US newspaper company shares have risen strongly in the past week as some of the leading operators have revealed better than expected profits (and not losses), confirming that they are not about to slide off the cliff into bankruptcy, as half a dozen did in late 2008 and early this year.
The rebound in the share prices however is more a relief rally at the news the papers are surviving. There’s no sign of future growth.
In Australia, the listed TV and radio companies are doing it tough, but newspaper companies such as APN and Fairfax, while wounded by the slump, are not on death’s door, as many in the US and the UK are.
In the UK, 80 local and regional papers have closed in the past year, with one group, Trinity Mirror closing 31 alone.
In the US The Tribune Co in Chicago was the biggest media failure so far, collapsing in late 2007.
Half a dozen other companies have gone into bankruptcy protection as well. More than 20 moderately-sized US papers have shut, dozens more local papers have been ‘consolidated’ .
Much of this has been done to lower costs for the owners: it’s worked, with last week’s reports showing a sharper fall in costs in the quarter than the fall in revenues, reversing the situation in the first quarter.
But that situation can’t go on for much longer; it’s an illusion. The deep cost cuts are only a temporary move; the loss of thousands of journalists, delivery and production people and sales people and others sacked from papers large and small.
Papers, offices and other facilities are being closed and consolidated is stripping much of the longer term growth options from these companies.
Asset sales are few and far between because no one wants to own what they see as a dying breed that’s losing value by the day.
The next phase in the US and the UK could very well be mergers that are allowed by regulators simply to save the papers concerned, even though they might be anti-competitive.
But it’s not the old analogue newspaper sector that’s sagging.
Major TV groups are reporting subdued sales lower profits and trying hard to see an improvement in the next six months and the news media is finding it tough.
Fabulous new media icons like Google, Yahoo, Amazon and Microsoft have, on the whole, underwhelmed the market with their quarterly figures. Amazon, which is now a mainstream retailer and nothing more, reported weaker sales and earnings last week , thanks to discounting (its competitive edge over analogue retailers is rapidly vanishing).
Microsoft’s sales fell by more than expected and profits were down 29% on the quarter. Google’s results were a bit on the light side as well.
So while the shares of groups like the New York Times rose, it was more in relief than in a positive reaction to better news: more along the lines of ‘Whew, they are still here and not in Chapter 11.
In fact the shares of McClatchy Co, which is in a worse state than the NYT Co, reported a better result than expected, its shares jumped 67% at one stage, to a high of just 80 US cents (around $A1).
Shares in Media General, another debt-ridden basket case, rose 125% in reaction to its surprise profit.
All three media companies reported better second quarters than first quarters, and with one off items, they were higher in one case than a year ago.
But strip out the impact of the cost cuts, the retrenchment pay, office closure costs and the impact of debt charges (some have claimed special tax benefits as well for exchanging debt) and there was no real improvement.
For the six months to June 30, all major groups have seen sharp falls in all revenue areas and earnings.
For the time being though, the New York Times Co and its high profile major asset, survive for another quarter or two.
Despite the optimism of the profit, topping forecasts, advertising revenue fell 30%.
New York Times Co posted second-quarter net income of $US39 million, compared with $US21.1 million. The Times said it slashed operating costs by 20% in the quarter, and said it plans to get $450 million in cost savings this year, which is 16% of its 2008 cost base.
Revenue fell 21% to $584.5 million on that 30% drop in ad revenue, including a 32% fall in its newspapers as car, jobs and real estate advertising remained depressed. The Times said its online revenues fell 15.5% in the quarter (they were stronger a year ago) in a catch up to the fall in print ads.
The better result for the Times follows similar reports from USA Today owner Gannett Co and from Miami Herald publisher McClatchy Co and Richmond Times-Dispatch publisher Media General Inc. All came on the back of swingeing staff cuts.
Gannett is still cutting an estimated 1,000 or more jobs from its papers and other businesses.
"Excluding depreciation, amortization, severance and a pension charge as noted below, operating profit was $66.1 million in the second quarter of 2009 compared with $100.5 million in the second quarter last year," The Times Co reported, giving us a better picture of the company’s predicament.
McClatchy Co reported ad revenue fell 30% in the quarter, but that each month’s decline was a bit less severe than the last.
It made a profit of $US42.2 million compared with a profit of $US19.7 million in the second quarter of 2008.
McClatchy has sacked 15% of its workforc
