Mixed News for Newspapers
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you think of journalism, you probably think of The New York Times (NYSE: NYT). If you manage to pick up a paper copy (or more likely, the Times' website, if you haven't used up all your free views before the pay wall comes down) you'll expect to find all the hard-hitting, international and national news, opinion and book reviews the de-facto national paper is known for.
Investors have been a bit more confident on the news that it's selling About.com to IAC (NASDAQ: IACI) for $300 million. If you're a veteran of the original dot-com era, you're probably just as surprised as I am that About.com still exists and that the Times owned it in the first place. Let's hope IAC actually does something with their new toy, as the New York Times didn't really try to integrate it with any of their properties. Since IAC also owns Ask.com, it would be interesting to merge some of About.com's high-quality content with its search engine.
IAC posted a second-quarter profit of $43.33 million or $0.50 per share, beating consenus estimates by 19 percent, so there's reason to be optimistic that the company will actually treat About.com right.
The New York Times posted a second quarter loss of $83.67 million, or $0.27 per share. This has largely been blamed on a write-down of About.com's debt and is probably the reason the Times is unloading this turkey.
The New York Times, although it's charging for subscriptions, is largely based on advertising revenue. Revenue from ads has been shrinking as more readers switch from newspapers to the Web to get their news. Even if it's fashionable to bash old media as a dinosaur, they're not doing too badly in this transition. Circulation has actually been up, including subscription to the Times' website and mobile apps.
The big problems for the Times are the decline in ad revenue for print newspapers affecting the industry as a whole. Printing those papers, shipping them across the country, and having them thrown on your lawn just before the sprinklers turn on costs money. The high fixed costs combined with declining print revenues should make for a pretty bumpy ride in this stock.
Insiders, however, are pretty optimistic about the company, with a number of them buying shares. Director Steven P. Greenfield bought a total of 50,000 shares in May. I wouldn't be as sanguine as he is, though, even if the company does have positive cash flow, so perhaps it has just hit a bump on its paper route. I'd wait at least a quarter to see how the company performs before biting, however.
The Times' competitors have managed to be profitable, despite the perennial proclamations of the death of newspapers, precisely because they've been increasing their online operations. Gannet Co. (NYSE: GCI), publisher of USA Today, has bought BLiNQ (someone had fun with the shift key, evidently), a social media advertising firm, to target Facebook users, though the company isn't saying how much it paid for it. Gannet posted a profit of $119 million in the second quarter, or $0.51 per share, which beat earnings estimates.
News Corporation (NASDAQ: NWS), who publishes The Wall Street Journal, among others, has switched the Journal to a pay wall for some time. Since the Journal's audience is mainly people who read articles like this one, they'll pay a premium for excellent financial coverage, since the company posted a profit of $1.79 billion or $0.79 in the second quarter. The company hit earnings estimates right on the nose.
The Washington Post (NYSE: WPO) reported a profit of $51.8 million or $6.84 per share related to a decline in enrollment in its education division, including Kaplan Ventures, where operating income declined by 84 percent, with more restructuring costs to follow in the second half of 2012. Still, the company's earnings are up 13 percent year-over-year from $45.6 million at the same time last year.
The newspaper business is a rough one, even if the major media companies don't look like they're dying, but they are faced with lots of competitors. They'll have to adapt, like every other business does, but I'd wait for the major papers, including the New York Times, to demonstrate that they're doing so before sinking any cash into them.
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