Have Other Newspaper Companies Heard the News?
Jay is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Hardly these days the newspaper industry has much news to report about itself. We all know the circulation is down, advertising is going digital and most papers are in the red. Many are waiting for the day when the newspaper dinosaur, as some may call it, reaches the state of extinction. So when News Corp. (NASDAQ: NWS) broke the news about spinning off its lagging newspaper unit from the high-flying entertainment business, investors were all given a chance to reread into the newspaper's future. The move by Mr. Murdoch is as much a strategy to separate and promote the value of the company’s TV and film business as it is another attempt to make his beloved newspaper publishing work.
Many of us may not realize that other newspaper companies also have lines of businesses not quite related to their newspaper publishing. Gannett (NYSE: GCI), publisher of USA Today, also owns TV stations and the online job-search site CareerBuilder. The Washington Post Company (NYSE: WPO) operates a network of private-label schools in addition to educating the nation’s capital with its newspaper. The New York Times Company (NYSE: NYT) appears to have a somewhat related non-newspaper business, namely its about.com content site. While the site is a digital venture for the company, it is rather consumer-driven and of generic information and thus, not a reflection of the more sophisticated content and elegant style that are characteristic of The New York Times.
It’s difficult to point out the operational synergies between newspaper publishing and any of the other businesses, as well as seeing clearly how a company may have allocated its financial resources across business lines. A stand-alone newspaper entity can better test a paper’s survivability and show how it will really fare without any internal financial assistance. Expect some other newspaper companies to follow suit after News Corp.’s move. Such potential actions would also be good for the industry as a whole. Under the newspaper business’ current corporate structure, a soon-to-be-formed newspaper company from News Corp. would really have no peer companies to compare with, at least not on an equal basis.
Structure change alone won’t save the newspapers’ current declining fortune. The common wisdom about their misfortune is that newspapers are being challenged by the vast digital news available on the Internet. But there is a myth to that. Newspapers can easily switch to online distribution or reach readers via any other digital form. However, the problem doesn’t go away because news now can come free to readers the moment they are logged into their homepage. This eliminates the need to check into a newspaper’s Website or download its news app for the same news access.
Although it seems that newspapers as a relied-upon news medium is being replaced by the instant-news-disseminating platform of the Internet, the challenge for newspapers lies beyond the distribution revolution and includes necessary content evolvement. If newspapers provide only the same headlines and sound bites already on the Internet and all through social media and the like, where is the added value for paying newspaper readers? Adjusting and differentiating content offerings may be the change that can really save newspapers. After all, content is still the king, even for Internet properties.
I see two ways that newspapers may win the content war. One is the categorically easy and clever way of providing community-focused news content that is less likely found elsewhere on the Internet, and I dub it as the Warren Buffett way. Mr. Buffett has been snapping up small-town newspapers as its signature media investment, betting they’ll quietly excel. But following his investment logic, public investors in big-time newspapers such as USA Today, The Washington Post or The New York Times all seem to be out of luck. These papers report a great deal on national and international news that are also widely reported by everyone else. Rising Internet news stars such as The Huffington Post and other social media outlets often do a better job of grabbing readers’ attention, especially when using shocking and suspenseful headlines.
So the way for newspapers to still make a crack out of the seamless news coverage is by means of providing in-depth content beyond showy headlines. Why report the same story the same way as others? Kill a story if no meaningful background elaboration and analysis could be made by reporters. The Internet often is overflowed with news information that tells mostly what, when and where, but not so much about how and why. I happened to have just compared two recent news articles on the Zimmerman bond setting from The Huffington Post and The New York Times. Mostly identical, the Times’ piece only slightly edged out with two additional bits of background information. As a paying reader and investor of the Times, I still wouldn’t be very impressed.
While business structure change in newspapers presents investors with a more clear-cut investment opportunity, the awareness of better content management at a newspaper is what investors can really count on. A quality newspaper available for digital distribution can still be viable for both serious readers and value investors, even though the social media and other Internet chatters remain popular.
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