The Death of Newspapers Is Greatly Exaggerated

Posted December 5th, 2007 by Craig Aaron

FCC Chairman Kevin Martin claims that he is removing the newspaper/broadcast cross-ownership ban to “improve the health of the newspaper industry,” which he claims will “wither and die” without drastic action. But there is simply no good evidence showing the newspaper industry is in such grave danger.

Fact No. 6: Cross-ownership won’t solve newspapers’ financial woes.

It is highly questionable whether the FCC, which has no jurisdiction over newspapers, should be using broadcast regulations to “save” the newspaper industry. If the goal here is to promote media diversity, it’s hard to see how that would be accomplished with fewer newsrooms.

Though print circulation of daily newspapers has declined, Martin’s claims that newspapers are an “endangered species” are greatly exaggerated. Consider that:

• Revenue per circulated copy increased from 2005 to 2006 (the last year for which full financial data is available).
• Industry-wide, newspapers still enjoy operating profit margins near or above 20 percent — higher than the S&P 500 average.
• Recent mergers and acquisitions demonstrate that newspapers remain highly valued properties. Prices paid for newspaper companies have been above 10 times cash flow, with average stock prices at eight times cash flow. These values are considered quite healthy by financial industry standards.
• William Dean Singleton, CEO of MediaNews Group (a strong advocate of eliminating the cross-ownership ban) recently characterized the newspaper industry as “very, very, very profitable” and predicted it will continue to be so “for a very long time.”

Bad business bailout?

Moreover, there’s little or no evidence to suggest that cross-ownership will improve the finances of newspaper companies.

• Tribune Co. is often cited as one of the most financially troubled newspaper companies. Yet it is by far the largest owner of cross-owned newspaper-TV combinations operating under temporary waivers. If cross-ownership hasn’t helped save Tribune, why will it bring financial benefits to other newspaper companies?
• Many TV-owning newspaper companies are selling off their broadcast properties. The New York Times Co. recently sold all of its TV stations, and Belo Corp. has announced a plan to spin its TV stations off separately from its newspaper business.

These trends suggest that newspaper companies will be fine if they focus on their core mission of providing quality journalism and work to attract online readers. Lifting the cross-ownership ban seems designed to benefit certain companies like Tribune, Media General and Gannett, which bet heavily on this specific business model. The public interest is too important to bail out to a few conglomerates that mismanaged their businesses.

Over the next two weeks at StopBigMedia.com, we’ll be counting down the “10 Facts Kevin Martin Doesn’t Want You to Know” about his new media ownership rules, as exposed in our new report — Devil in the Details.

Next: The Internet is an opportunity, not a death sentence

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