to market of its financial derivatives.”
In other words, the two largest newspaper publishers in B.C.—CanWest and Black Press—appear to have fallen on hard times. Black probably hasn’t helped his cause by expanding his U.S. holdings in recent years just before the daily-newspaper industry went into a serious dive.
Meanwhile, several publicly traded U.S. newspaper publishers have seen their share prices fall between 50 and 70 percent in the last year, according to an August 4 story in the New York Times.
This year, according to the article, the Washington Post Company is down 24 percent, the New York Times Company has fallen 26 percent, and Gannett, which publishes USA Today, has fallen 52 percent.
If that’s not bad enough, Standard & Poor’s credit analyst Emile Courtney told Bloomberg.com in June that the controlling investor of the Los Angeles Times and Chicago Tribune, Sam Zell, could be in default by the end of the year because his company might not be able to generate enough cash to pay its loans.
Courtney told Bloomberg.com that other publishers in danger of default include MediaNews Group Inc., which publishes the San Jose Mercury News, Journal Register Co., which publishes the New Haven Register, and Morris Publishing Group, which publishes the Florida Times-Union.
Other signs of trouble in the U.S. publishing industry include the Los Angeles Times’s recent decision to kill its printed real-estate section. Furthermore, MediaPostPublications.com reported that Thomson Reuters Corp. will cut about 1,500 jobs, though it didn’t say when. (The company did not confirm the figure.)
And the Atlanta Journal-Constitution announced last month that it will eliminate geographically targeted news sections and will cut 184 jobs, or eight percent of its work force, between August and October.
Fears of a weaker economy are causing investors to worry about advertising revenue. The Internet is drawing readers away from daily newspapers, which then have to invest huge sums on Web content. Then there are the circulation problems.
In its July 10 interim management’s discussion-and-analysis document, CanWest reported a five percent decline in “circulation volume” in the last quarter compared to the same period a year ago. It also reported a four percent decline in “circulation volume” over the last nine months, which it has tried to offset by increasing the per-copy price.
Revenue keeps going up, but CanWest is also dogged by a $3.7-billion debt. Net earnings fell 24 percent in the last quarter compared to 2007. The decrease, according to CanWest, was due to increased interest expenditures as a result of taking CanWest MediaWorks private, which cost $495 million.
The sharp decline in the share price suggests that some in the investment community have concluded that CanWest will have trouble generating sufficient income to pay down its debt and still produce profits.
Goldman Sachs recently forecast that newsprint prices will jump 30 percent in the final half of 2008. This will pile on more costs for newspaper publishers. If the Canadian dollar falls relative to the U.S. dollar, it could spell more bad news for CanWest, Torstar, Black Press, and others because newsprint is sold in U.S. dollars.
An even bigger danger for publishers is if the public continues losing confidence in daily newspapers, leading to plummeting circulation. Last May, Poynter Online published some shocking opinion research from Denmark. According to an article by Ernst Poulsen, 2,800 Danes were asked which type of media they would prefer to keep. Half preferred their television sets; 27 percent responded that they wanted Internet access; only 23 percent mentioned a daily newspaper.
For publishers the most troubling response might have come in response to this statement from the poll: “Today it’s possible to stay informed without subscription to a daily paper.” Fully 79 percent said they agreed or mostly agreed. Five percent didn’t know. Only 16 percent said they disagreed or mostly disagreed.
That, more than anything, explains why U.S. and Canadian daily newspaper publishers’ share prices can’t climb out of the sewer.
Mar 6, 2010 at 8:11am
The daily newspaper industry is the daily propaganda industry, and the people know it. The only reason most people pick up a newspaper is that there isn't yet anything yet quite comparable on the internet or in print where you can stay abreast of the news.
But it's a huge problem and effort to sift the truth from the heavily biased propaganda that fills the newspapers nowadays. The massive corporations, like the pharmaceutical, military suppliers, banks and oil companies have infiltrated most positions of power and influence from city hall to the WTO, UN and IMF. These same companies either own or collude with the massive international media cartels to write and massage the content of all the so-called "news" and editorial in the newspapers, and only let enough truth and reason sift through to retain a tiny shred of crebility.
Ask people of all ages, and 85% percent know that the radio, TV and newspaper "News" all comes from exactly the same source - the public relations departments of the big corporations, as well as the government intelligence / mass mind control departments ( like the CIA) - and that its primary purpose is to distract, delude, and manipulate the masses to conform to the elite "program".
The newspaper industry is a tool of public perception management through pretenses at news reporting, and the people know it, or sense it, or at the very least experience it as the pathetic quality of the content, which is all too obvious. People need comprehensive, timely, accurate, well supported, unbiased information about the world they live in, and they certainly aren't getting that from any of the current newspapers that issue from the bowels of the beast.
"The most effectual engines for [pacifying a nation] are the public papers... [A despotic] government always [keeps] a kind of standing army of newswriters who, without any regard to truth or to what should be like truth, [invent] and put into the papers whatever might serve the ministers. This suffices with the mass of the people who have no means of distinguishing the false from the true paragraphs of a newspaper." --Thomas Jefferson
"Nothing can now be believed which is seen in a newspaper. Truth itself becomes suspicious by being put into that polluted vehicle. The real extent of this state of misinformation is known only to those who are in situations to confront facts within their knowledge with the lies of the day." --Thomas Jefferson
"The man who never looks into a newspaper is better informed than he who reads them, inasmuch as he who knows nothing is nearer to truth than he whose mind is filled with falsehoods and errors. He who reads nothing will still learn the great facts, and the details are all false." --Thomas Jefferson