Posted on 01/02/2007 6:23:33 AM PST by abb
In a dramatic repudiation of newspapers by investors, the shares of publicly held publishing stocks in the last two years lost nearly $13.5 billion in value, or 20.5% of their market capitalization.
To put this in perspective, the vaporized value is greater than the enterprise value of the Tribune Co. or the combined value of the McClatchy, New York Times and Media General publishing companies.
The vertiginous drop came at the same time the Dow Jones industrial average soared to an all-time high and other market indicators gained by healthy double-digit percentages.
Of the 12 publicly held newspaper stocks traded in 2004 that remain with us today, only the shares of Scripps have advanced. Scripps’ 5.4% gain contrasts with the 15.6% advance in the Dow industrials in the same period.
Scripps shares are going in a different direction from the rest of the newspaper industry, because the company has been moving aggressively to build its cable TV, broadcasting and online holdings. With only about a third of Scripps revenues coming from the newspaper business, it probably shouldn’t even count as a publishing company any more.
Although the shares of Dow Jones, Gannett and Tribune gained in 2006, those companies and the rest of the industry have been in negative territory since 2004. The biggest loser, in the last two years, by far, was Journal Register Co., whose shares plunged 61.8%. The Washington Post Co., which has been diversifying away from its eponymous newspaper, suffered the smallest decline at –1.9%. Details are in the table below; calculations are based on 2004 closing prices adjusted for dividends and splits.
At the end of 2004, newspaper shares roughly paced the performance of the S&P 500, an index measuring the performance of a broad array of stocks. In the last two years, however, the S&P 500 rose 17% while the publishers melted down.
The sell-off has been prompted by declining readership, falling revenues and rising concern over the industry’s ability to respond effectively to competition from the new media. As Goldman Sachs recently noted, 2006 likely was the first “non-recession year” in history in which newspaper revenues declined.
Publishers, investors and others who care about newspapers rightfully were (and should be) worried about changes affecting the long-term economics of the industry. It is completely rational for the market to discount stocks in response to a real or perceived deterioration in their fundamentals.
But the collapse of newspaper share prices arguably was accelerated by a panic sparked by several large investment funds that suddenly soured in unison on the publishing stocks they once accumulated with confidence and zest. When they fell out of love with newspaper shares, they (and the stocks) fell hard.
Institutional investors for the last two years have pressured a succession of iconic newspaper companies – including Dow Jones, Knight Ridder, the New York Times and Tribune – to put themselves up for sale in hopes of realizing greater value than the stock market accorded their shares.
To date, Dow Jones and the New York Times have resisted the pressure to peddle their assets. Tribune has been trying, without much evident success, to find someone to buy part or all of it. And Knight Ridder succumbed in what proved to be a disappointing financial outcome for its faithful investors.
Growing investor pressure has terrorized and dangerously defocused the executives of publicly held companies, whose compensation and job security are tied directly to the value of their shares.
Instead of navigating their businesses through the most difficult environment they will ever know, the executives have been forced to spend disproportionate amounts of their time on investor relations, financial engineering and ill-considered expense cuts that could imperil the long-term health of their franchises.
In all likelihood, newspaper companies would have performed better in the last two years, if publishers had spent more time rigging their businesses for the digital age and less time truckling with the pin-striped barbarians at their gates. Better operating performance probably would have led to higher share prices, too.
As big a fan as I am of free enterprise and free speech, I don’t think anyone has the right to cry “Fire!” in a crowded theater while decent and well-intentioned people (newspaper executives) are trying to shepherd the innocents (readers, employees and advertisers) to safety.
But that’s essentially what Wall Street has been doing for the last couple years.
It was only "paper" to begin with.......
"There was a land of Publishers and Editors called the Newspaper Business... Here in this pretty world Journalism took its last bow... Here was the last ever to be seen of Reporters and their Enablers, of Anonymous Sources and of Stringers... Look for it only in books, for it is no more than a dream remembered. A Civilization Gone With the Wind..."
With apologies to Margaret Mitchell...
Consider it a $13.5B donation to DemocRATS.
Ping
Sounds like the MSM should have spent more time worrying about the Media Bubble than the housing bubble.
20.5 down, another 79.5 to go.
Great post. Great news! Do not contribute inadvertently to the enemy within.
This newsosour writes like one of the many lefties in the WSJ.
"As big a fan as I am of free enterprise and free speech, I don’t think anyone has the right to cry “Fire!” in a crowded theater while decent and well-intentioned people (newspaper executives) are trying to shepherd the innocents (readers, employees and advertisers) to safety.
But that’s essentially what Wall Street has been doing for the last couple years."
Thanks to Wall Street for warning current and potential investors of the fires burning inside the ivory towers of these Fish Wraps.
This whining writer apparently has very little concern for the stock owners of these Dying Fishwraps. He is willing to let the stock owners, like the pension funds, mutual funds and straight investments of innocent investors suffer massive financial losses to keep these dying fishwraps publishing their daily lies.
The elite controllers of the dying fishwraps are the arsonists, who set or allowed the fires to be started. They would never inform their stock owners of their reality. It was up to Wall Street to warn us.
Their corporate culture of lying to those who buy their fishwraps or buy advertising has been exposed, and they are paying the price.
.Gone With the Wind
"Consider it a $13.5B donation to DemocRATS."
Exactly! The MSM for decades has donated their expensive paper space, tv news time and radio time to push the agendas of the rats and to lie about Republicans instead of reporting the news.
They enabled two dangerous and unknown rat governors to become president, Carter and the Clintoon. Last year they enabled the rats to regain control of Congress with their daily lies about our President, our military, the realities of Iraq, and the WOT.
These daily lies, spins and attacks against our leaders and our beliefs have angered 50% of their potential readers, viewers and followers. That anger results in personal boycotts of their lies/trash posing as news.
Businesses can't anger 50% of their customers and potential customers on a daily basis and expect to stay in business.
Months ago I sent to Tom Fiedler, then the editor and publisher of the Herald, an idea I had for increasing their online readership. He replied back right away that he really liked the idea and then passed the project along to Rick Hirsch where the idea died due to his LAZINESS.
I talked to Rick on the phone several times. He also liked the idea but didn't want to try it out even on a limited basis because he claimed he didn't have the "resources" to spend time on it. The "resources" could have consisted of a college intern that knew something about programming. Even most of that programming software is readily available on the Web which I pointed out to Rick Hirsch. However, he was STILL too lazy to even give it a try.
No wonder the dinousaur media is collapsing. It consists of completely lazy people who don't want to rock the boat.
Tom Fiedler of the Miami Herald made a big deal about how they need to adapt to the Web a couple of years ago. It was all TALK. When it came time to walk the walk, he went into the fetal position. And now he is out. Yeah, Fiedler really liked my idea for increasing their web readership but then did NOTHING but hand the idea off to the incredibly lazy Rick Hirsch who did nothing but come up with lame excuses about his "lack of resources" to follow thru.
Just out of curiosity, why would you want to improve the market share of the MSM?
FIRE! FIRE! FIRE!
Women and children first.
There are no young abroad the Old Gray Ladies of every community that are the local newspapers. They're all populated with Helen Thomases and Andy Rooneys -- who believe they should not be adapting to the rest of the world, but that the rest of the world should be changing to suit them.
It's the same story in every community. Journalism is a paradigm that has been surpassed and subsumed, and they still think they are the only game in town, and so when they roar now, they're shocked that people no longer jump at their every utterance but instead, ask bemusedly who they are -- at which point, they proudly show their badges that say "Press," and are shocked when people reach out and give them a gentle push.
Looking for another 20 percent drop again...soon.
There are, in fact, at least two major reasons for the decline of the MSM.
One of them, of which we are well aware, is their incredible bias, willingness to lie, carelessness about reporting the facts, and steady dumbing down of the product.
The other is simply the growth of the internet, which is stealing their advertising revenue, more or less regardless of how good their product is.
Not much they can do about the second problem. And not too much, possibly, that they can do about the first. Because their readership at this point is probably mostly leftists, the last ones to leave the sinking ship. If they go hard right, they may drive away a lot of current readers without gaining new ones.
Their fault, of course, for polarizing their audiences in the first place. To return from ideology to economics, their problem was that they had a MONOPOLY ON THE NEWS, and monopolies are always economically destructive in the long run, as soon as some clever entreprenteur figures out a way to make an end run around them. That turned out to be Steve Jobs and Bill Gates, and now the MSM is reaping the fallout of having pushed their monopoly to the limits because of the usual pride and blindess--hubris--that having monopolistic control of something produces in the operator.
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