The New York Times Company (NYT), News Corporation (NWS), Gannett Co., Inc. (GCI), The Washington Post Company (WPO), and other newspaper companies moved lower after negative earnings reports and bearish comments from Buffett hit the markets.
The newspaper industry has been struggling over the past few years with a growing switch to online media as a source for news and information. Faced with smaller syndications and slower ad spending, many newspapers have been reporting steep losses that could prove difficult to turn around. After all, the internet offers instant news for free, while advertisers can more effectively target their advertising campaigns for a higher return-on-investment than print advertising.
The Washington Post Company reported an $18.7 million loss during its most recent quarter as its newspaper faced a 33 percent drop in print advertising sales. Meanwhile, analysts believe that News Corporation will report just $7 million in profit, compared to $216 million a year earlier, with movie studio performance keeping it in the black. The outlook for other industry players remains just as bleak, as investors prepare for the upcoming earnings season.
Buffett’s Bearish Comments
Billionaire investor Warren Buffett only added fuel to the fire at the annual meeting for his company Berkshire Hathaway.
“For most newspapers in the United States, we would not buy them at any price,” said Mr. Buffett to more than 35,000 attendees. “They have the possibility of going to just unending losses.”
These were sobering comments coming from a man who started life as a paperboy before becoming the largest shareholder of The Washington Post.
Hope in Kindle & Online Papers
Amazon.com’s (AMZN) Kindle and online newspapers remain the only viable hope for newspapers in the long-run as consumers continue to move away from traditional print media.
The Kindle offers digital versions of newspapers on the mobile device that can be downloaded for a fee. And with Kindle sales expected to top $1 billion by 2010, many newspaper companies are hoping that they can position their products on this device to drive revenues going forward.
Meanwhile, many newspapers also put their news online in order to generate additional ad revenue via the internet. Unfortunately, online advertising growth has slowed with the global economic crisis hitting ad budgets, but this spending should pickup upon a recovery.
A New Era for Newspapers?
Newspapers must effectively make the switch from print to digital in order to succeed in this new era of online and digital media. Partnerships with Amazon’s Kindle and effective online advertising could help these companies pull out of their slump and make the switch online. After all, there will always be demand for reliable news, it’s just a question of where to find it.
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