Market analyst: newspapers going down

Don’t let recent good news from newspaper publishers fool you, the stock market analysis website Seeking Alpha warns. The industry is dying.

The site keys on the relatively rosy picture pushed by McClatchy last month, saying “publishers across the board got a big boost when The McClatchy Company announced that its advertising revenue rose during the fourth quarter. What’s more, CEO Gary Pruitt said he expects these improvements to continue this year.

“As the third-largest newspaper publishing company in the United States, McClatchy’s news caused some bullish activity in the industry. But the fact remains that we’re talking about newspapers here. So even though McClatchy publishes more than 70 of them – including The Miami Herald and The Charlotte Observer – they’re still just … well, newspapers.”

And, in fact, since the first of the year, McClatchy’s Kansas City Star has announced layoffs, while at  The News & Observer in Raleigh, N.C., buyouts have been mentioned by management amid rumors of furloughs and layoffs. At Gannett, one-week furloughs in the first quarter are already policy at most of its papers, while some of its papers in New Jersey face much more drastic measures.

Elsewhere, the Washington Post said this week it returned to profitability in 2010 and expected to remain profitable in 2011.

Seeking Alpha leads the reader through the familiar decline of newspapers, concluding that “a daily paper simply can’t compete with the up-to-the-second Internet in terms of news. Plus, there’s the added incentive that the Internet is free, leaving publishers scrambling to find a way to successfully monetize their online product.”

Online advertising revenue presents a glimmer of hope,  including a 13.9 percent gain in the second quarter of 2010 – the first quarterly gain since 2008, and a rise in McClatchy’s online revenue for the quarter that boosted its stock price.

“But even if this trend continues, it’s still not enough to combat the rapid decline of printed ad revenue,” Seeking Alpha says. “The numbers have been in a freefall for 14 consecutive quarters … with no end in sight.

“The bottom line is that newspaper publishers are going down. They won’t all bite the dust, of course. But it will take a few more years of closings, mergers and tinkering with online advertising before the real winners emerge. So don’t let McClatchy’s bounce fool you – this is one industry to dodge.”

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