Newspapers Face Tough Transitions
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The New York Times (NYSE: NYT) recently announced that they will be selling About.com to Answers.com for $210 million. The About.com unit took a nearly $200 million write-down in the second quarter while revenue declined 8.7%. The site has had difficulty coping with changes to Google’s algorithms. The change affected online traffic, leading to a decline in display and click advertising. Since the New York Times purchased About.com in 2005, the site has produced profits that helped bolster the company’s financial picture. At the same time the company’s newspaper business struggled to make the transition to digital.
This deal would only be the latest in a string of sales by the New York Times. It has also sold its stakes in the Fenway Sports Group, owner of the Boston Red Sox. Its regional newspaper group was sold to Halifax Media Holdings in January for $143 million. It would appear the company has been working to streamline the business around their New York Times product. Similar to other newspaper companies the New York Times has been struggling recently as it figures out the transition from print to digital.
Although, every newspaper seems to be facing different problems. The scandal surrounding News Corp (NASDAQ: NWS) has had a negative effect on the company’s reputation. This only serves to mask the company’s other problems. The company recently reported a $1.5 billion quarterly loss as shrinking advertising revenue led to a write-down of its Australia publishing business. However, News Corp has branched out. Currently the majority of the company’s value comes from its entertainment operations, including the Fox News cable network and Twentieth Century Fox film studio. Still, dealing with the fallout from their recent scandal has left the company hurting.
The Washington Post Company (NYSE: WPO) is facing different problems altogether. Its second quarter profit fell 29% after revenue from its education business declined. Revenue in the education business alone dropped 9%. The company’s Kaplan unit has come under government scrutiny along with the rest of the for-profit education industry and faces increasing regulation. In addition, the company’s newspaper business is also struggling to find ways to boost revenue. Their print circulation is in rapid decline and they are having trouble with the transition to digital.
Though the New York Times, News Corp, and Washington Post all face different individual problems on the side, the main problem for all of them is the difficulty that comes with making the switch from print to digital news and advertising. Print circulation is down all across the board and the online market is different and offers its own set of competitive disadvantages. If these companies truly want to be successful, they need to ramp up their digital game on all fronts. If they continue to place the priority in print their newspaper business will only drag them down.
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